Monday Morning Livestock Market Update - Mixed Trade to Begin Week

GENERAL COMMENTS:

Cash cattle showed a bit more strength by the end of the week compared to earlier in the week. This provided traders with more confidence to buy into the market. Southern trade closed the week about steady with the previous week, as packers needed to step up to procure needed head. Northern dressed cattle average about $4 lower. It was a victory considering the recent fall of futures. The December live cattle contract regained 50% of its loss over the past two weeks. The October live cattle contract goes off the board Tuesday with December then being the lead month. Traders may be more cautious to begin the week as they assess beef demand and show lists. Boxed beef prices were higher with choice up $0.72 and select up $0.43. Feeder cattle did not see quite the strength, which is a little unusual as feeder cattle generally lead the charge. The Commitment of Traders report showed funds sold 20,714 live cattle contracts, bringing their net-long position to 62,703 contracts. Funds sold 3,104 feeder cattle futures, bringing their net-long futures positions to 3,336 contracts.

Hog futures concluded the third day of strong gains Friday, moving higher based more on technical factors rather than fundamentals. Cash and cutouts had been struggling much of the week with the National Direct Afternoon report down $0.63 with the weighted average just barely holding above $70.00, closing at $70.07. Cutout did show some strength on Friday with a gain of $0.67. Packers may begin the week more aggressively as they may want to purchase hogs early unless they see plentiful market-ready hogs available. Technical buying may have run its course with short-covering having run for three days. The Commitment of Traders report showed funds selling 9,497 futures contracts, moving to a net-short position of 6,551 contracts.

	BULL SIDE		BEAR SIDE
1)	Live cattle may move to close the chart gap that was left after the Cattle on Feed report. Stronger cash would allow traders to accomplish that purpose.	1)	Live cattle futures may have run out of strong buying interest as contracts could not hold the highs Friday. Traders may now position themselves for the end of the month.
2)	Traders are optimistic cattle prices will remain high as supplies continue to remain light.	2)	Traders may be quick to sell into the cattle market on any fundamental weakness.
3)	Hog futures had a strong price correction, which could indicate a bottom has been set and futures will find support at a higher level.	3)	The recent price strength in hogs has not been supported by cash or cutouts but is technical in nature as short-covering took place. This may have run its course.
4)	Hog futures close above the 20-day moving average, which will be considered as support for technical traders.	4)	Higher hog weights mean fewer hogs are required by packers to receive the tonnage needed to supply demand. This may limit upside potential.