Monday Morning Livestock Market Update - Traders Should Remain Optimistic

GENERAL COMMENTS:

Buying interest came into the cattle complex Friday with the movement eliminating the losses of the previous three days. The April live cattle contract closed at the highest level since Nov. 2, 2023. It did not matter that cash traded steady to $2 lower. The focus was on the continued strength of boxed beef during the week. Boxed beef on Friday showed choice up $1.08 with select up $1.56. Packers have been reducing slaughter to back up cattle in the country and improve boxed beef prices. Boxed beef has been improving, but cattle are likely not going to back up very much due to already tighter supplies. Feeder cattle futures posted strong gains as traders saw the recent decline as a buying opportunity. Demand for feeder cattle continues to remain strong. The Commitments of Traders report showed funds adding 4,769 long live cattle futures positions, bringing their net-long positions to 58,972. There were 1,687 long positions added to feeder cattle, increasing their net-long futures positions to 9,085 contracts.

Hog futures continued to march higher, completing seven consecutive days of higher highs in June and later contracts. It has been an incredible run higher with increasing cash prices and stronger cutouts supporting trader optimism. The strength has been long overdue and has resulted in futures moving back to the levels they were at a year ago. The National Daily Direct Afternoon Hog report showed cash down $2.82 with a weighted average of $72.67. This was offset by the strength of cutouts posting a gain of $4.23. Cash may be slow to develop this week, but the anticipation is for higher prices. The Commitment of Traders report showed fund traders adding 14,841 futures contracts, increasing their net-long positions to 62,893 contracts.

	BULL SIDE		BEAR SIDE
1)	Traders bought the break in cattle futures and are likely to remain aggressive Monday.	1)	The packers have been reducing slaughter speeds to improve margins. They will be reluctant to pay more for cattle this week.
2)	Packers have reduced slaughter, which has improved boxed beef prices. However, strong demand will require them to purchase cattle to keep up with demand, limiting how much they can hold back.	2)	Increasing boxed beef prices will eventually reach a level of consumer resistance and reduced demand.
3)	The trend is up for hogs, which continues to bring buyers into the market. There is optimism that domestic and international demand will continue.	3)	Hog futures are overbought and could see a price correction at any time.
4)	The packers have been aggressive in purchasing hogs in the country. Hog numbers appear to be tightening more than expected.	4)	If both cash and cutouts decline Monday, some traders may take profits on positions, which could trigger further liquidation of hog futures.