Monday Morning Livestock Market Update - Volatile Week Possible for Cattle

GENERAL COMMENTS:

It certainly was an interesting week with feedlots and packers holding out for the prices they wanted but did not get. Feedlots passed on packer bids and packers did not want to aggressively move up to purchase cattle. Business was done on a limited basis with much of the trading about $1.00 higher. Live trade in the North was about $185 with dressed deals from $290-$292. There is going to be a lot of pent-up energy this week with the necessity of doing business. Feedlots held their ground and may raise their offers, anticipating packers are short-bought and will need to be aggressive. Boxed beef was lower again with choice down $0.97 and select down $3.37. Live cattle futures posted new contract high closes in contracts through April. Feeder cattle were pulled along despite the strength of corn with higher live prices keeping buyers of feeder cattle at auctions aggressive. The Commitment of Traders report showed funds adding 4,988 futures contracts, bringing their net-long futures positions to 117,145. Funds reduced their futures positions by 580 contracts to a net-long position of 15,761 contracts.

Hog futures traded in a somewhat narrow range Friday, seeing little reason to go anywhere. The July contract goes off the board Monday, leaving August as front month carrying nearly a $6.00 discount at the close on Friday. Cash was $1.63 lower on the National Direct Afternoon Hog report Friday. Packers are expected to be somewhat aggressive to begin the week following the pattern of the past few weeks. Futures are expected to be higher as cutouts showed a gain of $4.65, finishing out a week of strong cutout gains. The Commitment of Traders report showed funds increasing their net-long futures positions by 10,085 contracts, bringing their net-long positions to 25,812 futures contracts.

	BULL SIDE		BEAR SIDE
1)	The new contract high closes in live cattle despite higher corn prices will give confidence to feedlots to hold for higher prices this week.	1)	Higher corn futures again overnight might have more of a negative influence on feeder cattle Monday.
2)	Packers did not purchase the usual amount of cattle last week, which may result in cash trade earlier this week and potentially at higher prices.	2)	It is uncertain how cash cattle will trade this week with the market already having an increase factored in, which may leave the market sideways.
3)	Pork cutouts continue to increase with values reaching $115.55 Friday. Strong demand should keep packers aggressive early this week.	3)	Packers may not be aggressive with hog purchases Monday as they may wait to see product movement over the weekend.
4)	August hog futures will take over as the front month is holding a discount to cash, which may need to be reduced.	4)	The increase in hog weights last week means more tonnage will be available on the same number of hogs with fewer needing to be purchased.