Monday Morning Livestock Market Update - Feedlots Will Try to Squeeze More Out of Packers This Week

GENERAL COMMENTS:

Feedlots held out last week and were rewarded with higher cash trade. Southern live cattle traded $1.00 higher and Northern dressed cattle traded $2.00 higher. October live cattle futures closed higher to adjust to the higher cash. Support also stemmed from strong gains in boxed beef as choice gained $2.78 and select gained $4.32. Live cattle futures were unable to push above the highs of Wednesday and Thursday following the higher cash and cutouts, which could increase the potential for some liquidation if boxed beef prices decline early this week. The feedlots will try to squeeze more out of the packers again this week. The Commitments of Traders report showed fund traders increasing their live cattle long futures positions by 10,878 contracts, moving to a total long position of 67,888 contacts. Fund traders were net buyers of 3,752 contracts in feeder cattle, increasing their net long futures position to 4,803 contracts.

Hog futures closed lower Friday but not without making new highs for the current trend. The packers needed to purchase hogs to finish the week and bid higher to obtain them. The National Direct Afternoon Hog report showed cash up $0.90. The slight pressure on futures was due to the weakness seen in cutouts as they closed $0.49 lower. Traders anticipate higher prices through the end of the year but December futures hold at an $8.00 discount to the October contract. The market will need to prove itself. The Commitments of Traders report showed the fund traders increasing their long futures position by 5,016 contracts to 63,841 contracts.

	BULL SIDE		BEAR SIDE
1)	Feedlots will hold for higher cash again this week as holding out the past two weeks has been rewarded with higher cash prices.	1)	Cattle futures have the higher cash already factored into the market, which may limit the upside early this week.
2)	The trend is up and beef demand may be improving. This may continue to provide support to the market.	2)	Boxed beef prices need to show further strength or cattle futures may trend lower this week.
3)	Hog futures made a new high Friday, keeping the uptrend intact. Traders anticipate demand will continue to improve.	3)	Hog futures are nearing technical resistance and a failure to close above that level could trigger some liquidation.
4)	The packers should be aggressive Monday as they will be ready to purchase hogs to get started on the week. Higher cash Friday indicates good demand.	4)	Cutouts lack the consistency of a higher trend. Continued choopy coutout prices may limit the upside price potential.