Monday Morning Livestock Market Update - Pressure Expected on Cattle Futures

GENERAL COMMENTS:

Live cattle traded mixed Friday as the second week of lower cash trade did not lend itself to a rebound of futures. This may leave traders cautious Monday as the uncertainty of cash and the volatility of corn may keep futures mixed. However, the bearish implication of the Cattle on Feed report might have the upper hand with traders selling more aggressively. May placements were quite a bit higher than the trade expected. Expectations were for placements at 101.7% of a year ago with the report showing them at 105.0%. That is bearish for the market and could result in futures gapping lower on the open. On-feed numbers were 97.0% compared to the estimate of 96.8%. Marketings in May were 102.0% compared to the estimate of 101.6%. Packers may bid lower this week using the report and boxed beef weakness as leverage. Boxed beef on Friday showed choice down $0.46 and select down $3.84. Feeder cattle reacted positively to the pressure on corn posting triple-digit gains, but there may be no follow-through in reaction to the Cattle on Feed report. The Commitment of Traders report showed funds trimming their long position by 8,999 contracts, bringing their net-long futures position to 111,401 contracts. Feeder cattle showed funds selling 3,003 contracts, bringing their net-long positions to 15,695.

Hogs closed mixed Friday as the market coasted into the weekend. The delay in the implementation of Prop 12 for six months was somewhat anticipated and now is a reality kicking that can down the road a bit. This allows the market to focus on fundamentals for the time being and they have been more positive. Increasing cash and higher cutouts have provided support. Packers should be more aggressive again early this week. Traders will be looking ahead to the Quarterly Hogs & Pigs report Thursday, which could temper some trade exuberance. Cutouts were higher with a gain of $0.86 on Friday. The Commitment of Traders report showed funds purchasing 13,665 futures contracts, bringing net futures position to a net long of 7,819 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may have lower cash already factored in, which may leave the market mixed this week.	1)	The Cattle on Feed report was bearish with placements much higher than the trade estimated.
2)	Feeder cattle left a chart gap Frida, creating a small island bottom which is positive technically.	2)	Lower cash cattle are expected again this week as demand seems to have slowed with boxed beef showing weakness.
3)	Funds have changed to a net-long futures position, providing confidence to traders to buy into the market.	3)	The upcoming Hogs & Pigs report Thursday may temper trade this week as traders position themselves ahead of it.
4)	Tighter hog supplies and better demand are providing support to the market.	4)	Hog futures still may need to correct further to relieve the overbought market.