Monday Morning Livestock Market Update - Follow-Through Buying May Begin Week

GENERAL COMMENTS:

Cash cattle followed the pattern of the week with Southern trade averaging $3 lower and Northern dressed trade $4 lower. Without any further losses, traders decided the market was overdone due to the discount to cash. This prompted strong buying interest in futures as the day progressed. The fact that it was the end of the week also played a part in short-covering as traders seemed to think the weakness of cash may be nearly finished. There is some thought cash might be no worse than steady this week. It was good to see the market show strength despite USDA reducing the 2023 average steer price this year to $175.55, down $1.75 from November, and the average price for 2024 down $7.00 from their November estimate at $178.00. Boxed beef was lower in both categories with choice down $1.83 and select down $0.93. The Commitment of Traders reports showed funds trimming their long futures positions by 5,802 contracts, bringing their net-long position to 26,889 contracts. Fund sold a net 640 futures contracts of feeder cattle bringing their net short position to 1,819 contracts.

Hog futures bounced Friday, nearly eliminating the losses of Thursday. That does not necessarily indicate futures have found a bottom, but some of the pressure was relieved from the previous few days. Packers did need to step up more aggressively as they needed hogs to finish out the week. The National Direct Afternoon Hog report showed a gain of $0.17, bumping the weighted average price to $51.88. Cutouts were up $2.30, supported by the picnic which was up $10.23. This may provide some support to futures Monday; however, cash is not expected to be higher as packers may wait to see weekend demand. USDA reduced the average price this year by $0.25 to $58.70 but left the average price estimate for 2024 unchanged at $60.00. The Commitment of Traders report showed funds increasing their net short position by 2.226 futures contracts to a net-short position of 16,969.

	BULL SIDE		BEAR SIDE
1)	The discount of futures to cash could allow for further gains as cattle futures were overdone to the downside.	1)	Lower cash cattle last week and the uncertainty of cash this week may keep upside price potential limited.
2)	After some weeks of lower cash, there is anticipation cash cattle may hold steady this week.	2)	Boxed beef prices continue to trend lower, indicating slowing demand. This will keep packers on the defensive and bidding lower.
3)	The strength of pork cutouts Friday might provide further support to futures today as the pattern is to trade strength the following day.	3)	The strength of hog futures may have been more the result of weekend short-covering rather than a turn in trend.
4)	The fact that USDA estimated the average cash price of hogs at $60 for next year, unchanged from the November estimate, may provide some optimism.	4)	Lower cash has been the overall trend, and this week may be no exception. This would keep upside price potential limited.