Monday Morning Livestock Market Update - Traders to Begin Week With Caution

GENERAL COMMENTS:

Cash cattle showed light trade Friday with prices in the South mostly at $180, which was $1.00 higher than the previous week and $290 to $292 in the North and steady to $2.00 higher. Another week is before us, and it is a guessing game as to cash potential. We know cattle supplies are tight, which should continue to support the market; but there will also be a threshold as to what consumers will pay for beef. International demand was a bit lower according to the weekly export sales report with 11,900 metric tons (mt) of beef exported. This was a decrease of 34% from the previous week. Boxed beef was mixed with choice up $1.24 and select down $0.12. The Commitment of Traders report showed funds increasing their long positions in live cattle by 52 contracts, bringing their net-long positions to 94,767 contracts. Funds decreased their longs positions by 1,476 bringing their net long positions to 13,187 contracts.

Hog futures received no support from the cash market as the National Direct Afternoon Hog report showed a decrease of $1.12 to end the week. Packers are not expected to be very aggressive Monday as they see how many hogs they need and what is available to begin the week. Futures could see some buying interest due to cutouts being up $3.59. However, the erratic nature of cutout prices may not garner much attention. Cutouts will need to see consecutive days of gain to trend higher. Futures could rebound somewhat Monday as the recent pattern has been futures price movement in opposite directions from day to day. Weekly exports sales were down 29% from the previous week at 26,300 mt, lacking robust demand from international buyers even though pork prices are low. The Commitment of Traders showed funds adding 5,063 futures contracts, bringing their net-long positions to 32,712 contracts.

	BULL SIDE		BEAR SIDE
1)	Cash cattle traded steady to higher last week on light trade, providing confidence to feedlots to hold again this week.	1)	Cattle futures already have higher cash factored in, which could result in sideways to lower trade early in the week.
2)	New contract highs last week kept funds active in the market, adding to their long positions. Fundamental traders remain friendly as cattle numbers remain tight.	2)	The trend higher will not last forever as there will be a level at which consumers will reach a threshold and reduce their demand for beef.
3)	Strong cutouts at the end of the week could indicate demand was strong during the week and retail will need to restock pork early this week supporting prices.	3)	Pork cutouts just cannot find sufficient support as prices remain erratic. This keeps traders scalping the market for short-term potential profit, keeping prices volatile.
4)	Heavy slaughter Saturday may require packers to be more aggressive purchasing hogs in the countryside early this week to fill slaughter.	4)	The uncertainty over the full implementation of Prop 12 on Jan. 1 keeps an element of bearishness in the market.