Monday Morning Livestock Market Update - Cattle Futures May Regain Friday's Losses

GENERAL COMMENTS:

The cattle complex moved to new highs early Friday and, even though cash cattle traded higher, traders decided to take profits ahead of the Cattle on Feed report. That may not have been necessary as the report was bullish. However, much of the bullishness of the report might have already been factored in and now that the numbers are known, futures may settle back further. The strong cash trade will provide sufficient support to move the market higher, no matter the reaction to the report. Southern live cattle traded $7.00 higher at $210. This should support the futures as the April contract holds a discount to cash. Northern dressed cattle traded $10.00 higher, averaging $335. Boxed beef prices were mixed, ranging from $2.61 lower to $0.26 higher. Feeder cattle prices in the country continue to increase with continued strong demand. The Commitments of Traders report showed fund traders as net buyers of 6,968 futures contracts in live cattle, bringing their long position to 118,029 contracts. They added 771 long positions to feeder cattle with a net-long position of 29,538 contracts.

Hog futures found support, keeping futures in the sideways range it has been in. Cash and cutouts continue to fluctuate and unable to establish a solid trend. Hog slaughter was lower for the week due to the impact of weather and some plants being closed some days. That may have little impact on the market as movement and slaughter will return to the usual. The National Daily Direct Afternoon Hog report showed cash down $0.99. The packers will assess pork demand before purchasing more aggressively. Pork cutouts on Friday gained $1.00. The Commitments of Traders report showed fund traders increasing their net-long futures position by 2,246 contracts to 52,675.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report was bullish, which may increase the buying interest and keep the trend higher.	1)	The bullishness of the Cattle on Feed report may have already been factored in. Further liquidation may be possible.
2)	The large increase in cash cattle last week indicates the packers were short-bought and it is unlikely they purchased many cattle for deferred delivery with the jump in prices.	2)	Cattle futures are overbought and ripe for a price correction. Traders may liquidate and buy back into the market at a lower price.
3)	Hog futures bounced from the lows, moving futures solidly back into the trading range. The market seems to be building support.	3)	Pork cutouts and the cash market remain choppy, unable to trend higher. Consumer demand has not shifted from beef to pork as expected.
4)	There is anticipation that pork demand will improve due to the extremely high beef prices. Consumers will reach a threshold of what they will pay for beef.	4)	The packers continue to find an ample supply of market-ready hogs, leaving them less aggressive with no need to chase the market higher.