Monday Morning Livestock Market Update - Cattle Expected to Open Lower

GENERAL COMMENTS:

It was anticipated there would be some positioning ahead of the Cattle on Feed report as traders that had profits would want to preserve those profits. Feeder cattle were under the most pressure with May falling $4.30. There was concern, fearing another bearish surprise on the report, and traders were not disappointed. On-feed numbers came very close to the trade estimate of 100.8% with the actual number at 101.0%. The placements in February were bearish with the actual 110.0% compared to the average estimate of 106.3%. Marketings were slightly less at 103.0% with the estimate at 103.9%. The market will likely react negatively to the numbers, but some of it has been factored in. The initial negative reaction may be short-lived. Cutouts took a hit Friday with choice down $3.01 and select down $2.26. The Commitment of Traders report showed fund traders as net sellers of 617 futures contracts, bringing their net-long position to 66,730 long contracts for live cattle. Funds were net buyers of 1,287 futures contracts in feeder cattle bringing their net-long position to 10,622 contracts.

Hogs were able to eke out a higher close in all contracts except nearby April. The selling pressure finally subsided, but it may be difficult to rebound unless there is continued strength of both cash and cutouts. The National Daily Direct Afternoon Hog report showed a decline of $1.00, reducing the weighted average to $79.30. However, cutouts offset the cash decline with a gain of $2.29 with ribs showing the greatest gain. Packers may be more aggressive early this week, paying higher cash as they will want to purchase hogs due to Good Friday, which may result in a down day or at least reduced slaughter for some plants. Weekend retail demand will dictate aggressiveness. The Commitment of Traders report showed funds reducing their net-long futures position in hogs to 61,726 contracts, down 1,322 contracts.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded higher last week with market-ready cattle supply current. Reduced slaughter has not backed up cattle in the country.	1)	The substantially larger placement number on the Cattle of Feed report may put further selling pressure on the market.
2)	The Senate vote to ban beef from Paraguay now moves to the House for a vote. If approved, this beef would not enter the U.S. supply chain.	2)	Feeder cattle futures are in a downtrend and may remain that way after the report on Friday.
3)	The selling pressure seems to have subsided with the hog market now looking to regain support. This may increase traders' interest in buying into the market.	3)	Hog futures will have a tough time regaining the losses that were seen last week as traders are concerned over consistent demand.
4)	Hog futures have corrected their overbought technical position. This may increase the buying interest of futures.	4)	It is a holiday-shortened week which may leave packers less aggressive in the cash market.