Monday Morning Livestock Market Update - Futures May See Two-Sided Trading Activity

GENERAL COMMENTS:

Feedlots held strong and were not willing to let cattle go at lower prices or even steady money. Late trading developed in the North at $2.00 higher while no trade was reported in the South. Trade was believed to have taken place later after there was no further price reporting for the day. This will be seen Monday after information is gathered. It is anticipated that late Southern trade might have been at least $2.00 higher if not more. With light cash trade taking place last week, it puts packers in a precarious position. They will need cattle this week and may need to pay more to get them, but they will not want to due to the weakness of boxed beef. Boxed beef prices on Friday were lower with choice down $0.36 and select down $2.05. The activity last week will increase the resolve of feedlots to stand strong again this week. An ongoing issue with a third-party service provider impacted some reporting firms' ability to provide the Commitment of Traders report with timely and accurate data. The report will be delayed until corrected.

Hogs were able to close higher Friday defying cash and cutouts. The exception was front-month February, which will try to align with cash and the index over the next week. Futures showed some follow-through from the bounce of contracts from technical support a few days ago. The bounce may be short-lived as the evidence of weaker cash and cutouts might influence trading Monday. The National Direct Afternoon Hogs report on Friday showed cash down $0.26. Cutout values saw more pressure with a decline of $2.45. Strong weekly export sales are now in the rearview mirror. As mentioned earlier, the Commitment of Traders report is delayed.

	BULL SIDE		BEAR SIDE
1)	Packers did not purchase sufficient cattle last week to meet their needs. They may need to be more aggressive this week to procure the cattle they need.	1)	Boxed beef continues to exhibit weakness, possibly indicating slower demand may be developing.
2)	New contract highs for live cattle will bring more traders into the market and increase the resolve of feedlots to hold for higher prices.	2)	February cattle futures already have higher cash factored in, leaving traders in a wait-and-see mode.
3)	The technical set up of hogs may result in further short-covering despite underlying cash.	3)	Lower cash hogs and pork cutouts from Friday will likely impact the market negatively Monday.
4)	The hog market remains oversold, which may trigger further buying interest due to the funds being net-short futures positions.	4)	Strong slaughter pace has kept pulling market-ready hogs forward, but supply remains available, leaving packers with plentiful supply and little need to be aggressive.