Monday Morning Livestock Market Update - Cattle Futures May See Early Pressure

GENERAL COMMENTS:

The cattle complex pushed higher Friday with feeder cattle again leading the charge. This is the second week feeder cattle have outperformed live cattle, pushing through technical resistance and garnering increased buying interest. It was a bit unusual for traders to buy aggressively ahead of the Cattle on Feed report. They generally want to reduce exposure and will position themselves to that end. However, they felt more confident over the steady to higher cash received for cattle rather than what the report might say. After all, most often the reaction to the report is short-lived. The report was slightly negative and may trigger selling to begin Monday. Cattle on feed as of Nov. 1 was 100.3% at 11.986 million head compared to the estimate of 99.9%. Placements were higher at 105.3% at 2.286 million compared to the estimate of 103.3%. Marketings came in at 104.7% at 1.845 million head compared to the estimate of 105.1%. The Commitments of Traders report showed fund traders adding 5,098 live cattle futures contracts, increasing their net-long position to 108,415. They added 1,608 futures contracts to increase their net-long position in feeder cattle to 13,667.

Hog futures pushed higher despite the weakness of cash and cutouts during the week. The change in cash was not reported Friday due to packer confidentiality, but the weighted average price of $82.72 was listed. Pork cutouts took another hit with a decline of $1.30. The packers may be aggressive Monday as they may want to purchase hogs early as it is a holiday-shortened week. But even though they may be aggressive, they may not pay very much. This may not be sufficient to hold futures in positive territory. Traders remain bullish for the summer as July made a new contract high, closing above $100 with June knocking on the door of a new high. The Commitments of Traders report showed the fund traders reducing their long position in hogs by 5,371 contracts and holding a total of 115,590 long positions.

	BULL SIDE		BEAR SIDE
1)	Feeder cattle continue to lead the cattle complex higher with the March contract closing at the highest level since July 26.	1)	The Cattle on Feed report was slightly bearish in all three categories. This may trigger selling to begin the day as traders may not have positioned themselves ahead of the report.
2)	Traders are optimistic over continued tight cattle numbers which may limit the downside price potential of beef prices.	2)	Cash cattle did not perform quite as well as some early trade indicated. Prices were steady to $1.00 higher but might have been a disappointment.
3)	July hog futures closed above $100 and a new contract high with June nearly reaching a new high. Traders are bullish on demand as the year progresses.	3)	The further weakness of pork cutouts on Friday added to the weakness seen much of the week. This may trigger renewed liquidation.
4)	The packers may be aggressive early this week to obtain the hogs they need before the Thanksgiving holiday.	4)	The packers may not be aggressive due to the holiday-shortened week. They may have already purchased much of their needs.