Monday Morning Livestock Market Update - Selling Pressure in Cattle Futures Expected

GENERAL COMMENTS:

Cash cattle traded higher last week with Southern live cattle averaging $2.00 higher and Northern dressed cattle $3.50 higher. The market already had that factored in, leaving traders turning their attention to the Cattle on Feed report. The report many times carries a surprise and this one was no exception. The bearish category was placements in June at 3% above a year ago. That number was even above the highest trade estimate. This would put pressure on futures Monday. On top of that, there will be a strong corn market as hot weather moves into the Midwest this week with areas lacking moisture. On feed numbers on July 1 were 2% below a year ago with marketings 5% below a year ago. Both of these were in line with trade expectations. The Cattle Inventory report was in line with expectations at 3% less than a year ago. Both feeder cattle and live cattle futures are expected to open lower due to the report and strong corn futures. The Commitments of Traders report showed funds selling 3,330 futures contracts, trimming their net-long positions to 113,815 futures. Feeder cattle showed an increase of 252 long positions to 16,013 net-long positions.

Hog futures settled back a little into the weekend as packers were not aggressive to end the week. Futures tried to move higher, adding to the gains of Thursday, but lower cash did not provide much support. The National Direct Afternoon Hog report showed a decline of $3.26 with a weighted average of $106.25. Even with the decline, it remains a very good price considering where it was two months ago. Cutouts were able to close higher with a gain of $0.15. Packers may be a bit more aggressive Monday as they want to get hogs on the books early in the week. The Commitment of Traders report showed funds increasing their long positions by 374 futures contracts, bringing their net-long positions to 26,186 contracts.

	BULL SIDE		BEAR SIDE
1)	The number of cattle on feed on July 1 was 2% below a year ago, which supports continued tight numbers for some time.	1)	Cattle placements 3% above a year ago according to the Cattle of Feed report will be negative to the market Monday and maybe for a couple of days.
2)	Higher cash last week will give feedlots the confidence to look for more this week as holding out caused packers to step up and pay more.	2)	Strong corn prices overnight will put significant pressure on feeder cattle, which will also pressure live cattle.
3)	Hog numbers have tightened and demand has been good, keeping packers aggressive for much of the week. They should remain that way again this week.	3)	Deferred hog futures continue to lag as uncertainty over demand by the end of the year is a cloud hanging over the market.
4)	Hot weather might slow hog movement and increase buying interest so packers make sure they will get the hogs they need.	4)	The market will need to prove itself before later contracts will find strength to reduce the large discount they currently contain.