Monday Morning Livestock Market Update - Traders Turn Bearish

GENERAL COMMENTS:

Live cattle futures plummeted Friday, nearly eliminating the gains of the past two weeks. The weakness of cash trade last week does not provide much hope for cash this week. Those feedlots holding out for higher prices for the past two weeks are now staring at possibly lower prices offsetting any gains they may have anticipated due to lower feed prices. This has happened before and may result in further selling as panic sets in and selling increases before prices fall much further. Boxed beef was higher with choice up $0.51 and select up $0.56, but that may not have much influence on the market. Further weakness and we could see a similar pattern as March and early April. The Commitments of Traders report showed funds selling 10,270 live cattle futures contracts, reducing their net-long positions to 48,078 contracts. Funds sold 2,156 feeder cattle futures increasing their net short futures to 3,489 contracts.

Hog futures remain solidly in a sideways trading range. Cash was lower, as expected, resulting in some profit-taking ahead of the weekend. Traders do not seem interested in taking positions for the long haul but continue to trade to scalp the market for a possible profit. Both cash and cutouts continue to chop around with little solid direction. The National Direct Afternoon Hog report showed cash down $2.31. The packers are not expected to step up aggressively Monday as they wait to see weekend product movement. Cutouts on Friday declined $1.20. The Commitments of Traders report showed funds selling 11,067 futures contracts moving them to a net short of 1,702 contracts.

	BULL SIDE		BEAR SIDE
1)	Cattle futures bounced off the lows as the selling pressure subsided into the close. This could generate some buying interest Monday.	1)	The cattle complex looks weak technically. Price increases may be viewed as selling opportunities.
2)	Boxed beef has been holding well recently. Demand is steady, which may limit the downside potential of futures prices.	2)	High prices cure high prices and cattle futures may have difficulty reaching back to last year's highs.
3)	Hog futures may build support as the market remains in a sideways trading range. Futures hold a significant discount to cash.	3)	The hog market has been unable to find solid support from underlying cash and cutouts. Futures may remain rangebound.
4)	The hog slaughter pace remains strong and keeps the supply current in the countryside. Hog weights are steadily declining.	4)	Traders remain bearish on the market with funds selling heavily and moving to a net-short position.