Tuesday Morning Livestock Market Update - Futures May Struggle

GENERAL COMMENTS:

Cattle futures closed higher for the week but the gains were limited. The hopes for higher cash and support for boxed beef decreased as the week progressed. Cash cattle traded steady to $1.00 lower in the South depending on the day with Nothern dressed cattle trading $2.00 lower. This is a shorter week for business to be done, which may impact price potential. The initial estimate is from much of a repeat as last week with cash steady to lower. Boxed beef prices were mixed Friday with choice up $0.68 and select down $0.37. This does not provide solid support for the complex. Feeder cattle prices in the country were mixed last week as uncertainty influences the market. The Commitments of Traders report showed funds selling 3,609 live cattle contracts, reducing their net-long positions to 41,656 contracts. Funds were net buyers of 878 feeder cattle contracts, reducing their net-short position to 3,567 contracts.

Hogs has had a very good week with new highs posted each day. Traders have been bullish and continued to support the market, even though underlying cash did not support the strength. It was surprising to see cash up $0.09 on Friday's National Direct Afternoon Hog report after being lower all week. There is optimism over hog prices for the rest of the year. The December futures contract has rallied $10.00 since mid-July. Cutouts on Friday were up $1.34. This should provide support to begin the week. Packers may be more aggressive Tuesday due to the shorter week. The Commitments of Traders report showed funds as aggressive buyers, adding 22,172 long positions bringing their net-long position to 32,007 futures contracts.

	BULL SIDE		BEAR SIDE
1)	The October live cattle contract is now the front month and is at a discount to cash. This may move higher to close the gap.	1)	Lower cash prices and the weakness of boxed beef may continue this holiday-shortened week.
2)	Futures may be finding some support at this level with traders anticipating stronger boxed beef prices to develop.	2)	The packers may have been able to purchase more cattle ahead last week, leaving them less aggressive this week.
3)	Traders are bullish on the hogs. The Commitments of Traders report showed fund traders increasing their buying interest substantially.	3)	Hog futures are about ready for a price retracement. Traders may take some profits if there is any sign of weakness.
4)	The trend is up for hog futures, which may increase the buying interest. Traders may continue to trade with the trend.	4)	Cash hogs have not been leading futures higher. This may limit the upside price potential and trigger selling once the trend runs out of steam.