Monday Morning Livestock Market Update - Boxed Beef Weakness May Pressure Futures

GENERAL COMMENTS:

Cattle were able to close higher with a correlation to weaker corn futures. Live cattle futures were also supported by cash remaining steady to $1.00 lower. The fear of lower cash cattle subsided as the trend established Thursday carried through Friday. This relieved some of the fear, allowing futures to be supported by lower corn. The greater issue plaguing the cattle complex is the weakness of boxed beef. Choice cuts declined $2.97 with select down $4.34 on Friday. This does not bode well as demand has slowed. Feeder cattle found strength from lower corn prices resulting in contracts closing the chart gap left from the lower opening and trade of the previous day. However, feeder cattle closed over $2.00 lower for the week. The Commitment of Traders report showed funds adding 5,005 futures contracts to their already net-long position in live cattle, moving it to 112,157 contracts. Feeder cattle showed an increase of 1,707 long positions moving to it a net-long position of 16,341 contracts.

Nearby hog futures were under pressure for the last two days of the week as the market corrected from recent strong gains. Cash weakness took some steam out of the market with July having only one week remaining to trade, requiring it to converge with the index. Weekly exports sales were slightly lower than the previous week, having little impact on trading. With strong cutout prices, it is likely packers may be aggressive early this week looking to purchase hogs. Cutouts on Friday gained $2.94. This should have a positive influence on futures Monday. The Commitments of Traders report showed fund traders adding 5,284 contracts, bringing their net-long positions to 15,727 futures contracts.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle closed the lower chart gap left Thursday, providing some technical support to the market.	1)	Higher corn overnight and expected Monday will put some pressure back on feeder cattle again.
2)	Packers are slowing their slaughter pace to maintain margins and keep supply in line with demand. Feedlots have lower cattle numbers to offer and will hold for steady prices.	2)	The significant weakness of boxed beef may put pressure on futures as packers will hold the line.
3)	Pork continues to see strong demand with cutouts gaining. This will keep packers more aggressive in the cash market.	3)	Weekly export sales of pork have not been exceptional, which leaves more pork available for domestic use.
4)	Hog numbers seem to be tightening with weights declining. Strong demand may keep prices supported.	4)	Hogs are overbought in nearby months and may make a further price correction.