Monday Morning Livestock Market Update - Traders May Begin Week With Caution

GENERAL COMMENTS:

The strong increase in cash cattle to end the week pushed all contracts to new highs. Southern live cattle traded as much as $4.00 higher; $6.00 higher in the North. Northern dressed cattle averaged $5.00 higher. Packers needed to step up to meet continued strong demand. Feedlots anticipated higher prices and held for them despite the increase in corn prices. Boxed beef closed higher with choice up $2.87 and select up $2.26. Feeder cattle kept pace with live cattle despite the bullishness of the Quarterly Grain Stocks report. There is another large winter storm in the forecast for this week moving through much of cattle country with blizzard conditions and quite a bit of snow again. This will have an impact on cattle performance and the spring calf crop. The Commitment of Traders report showed funds reducing their long futures positions by 3,192 contracts, bringing their net-long positions to 59,486.

Hogs were able to hold in deferred months as traders held out hope for a bottom to develop in this market. With ever increasing beef prices, more consumers may turn to pork but that is not likely to impact the April contract as it only has two more weeks remaining for trade. The National Direct Afternoon Hog report showed cash down $4.05. Cutouts took a hit with the average price down $1.51 with most of the pressure in bellies with a loss of $9.64. Deferred contracts found some support Friday from the neutral Hogs & Pigs report on Thursday and continued strong slaughter pace. Second quarter pork output is expected to be reduced. The Commitment of Traders report showed funds increasing their net-short futures positions by 6,280 contracts to another record short of 27,907 contracts.

	BULL SIDE		BEAR SIDE
1)	New contract highs across the board in the cattle complex keep the uptrend intact. Feedlots will set their sights on higher cash.	1)	High cash cattle prices are reducing packer margins, which may increase their resolve to try to limit cash.
2)	Another winter storm will have a negative impact on cattle performance and threaten some of the calf crop at a time when cattle numbers are already tight.	2)	Continued high beef prices will impact export business and may reduce domestic sales as retail prices continue to increase.
3)	Traders found a little hope in the Hogs & Pigs report from mostly neutral numbers, which indicates production may be holding or potentially slowing down through the second quarter.	3)	Lower cash hogs and lower cutouts Friday may put pressure on futures Monday. Cutouts last week were down $3.77 from the previous week.
4)	Increasing beef prices may turn more consumers to pork as it is very reasonably priced.	4)	Funds feel comfortable remaining short the market, increasing their short futures positions to another record net short.