Tuesday Morning Livestock Market Update - Futures May be Under Pressure

GENERAL COMMENTS:

The focus of trade to begin Tuesday will be the Cattle on Feed report. The report was bearish in all categories with the largest estimate being the placement number. This resulted in the fourth consecutive month with higher-than-expected placements. Placements were 98.1% with the trade estimating 92.2%. The on-feed number was 102.7%, slightly higher than expected. Marketings were 92.6%, a bit lower than expected. Futures are expected to open lower but may be offset to some extent by the development of stronger cash at the end of last week. Live cattle in the South traded $1.00 higher with dressed cattle around $3.00 higher. The previous three Cattle on Feed reports put pressure on the market with futures trending lower since the September report. Whether this will be the case again is difficult to say. The market may have already factored this in and may be supported by higher cash. Boxed beef was mixed with choice up $1.80 and select down $0.12. The Commitment of Traders report showed funds reducing their long position by 5,196 contracts, reducing their net-long position to 17,037 contracts. Feeder cattle showed a reduction of 595 contracts, increasing their net-short position to 2,258 futures contracts.

The Hogs & Pigs report was considered neutral to slightly bearish. All hogs and pigs were slightly higher than expected at 100%, along with kept for marketing at 100%. The kept for breeding category was more friendly at 97%, lower than the trade estimate of 98.7%. Futures may see greater support for the deferred contracts. The market will be influenced by cash that may struggle due to the holiday week. Packers may not be aggressive as they need to purchase less. Cash trade Friday was down $0.20, according to the National Direct Afternoon Hog report. Cutouts fared well with a gain of $0.86. The Commitment of Traders report showed funds buying 10,192 futures contracts, reducing their net-short position to 8,238 contracts.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle last week may provide support to the market with feedlots looking for more this week.	1)	Cattle placements were higher than expected and above expectations for the fourth consecutive month.
2)	The market may have the negative numbers of the Cattle on Feed report already factored in.	2)	Packers may not be aggressive this holiday-shortened week as they will not be running a full slaughter schedule.
3)	Funds reducing their net-short positions as reported in the Commitments of Traders report may provide some support to the hog market.	3)	All categories in the Hogs & Pigs report were higher than the trade estimate, except the kept for breeding category. This may put overall pressure on the market.
4)	The number of hogs kept for breeding, being lower than the trade estimate, may provide support for deferred contracts.	4)	Pigs per litter were at a record high for the third consecutive month. Pigs per litter in September-November increased 3.9% over the previous year.