Monday Morning Livestock Market Update - Higher Futures Expected for Cattle

GENERAL COMMENTS:

Live cattle were moderately higher having already factored in cash trading $1.00 lower for the week. Traders also adjusted positions ahead of the Cattle on Feed report. The report is considered slightly positive to more bullish. On-feed numbers on August 1^st were 98% compared to the estimate of 98.4%. Placements in July were 92% of a year ago versus the estimate of 94.5%. Marketings in July were 95% of a year ago with the trade estimate of 94.8%. This is the lowest marketing level for the month of July since 2016. On-feed and marketings were slightly positive while placements were bullish. Futures should open higher based on this report but where they go from there is uncertain. Many times, traders will fade these reports as some of it is already factored in. On the other hand, boxed beef prices were higher with choice up $1.97 and select up $2.10 closing out a strong week of boxed beef gains. The Commitment of Traders report showed funds increasing their long positions by 2,143 futures contracts to a net long of 97,771. Feeder cattle showed a reduction of futures by 240 contracts to a net long futures position of 13,171 contracts.

Hogs showed surprising strength with much of it possibly the result of short covering ahead of the weekend. Some support stemmed from higher cash with a gain of $0.51 on the National Direct Afternoon Hog report. However, cutouts failed again with a loss of $1.62. It was positive that futures regained the losses of the week, but the question is whether it will hold. Lower cutouts last week may provide increased demand but the proof with be it the interest of retail restocking supplies. Technically, the market should see some follow-through strength, but technical traders will need to battle with fundamentals. The Commitment of Traders report showed funds reducing their long positions by 10,042 contracts bringing their net long positions to 24,148 futures contracts.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report should provide support to the market with futures potentially gapping higher on the open.	1)	Cash cattle could trade steady to lower again this week despite a friendly Cattle on Feed report and stronger boxed beef prices. Packers may continue to reduce slaughter.
2)	Placements in July, down 8% from a year ago, point to tighter cattle numbers available to the market down the road. Tighter numbers will not change anytime soon.	2)	After a stronger opening, traders could fade the report limiting gains. Tighter cattle numbers have already been known in the market.
3)	Hog futures erasing the losses of the week may be an indication a bottom has been uncovered for the time being.	3)	Hogs had a rough week for cutouts which may be an anchor on price potential to begin this week. Demand is showing signs of slowing.
4)	Follow-through short covering and possible spillover strength from cattle could provide further support.	4)	Packers may not be very aggressive to begin the week as they assess pork movement over the weekend.