Monday Morning Livestock Market Update - Mixed Futures as Traders Look For Direction

GENERAL COMMENTS:

Cash cattle traded higher for the week with Southern cattle up $2.00 and Northern dressed cattle up $2.00. Futures had this factored in, leaving the market mixed into the close Friday. Higher boxed beef prices may provide support Monday, but traders may wait to see whether that will come to fruition before becoming too excited. Boxed beef on Friday showed choice cuts up $1.31 and select up $2.35. The Commitments of Traders report showed funds increasing their net live cattle futures position by 1,677 contracts and are now holding a net-long position of 66,718 contracts. Funds reduced their net-long futures position by 430 contracts with a net-long position of 2,781.

Hog futures posted another strong week as demand improved with futures extending the previous week's gains. The October and December contracts hold a steep discount to the August contract as traders remain cautious over continued strong demand after the summer months. The packers have been aggressive recently and should continue this week. Cash is expected higher Monday as packers want to purchase more aggressively at the beginning of the week to gain ownership. Pork cutouts were down $0.78 Friday. The Commitments of Traders report showed fund traders buying 7,821 futures contracts last week, reducing their net-short positions to 6,158.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle last week should keep support under the market. Beef demand has slowed but cattle supplies remain tight.	1)	Beef imports are running at a significantly high level recently which may continue to minimize the upside price potential of cattle.
2)	August and October live cattle futures broke through and closed above chart resistance. This could increase trader buying interest.	2)	Boxed beef prices have been under pressure, which is expected to continue this week despite higher prices Friday.
3)	Hogs remain supported as demand has improved and packers have been more aggressive in the cash market. Higher cash is expected Monday.	3)	Hog futures have had an impressive increase and may see a price retracement with some profit-taking in case weakness develops in pork demand.
4)	Pork packer margins are good and in line with last year and the 3-year average. This will encourage a strong slaughter pace and strong buying interest.	4)	The August and October hog contracts have a chart gap below the market that may be filled. This may take place over the next two weeks before the August contract goes off the board.