Monday Morning Livestock Market Update - Cattle Futures May Slip

GENERAL COMMENTS:

Cattle had a strong Friday with futures closing at the highest level in a week. Cash cattle did not trade higher Friday, resulting in Southern cattle ending the week $2.00 lower and Northern dressed cattle at $5.00 lower. Live cattle futures adjusted closer to cash as short-covering seemed to drive the trade. Boxed beef prices were higher but the gains were limited to $0.59 for choice and $0.56 for select. Packers held back on slaughter as they try to maintain margins. Packers will try to purchase cattle at lower prices this week as the slower slaughter pace has allowed them to purchase more cattle for deferred delivery. The WASDE report will be released Monday, providing information on grain and meat production with the expected prices. The Commitments of Traders report showed funds sold 21,045 live cattle futures contracts, reducing their net-long positions to 58,348 contracts. Funds sold 2,986 futures contracts in feeder cattle and had a net-short position of 1,333 contracts.

Hog futures closed higher for the day but lower for the week. Traders were uncertain about demand during the week, opting to be more aggressive as sellers. Last week's wild start to cash prices set the stage for negative overall trading activity. There is concern that demand may slip. The National Direct Afternoon Hog report showed cash down $1.34 while cutouts gained $0.43. Wednesday is the last day to trade the August contract with October taking over with a discount of nearly $16.00. The Commitments of Traders report showed funds bought 4,236 contracts, bringing their net-long futures position to 9,365.

	BULL SIDE		BEAR SIDE
1)	The rebound of cattle futures Friday still leaves futures below cash, possibly leading to further strength.	1)	The increase in cattle futures Friday may have been from short-covering into the weekend. The potential for lower cash this week may result in selling pressure.
2)	The trading action Friday may indicate cattle futures have established support at the lower levels.	2)	Packers have purchased cattle for deferred delivery and may put them in a strong position to hold for lower cash again this week.
3)	Packers may begin the week somewhat aggressively as they want to purchase hogs sooner rather than later. Higher cutouts Friday may indicate strong demand.	3)	Hog futures fell below the trading range last week and may have a difficult time recovering.
4)	The discount of October hog futures to the August contract seems excessive and may increase trader interest in buying the discount.	4)	The packers may not be aggressive Monday as they assess weekend pork demand. Demand generally slows moving through the later part of summer.