Monday Morning Livestock Market Update - Mixed Trade Expected to Begin the Week

GENERAL COMMENTS:

Boxed beef prices ended the day higher in both categories with choice up $4.25 and select up $1.01. This was much needed for the complex as boxed beef had been struggling earlier in the week. Traders received some encouragement that maybe demand would begin to improve. The limiting factor on the strength was likely the inability of cash cattle to find further strength in the country. Cash cattle in the South traded $1.00 lower for the week while Northern dressed cattle showed more of a range of $2.00 lower to $1.00 higher. Packers have been able to hold the line on cash the past few weeks and will attempt to do so again this week. They have strategically been working on slaughter to their advantage. The Commitment of Traders report showed fund traders reduced their long live cattle positions by 9,327 contracts, bringing their net long futures positions to 94,426 contracts. Funds reduced their long feeder cattle position by 3,288 contracts to a net long of 8,972 contracts.

Hogs showed a second day of strong gains as traders turned friendly to the market. As the day progressed, it was evident packers needed hogs as they were aggressive in the country with the result being a gain of $3.63 according to the Dairy Direct Afternoon Hog report. It has been unusual for packers to be aggressive at the end of the week. Cutouts did not support the strong cash, but packers might have been looking ahead to upcoming demand rather than the immediate demand. Cutouts declined $1.76 keeping a little bit of bearishness in the market. This is the final week to trade October hogs as the contract will cease trading on Friday. The Commitment of Traders report showed funds reducing their long positions by 18,617, reducing their net long futures position to 13,751 contracts.

	BULL SIDE		BEAR SIDE
1)	Cash cattle did not get any worse than what they traded earlier in the week with a few cattle in the North trading $1.00 higher.	1)	Funds reducing their long positions by a significant amount is not a good sign for the near term.
2)	Boxed beef showed some strength as the week progressed, which could indicate an increase in demand as expected during the month of October.	2)	Packers have been able to purchase cattle without having to bid up for them over the past few weeks. Reduced slaughter and lower demand have limited packer aggressiveness.
3)	The aggressiveness of packers on Friday may carry over into today as it is unusual for packer to be aggressive at the end of the week. Some new pork business may have surfaced requiring more hogs.	3)	Hog futures have bounced nicely the past two days, but upside may be limited without solid fundamental support.
4)	Selling pressure did not surface once the chart gap was closed on December hogs. That indicated a stronger fundamental market overriding the technical.	4)	Funds reducing their net long positions is not a good sign and may keep the market range bound.