Monday Morning Livestock Market Update - Negative Beginning to Week Expected

GENERAL COMMENTS:

The selling pressure last week was not the result of lower cash, as cash was $2.00 higher in the North and $1.00 to $2.00 higher in the South. That had little impact on trading as the emphasis was the Cattle on Feed report and the wide estimates for placements that increased uncertainty. Feeder cattle fell dramatically ahead of the report with the November contract down $9.35 for the week with $5.27 of that eliminated Thursday and Friday. This closed a chart gap that had remained from June 26. The Cattle on Feed report was bearish with on-feed numbers 1.2% above the average trade estimate at 101.0%. Placements were at 106%, up 4.4%, above the estimate and above the top end of the range. Marketings were slightly positive at 89.0%, 1.2% below the average estimate. It appears the highs will not be revisited again. Boxed beef prices were higher Friday with choice up $1.26 and select up $1.22. The Commitment of Traders report showed funds selling 2,753 contracts, bringing their net-long futures position to 83,417. Feeder cattle had a decrease of 615 long positions, bringing their net-long positions to 6,440 contracts.

Hog futures took it on the chin Friday with futures falling below support to new contract lows. Hogs might have seen some spillover pressure, but fundamentals remain bearish. The National Direct Afternoon Hog report showed a loss of $3.59, moving the weighted average below $70.00 with price down to $69.57. Cutouts were up $0.84 but had little impact and will have little impact on the market Monday. Packers did not need hogs on Friday, pulling back significantly. Futures contracts through May fell below support and established new contract lows. The Commitment of Traders showed a substantial change in fund-trader sentiment. Funds liquidated 13,531 contracts, bringing their net-long futures positions to 2,946 contracts.

	BULL SIDE		BEAR SIDE
1)	The cattle market may have the Cattle on Feed report factored in with the steep decline over the past week. Futures could rebound somewhat after a lower opening.	1)	Higher on-feed numbers and large placements will keep pressure on the market as there are more cattle around than expected. This will limit upside price potential.
2)	Higher cash and tight cattle supplies should provide support to the market once traders digest the numbers in the report.	2)	Feeder cattle futures have chart gaps below the market that may be filled at some point. The bearish implications of the Cattle on Feed report could provide further pressure and close those gaps.
3)	Hog futures are oversold and the recent liquidation may have run its course and provide technical traders with a reason to buy for a bounce.	3)	The weakness of cash hogs continues to pressure the market. Fund traders are now likely net short the market since the Commitment of Traders report was compiled last Tuesday.
4)	Low prices will cure low prices and current hog prices should stimulate demand, reduce production or both.	4)	Pork demand has not picked up sufficiently to support the market even at these lower prices.