Monday Morning Livestock Market Update - Cattle Expected to Open Lower

GENERAL COMMENTS:

Cattle futures closed lower for the week Friday as further cash weakness pressured the market. The outlook for this week has not changed with the potential for lower cash again unless boxed beef finds solid support and cattle futures uncover buying interest. The packers have been able to manage slaughter to their favor, which has improved their margins but backed up cattle in the country. The Cattle on Feed report did not provide much to change the current market. On feed as of Aug. 1 was 100.3% compared to the average estimate of 100.0%. Placements in July 1.702 million head or 105.8% compared to a year ago and the average estimate of 104.0%. Marketed in July was 107.7% with the average estimate at 108.2%. Placements were slightly above the range of estimates while marketings were slightly below. This sets the potential for a lower opening due to the bearish implications of the report. Boxed beef prices were mixed on Friday with choice up $1.35 and select down $1.57. The Commitments of Traders report showed funds selling 2,813 live cattle futures reducing their net long positions to 45,265 contracts. They were sellers of 956 feeder cattle contracts increasing their net-short position to 4,445.

Hog futures had a strong week with the October contract gaining $5.47, reducing the discount it held to cash. The packers were more aggressive during the week than anticipated. Cutouts showed strong gains to end the week with values up $2.62. This was on top of the $1.88 gain in cutouts seen Thursday. The limiting factor today might be the weakness of cash with the National Direct Afternoon Hog report down $2.60 and the possibility packers will not be aggressive Monday. The Commitments of Traders report showed funds added 11,537 futures contracts, bringing them to a net long of 9,835 contracts.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report may have already been factored in, providing stability to the cattle complex.	1)	July placements above trade expectations and marketings below expectations may keep pressure on cattle futures.
2)	Cattle futures are oversold and may find some technical support at these levels.	2)	Cash cattle may see further declines this week as packers purchase cattle ahead and feedlots need to move cattle.
3)	Strong pork cutouts during the last half of the week may indicate continued strong demand. The packers may need to remain aggressive with slaughter.	3)	Hog futures need to hold the gains of last week or traders could liquidate, pushing prices back down into the sideways trading range.
4)	Fund traders are increasing their long positions with the idea that higher hog prices are yet to come.	4)	Lower cash hogs to begin the week may limit the upside price potential as packers wait to see the level of weekend demand.