Monday Morning Livestock Market Update - Cattle Futures Expected to Open Lower

GENERAL COMMENTS:

Cash cattle finished the week with strong gains. Live cattle in the South traded $3.00 to $5.00 higher with Northern dressed cattle trading $4.00 to $6.00 higher. That is an incredible jump in price as packers had to step up due to the need to maintain slaughter and meet demand. To begin Friday, beef export sales were good at 14,900 metric tons (mt), up 24% from the previous week. This provided some support, mainly to the nearby months. Cash cattle did not trade much before the close of the futures market but optimism grew over better cash. However, that optimism remained in check due to the Cattle on Feed report, and rightly so. The report was considered bearish, but there is disbelief over the level of placements. Placements in May were 104% with the average estimate at 98.3%. This was above the top of the range of 102.4%. This was very bearish but not without controversy. Many expressed disbelief placements were that high. Maybe there are more cattle out in the country than the market has given the impression there are. After all, cattle weights are significantly higher than a year ago. On-feed numbers were 100.0% of a year ago and slightly higher than the estimate of 98.9%. Marketings in May were 100%, down slightly from the estimate of 100.3%. This should result in lower futures on the open, but that may be short-lived as strong cash and traders discounting the report may overcome the bearishness. Boxed beef was lower Friday with choice down $0.48 and select down $1.29.

Hog futures drifted into the weekend with little reason for traders to move the market. Pork export sales were lower than desired at 21,400 mt, down 29% from the previous week and 34% lower than the four-week average. Cutout values increased by $1.18 but were offset by cash weakness. The National Direct Afternoon Hog report showed cash down $1.17 with the weighted average falling to $86.04. Traders do not have sufficient positive news to buy aggressively into the market. Pork demand has been a concern and remains a concern as cash and cutouts remain uninspiring.

	BULL SIDE		BEAR SIDE
1)	Strong cash last week with the weighted average in Nebraska traded at another record high should keep the market supported.	1)	The number of cattle placed in feedlots during May was way above trade expectations. This may result in futures opening substantially lower.
2)	Traders may discount the large placement number on the Cattle on Feed report and focus on continued cash strength and strong slaughter.	2)	The hot weather has settled in much of the country and may impact consumer demand. Increasing beef prices may also affect the movement of beef.
3)	Hog futures were mixed Friday and traded in a narrow range as all of the bearish news may have been absorbed.	3)	Lower cash hogs during most of last week does not bode well for the beginning of the week. The packers will wait to see retail demand before aggressively purchasing hogs.
4)	Hog futures remain oversold and short-covering may be triggered if cash hogs trend higher.	4)	The bounce last week in hog futures was technical and not fundamentally supported. Futures could retest the lows.