Monday Morning Livestock Market Update - Futures May Face Pressure

GENERAL COMMENTS:

Live cattle futures have fallen back to levels they were at a month ago. Even with higher cash prices over the period, the anticipation is that it may now have run its course. Over much of the past month, boxed beef prices had been declining. Boxed beef on Friday finally showed a positive number for select cuts with a gain of $0.86, however choice declined $0.97. Cash was steady in the South with Northern trade $1.00 higher. The Cattle of Feed report is considered neutral and should have no significant impact on the market. On feed numbers totaled 12.2 million head and were 101% or 1% higher than a year ago compared to the average trade estimate of 100.7%. Placements were 995 compared to the average estimate of 98.76%. Marketings in January came in at 97% compared to the trade estimate of 97.1%. Cattle may have a struggle ahead of it Monday based on the surge of grain prices again following developing news of more severe sanctions on Russia. Monday is the final day to trade February live cattle.

Hog futures have suffered a Katie-bar-the-door selling event during the second half of last week. Underlying fundamentals have not changed as the industry is starting at tighter hog supplies. Futures were due for a correction and correcting is what they did with a vengeance. The National Direct Afternoon report showed a decline of $0.35 along with cutout values declining $0.81. Weekly export sales were good Friday at 26,600 mt, up 45% for the previous week. Packers need to be aggressive in purchasing hogs, but they may be cautious Monday waiting to see how the beginning of the week unfolds in other outside markets. Futures have corrected from an overbought market, but it is uncertain whether the correction has been enough to bring buyers back into the market.

	BULL SIDE		BEAR SIDE
1)	April live cattle takes over as front month Monday with futures having a chart gap above the market that needs to be filled.	1)	Escalating feed prices may increase the desire of feedlots to move cattle as quickly as possible rather than hold for higher prices.
2)	The neutral Cattle on Feed report will now turn trader's attention back to tightening supplies.	2)	Lower cattle futures, higher feed prices and continued weakness of boxed beef may cause packers to bid lower.
3)	Three days of fund liquidation have now been completed. This could increase the interest of traders to buy back into the market.	3)	Hog futures have been unable to find support as they correct from an overbought status. Further weakness may carry through Monday.
4)	Packers may be aggressive again this week as they need hogs to keep a strong slaughter pace to fill demand. Tightening supplies remain a concern limiting downside price potential.	4)	April hog futures retain a significant premium to cash. More than usual for this time of year.