Monday Morning Livestock Market Update - Traders to Begin Week With Caution

GENERAL COMMENTS:

Cash cattle traded Friday as they had earlier in the week. Southern cattle traded as much as $4.00 lower for the week with Northern dressed cattle $2.00 lower. The market had this factored in allowing for futures to bounce Friday. Traders will be cautious to begin the week as boxed beef prices are not providing much support with prices mixed Friday. Choice cuts were up $0.41 with select down $1.07. Lower boxed beef put the pressure on the market last week and may again this week. Reduced demand may keep packers less willing to pay up for cattle. The WASDE report was friendly to the cattle markets with USDA estimating higher prices. It must be remembered these are estimates and will change from month to month. Feeder cattle prices were lower at some auctions last week likely due to the hot weather and less desire to purchase and haul the animals. The Commitments of Traders report showed fund traders increasing their net-long live cattle position by 252 futures contracts to 68,963 contracts. Funds reduced their long positions in feeder cattle by 1,400 contracts to a net long of 2,205 contracts.

Hog futures closed mixed. August futures quickly made up the discount it held to the July contract. July goes off the board Monday with Aguust taking over as the front month. Cash did not fair well Friday with the National Direct Afternoon Hog report down $3.73 with a weighted average price of $83.04. This was offset by cutouts up by $2.61, supported by the $10.20 gain in hams. The WASDE report was mixed for hogs, providing no solid long-term direction. The slaughter pace remains strong, indicating demand is good as pork is needed to supply the demand. However, hogs are plentiful, leaving the packers less aggressive. The Commitments of Traders report showed fund traders reducing their net-short positions by 2,274 contracts to a net short of 11,834 contracts.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures hold a discount to cash and any stability in cash cattle may increase futures.	1)	Boxed beef prices are weakening as demand has slowed for the time being. Packers will not be aggressive in the cash market.
2)	Cattle supplies remain tight, which should continue to support prices.	2)	The support of cattle futures Friday may have stemmed from the friendly number on the WASDE report. Those are factored into the market, leaving traders cautious over cash.
3)	Hog slaughter continues to run above a year ago, indicating good demand as packers continue to process hogs to supply that demand.	3)	Lower cash hogs are the result of a plentiful supply. The packers see no need to be aggressive with purchases.
4)	The $26.00 discount of December hogs to August seems a bit too much with prices already as low as they are. This should narrow over time.	4)	The July hog contract goes off the board Monday with August already having closed the price gap. This may leave little reason for the August contract to rally.