Monday Morning Livestock Market Update - Cattle Expected To Open Lower

GENERAL COMMENTS:

Traders were uncertain of the numbers the Cattle on Feed report would show, resulting in mixed trade to end Friday. The report came in slightly bearish with on-feed numbers as of Oct. 1 at 100% compared to the estimate of 99.7%. Placements in September were at 98% of last year compared to the estimate of 95.6%. Marketings were 102% compared to the estimate of 102.2%. The higher placement number was not unexpected as the dry conditions were thought to have moved more cattle to feedlots. Nevertheless, the trade usually reacts to which side of the estimates the actual numbers fall. The report may result in pressure on the market at the open Monday but traders will then focus back on the fundamentals, tighter cattle supply, and strong beef demand. Boxed beef prices Friday closed higher with choice up $1.07 and select up $0.74. The Commitments of Traders report showed managed money traders adding 4,524 long futures positions in live cattle, bringing their net-long position to 92,825 contracts. They added 618 long positions to feeder cattle, bringing the next long position to 8,275 contracts.

Hogs futures were able to close in positive territory Friday with contracts regaining the losses of the previous day and later contracts pushing to new highs. The cash market remained strong through the end of the week with the National Direct Afternoon Hog report showing cash up $0.41. The packers may take a wait-and-see attitude as they assess product movement over the weekend before aggressively purchasing hogs. The market may find support from cutouts increasing by $0.79 Friday. The September Cold Storage report showed stocks of pork bellies down 31% from August and down 40% from a year ago. Demand continues to remain strong. The Commitments of Traders report showed managed money traders adding 7,967 long hog futures contracts, bringing their net-long potion to 92,646 contracts. This is only 3,518 contracts shy of the record-long position set in 2013.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report may be viewed as neutral and may not have a negative influence on the recent strength in the market.	1)	High cattle placements and slightly higher on-feed numbers may put pressure on cattle futures to begin the week.
2)	Live cattle futures are nearing technical resistance and a break above those levels should support further buying interest.	2)	Live cattle futures are nearing technical resistance levels, which may trigger some selling if futures cannot move above those levels.
3)	Managed money traders continued to add to their long futures position in hogs as they anticipated the uptrend to continue.	3)	Funds are heavily long in hog futures and any bearish news or numbers could trigger liquidation.
4)	High cash hog prices Friday bodes well for the market with the packers paying up to purchase the hogs they need to maintain higher slaughter.	4)	The weakness of the outside markets could spill over into hog futures as traders may opt to liquidate some of their positions.