Monday Morning Livestock Market Update = The Holiday Week May See Choppy Trade

GENERAL COMMENTS:

Traders eagerly awaited cash cattle trade Friday, but the close of the futures market did not see prices established. There had been concern cash would not be better than steady with last week. Cash cattle did trade mostly steady with some cattle trading for $1.00 higher, but the higher prices were more of the exception. It is a holiday-shortened week with the packers coming into the week short-bought and a tight cattle market. The packers are trying to improve their margins by reducing slaughter. Margins are improving and demand is not slowing. This requires them to step up and pay more for cattle to meet the demand. Feedlots are comfortable holding cattle for higher cash. The quarterly stocks and acreage report put pressure on the corn market, reducing feed costs for holding cattle. The Commitments of Traders showed fund traders adding 5,753 long live cattle futures positions, bringing their net-long position to 61,706 contracts. Funds reduced their long position in feeder cattle by 503 futures contracts to a current net long position of 2,483.

Hog futures showed strength to end the week and the month. This might have been tied more to positioning rather than a better price outlook. The recent futures price action might be the market building a bottom, but it is too early to tell. Both cash and cutouts need to find consistent support, indicating better demand. The National Direct Afternoon Hog report showed cash up $0.14 with a weighted average of $89.17. Cutouts were strong with a gain of $2.99. This may provide further support Monday with the market looking at a holiday-shortened week. The packers may be more aggressive early to procure the hogs they need for the week. This may support the cash price. The Commitments of Traders report for hogs showed funds sold 7,556 futures contracts moving their net-short position to 7,873 contracts.

	BULL SIDE		BEAR SIDE
1)	Some cattle traded $1.00 higher in the South last week, which may indicate packers will remain aggressive this week keeping cash at least steady.	1)	Corn prices falling to new lows with the potential for plentiful supplies did not support the cattle market on Friday. This may be a negative indication that the market may have difficulty seeing higher prices.
2)	The packers seem short-bought and will need cattle to satisfy beef demand that has not yet slowed seasonally.	2)	The holiday-shortened week may leave packers less willing to bid up for cattle as slaughter will be recused.
3)	Strong pork cutouts and higher cash may support the market triggering further short-covering.	3)	The strength of hog futures Friday may have been from the short-covering at the end of the month and the end of the quarter rather than demand induced.
4)	The trading action of hog futures the past week may indicate support is being established. The market needs to correct from being oversold.	4)	Fund traders adding to their net-short position on the Commitments of Traders report is not a good sign for market strength.