Monday Morning Livestock Market Update - Mixed Trading Activity Expected

GENERAL COMMENTS:

Cash cattle traded higher for the week with Southern cattle gaining $2.00 and Northern cattle increasing $1.00. June live cattle futures are at a discount to cash as traders remain concerned over the level of demand through May and June. Cattle futures did not rebound as much as anticipated once it was confirmed the H5N1 virus was not found in ground beef. It is going to take solid demand to turn the trend back up. That was lacking again in boxed beef with choice up by $1.30 and select down $0.33. The Commitments of Traders report showed funds reducing their net long live cattle positions by 640 contracts to a current net-long position of 39,473 futures contracts. Funds were net sellers of 172 contracts, reducing their net-long positions in feeder cattle to 4,629 contracts.

Lean hogs closed the week on a very negative note. It is not that cash and cutouts fell apart during the week, but spillover pressure from cattle and the concern over summer demand cast a cloud over the market. Packers were not aggressive on Friday as much of their buying for the week was finished. The National Direct Afternoon Hog report showed cash down $2.40, moving the weighted average to $89.38. Cutouts gained $0.24 but it was not enough to stem the tide. Liquidation generally runs its course in three days, which may result in higher trade early this week. The Commitments of Traders report showed funds actively liquidating futures contracts. They were net sellers of 5,119 futures contracts, bringing their net-long position to 86,883 contacts.

	BULL SIDE		BEAR SIDE
1)	August and later live cattle contracts have chart gaps above the market that need to be filled.	1)	Cattle saw quite a bit of volatility last week but futures closed lower than the previous week. The market is struggling to find support.
2)	June cattle futures are holding a discount to cash, which may be reduced as cash cattle increased last week and at least steady cash is anticipated this week.	2)	Feeder cattle showed some price weakness at auctions last week. Buyers may not feel as confident about live cattle prices as the year progresses.
3)	Hog futures have finished three days of liquidation with the market ready for a bounce. Fund liquidation generally lasts about three days.	3)	Packers will be apprehensive to begin the week and wait to see the level of pork demand over the weekend.
4)	Packers continue to run a strong slaughter pace as margins are good and current demand is strong.	4)	Traders may be cautious over buying hog futures aggressively due to the recent weakness and little sign of technical support.