Monday Morning Livestock Market Update - Mixed Trade to Begin Day

GENERAL COMMENTS:

Cattle futures seem poised to move higher, but support will need to be seen from at least steady cash. The August contract carries a discount to cash but also had nearly two months to figure it out. Packers should be more aggressive to purchase cattle as they held back somewhat last week. Feedlots will use the recent decline of corn price as leverage to indicate they may hold out another week if they do not see higher cash. Boxed beef prices closed higher with choice up $0.62 and select up $0.67. Feeder cattle pushed to new contract highs in September and later contracts. Corn prices will again provide direction to trade.

Hog futures diverged again on Monday, following the pattern they have had for the past week. July led the way as strong cash continues to support the market. Packers were aggressive buyers ahead of the holiday with the National Direct Afternoon report up $5.70 to a weighted average of $96.66. With the index moving steadily higher, July futures remain supported with 1 1/2 weeks remaining for the contract. Cutouts were very strong Monday with an increase of $5.55 indicating strong demand.

	BULL SIDE		BEAR SIDE
1)	With better rains forecast this week in the Midwest, corn may be under further pressure, providing support to cattle.	1)	Overall beef demand may be slowing, which may leave packers less aggressive as they try to maintain margins.
2)	Packers may be more aggressive this week as they did not purchase a large volume of animals last week.	2)	The sharp increase of feeder cattle over the past week may have been too far, too fast. Markets tend to decline faster than they went up.
3)	Strong cash and cutouts Monday should provide support to hog futures today.	3)	Bull spreading of hog futures may have run its course, which could put some pressure on nearby months as they are unwound.
4)	There should be some unwinding of spreads soon as there has been quite a divergence between nearby months and later months.	4)	The uncertainty over demand once Prop 12 is fully implemented on Jan. 1 may keep uncertainty in later contracts.