Monday Morning Livestock Market Update - Initial Weakness in Cattle Futures Possible

GENERAL COMMENTS:

Cattle futures reflected steady cash with October up $0.15 and December down $.47 for the week. The Cattle on Feed report showed on-feed numbers at 98% of a year ago. Placements were 95% and marketings were at 94%. This is supportive to the market as lower numbers indicated continued tightness of cattle numbers. However, the numbers being slightly higher than the trade estimate for placements with slightly lower marketings could result in more aggressive selling of futures Monday. The selling may be short-lived as traders react to the numbers, but overall, the report was friendly in the larger picture as cattle numbers remain below a year ago. Boxed beef prices were higher with choice up $1.40 and select up $1.43. The Commitment of Traders report showed funds adding 2,680 long futures positions bringing their net-long total to 102,372 contracts. Feeder cattle were trimmed 329 contracts, reducing their net-long positions to 15,643 contracts.

Hogs were the recipients of massive selling pressure Friday. Futures closed above technical resistance Wednesday only to see the gains of the past month erased over the past two days for the February contract with the December contract falling back from the highest close since May. Futures are likely to test support, to $0.50 to $1.00 lower. The National Direct Afternoon Hog report showed a decline of $0.50 to a weighted average price of $77.59. The cutouts did not fare well as they were down $1.49. Slaughter continues to remain strong. The Commitment of Traders report showed funds added 2,375 long futures positions, bringing their net-long positions to 40,693 contracts.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report showed continued lower numbers than a year ago. It will take time to rebuild cattle numbers.	1)	Feeder cattle futures look somewhat top-heavy, which could trigger further liquidation in the near term.
2)	Technically, the live cattle market looks strong and may break through to new contract highs again as traders remain bullish on prices.	2)	Knee-jerk selling could take place due to the Cattle on Feed number being slightly negative relative to trade estimates. Traders generally react based on how the actual results are compared to the estimates.
3)	Hog futures may retest the recent lows again but should find some buying interest at that level as funds are long the market and may defend their positions.	3)	Hogs may retest the previous low and if strong buying does not surface at those levels, further liquidation is possible.
4)	Slaughter pace remains strong, which should keep hogs from backing up and weights from increasing.	4)	Hogs are unable to find cash support. Packers pay higher cash prices for about two days out of the week with overall prices continuing to decline.