Monday Morning Livestock Market Update - Uncertain Beginning to Week

GENERAL COMMENTS:

The awaited Cattle on Feed report was released on Friday and was not quite what the trade anticipated. Both on feed at 102% and placements at 99% were higher than anticipated. This is the second consecutive month that the estimates for placements were significantly below the actual. This is not a supportive report in light of the inflationary period we are in as well as the concern about a recession. If slaughter pace slows somewhat, cattle may back up into the market. Carcass weights declined last week and still cash is struggling as packers had purchased sufficient head for the week as well as some for the next few weeks. Cash does not look promising this week with some initial calls for another $1.00 to $2.00 lower. However, if futures do what they often do after a report, they may move higher Monday. The market may have already factored in the report with the weakness last week resulting in some short-covering Monday. Boxed beef prices were mixed on Friday with choice up $0.47 and select down $1.04.

Hog futures closed very strong on Friday, resulting in an impressive weekly gain of $8.13 for the June contract. Futures struggled briefly early in Friday's trade, but early cash activity pointed to higher prices. The National Direct Afternoon Hog report showed cash up an impressive $2.46 to end the week. Not only this, but cutouts jumped $3.65, ending a week of strong gains. Traders seem convinced higher prices are yet to come as long as packers remain aggressive and cutouts continue higher. Technically, June futures will reach 50% retracement around $110, which could provide some resistance. A push above that may take futures higher.

	BULL SIDE		BEAR SIDE
1)	Marketings were right on trade estimates for the Cattle on Feed report, which may provide some support.	1)	Cattle futures could not find support despite the weakness of corn prices. Fundamentals were too bearish to trade higher as they generally would.
2)	The cattle market moved lower into Friday's report, which may result in a rebound due to traders already having a bearish report factored in and being technically oversold.	2)	There is anticipation of lower cash castle trade again this week as cattle need to come to the market and packers already have some forward contracted.
3)	Hogs made impressive gains in both cash and cutouts last week with the momentum anticipated to carry over this week.	3)	Packers may find more hogs available due to the impressive increase of prices last week. More hogs may be pulled forward to take advantage of the higher prices.
4)	Slaughter pace has increased, resulting in packers having to be more aggressive in their search for hogs.	4)	Short-covering may have run its course with futures possibly taking a breather as traders assess demand.