Monday Morning Livestock Market Update - An Uncertain Reaction to Friday's Report

GENERAL COMMENTS:

Traders were uncertain ahead of the Cattle on Feed report Friday, as the report generally holds surprises. This one was no exception as the placement number was lower than expected at 93.0%. It was within the wide range of estimates, leaving it in a neutral position. Placements were expected to be lower due to the large placements in May. The on-feed number on July 1 was 101.0%, in line with the estimates. Marketings were 91.0% and lower than the estimate of 91.8%. This will leave traders cautious on the open as these numbers may have been factored in. Boxed beef prices showed further weakness on Friday with choice down $2.32 and select down $0.66, indicating demand is currently struggling. The Commitment of Traders report showed funds selling 3,922 live cattle futures contracts, reducing their net-long position to 65,041. Fund traders increased their long futures position for feeder cattle by 1,006 contracts to a net long of 3,211.

Hog futures had a very positive week last week with the market turned by the potential for continued strong demand. It seems demand has turned the corner, indicating potential further price strength. This was sufficient to trigger short-covering and renewed buying interest in an oversold market. Cash did not perform well Friday with the National Direct Afternoon Hog report down $2.97. However, cutouts did well with a gain of $1.91, indicating good demand. For traders to be confident the market will trend higher, they will need to see more consistent support in cash. The Commitment of Traders report showed the funds reducing their short position by 2,145 contracts to a net short of 13,979.

	BULL SIDE		BEAR SIDE
1)	The June placement number from the Cattle on Feed report was below the average trade estimate, which may provide traders with the desire to buy the market Monday.	1)	Cattle marketings were below the average expectations, indicating the reduction of slaughter is increasing the availability of cattle.
2)	Cash cattle traded at steady money in the South, which may provide some confidence for traders to hold for at least steady money again this week.	2)	The numbers on the Cattle on Feed report were within expectations, which may leave futures with limited upside potential.
3)	Hog futures posted a positive week and the strength of cutouts Friday should further support the market Monday.	3)	Cash hogs have yet to show consistent strength to solidify the uptrend and assure it will remain intact.
4)	Hog futures have further to correct the oversold condition the contract have been in for a long time.	4)	The packers generally do not begin the week with higher cash as they wait to see the level of demand over the weekend. This may leave the upside potential of futures limited.