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

GENERAL COMMENTS:

Last week was positive for cattle with cash trading significantly higher. Southern cattle sold for $3.00 to $4.00 higher while Northern dressed cattle traded as much as $5.00 higher. Packers needed cattle and were not shy about bidding up to obtain them. It will be interesting to see the direction cash takes this week as the market moves through December. Boxed beef prices were steady to higher with choice down $0.74 and select remaining unchanged from the previous day. Weekly export sales were a paltry 4,800 metric tons (mt) and hopefully are not indicating that international buyers are backing away due to high prices. Feeder cattle showed greater strength, making new highs Friday as they continue to push toward contract highs. Support continues to stem from the restriction of cattle imports from Mexico.

Hog futures set back Friday in nearby months. The June and later contracts held, indicating traders are looking for strong prices to continue. The cash market took a hit with the National Direct Afternoon Hog report falling $3.67 and the packers had sufficient supply purchased with no need to be aggressive. This weakness may be short-lived as the packers may be more aggressive this week as they step up to the plate to procure hogs for regular slaughter schedules. Pork cutouts were higher, posting a gain of $1.37 after a recent period of struggling cutouts values. Pork export sales were not exceptional at 17,200 but were not bearish as they were near the previous week's level.

	BULL SIDE		BEAR SIDE
1)	Strong cash cattle trade will increase the resolve of feedlots to set their sights on higher cash this week.	1)	Feeder cattle futures are overbought and may have difficulty reaching much higher without further fundamental support.
2)	Feeder cattle should remain supported as cattle import restrictions from Mexico remain in place. It is uncertain how long this will continue.	2)	High beef prices may be impacting international demand. This could limit further upside potential.
3)	Hogs set back Friday with pressure due to cash weakness and end-of-the-month positioning. This may be short-lived as traders may be more active Monday.	3)	Hog futures had been moving higher despite the recent weakness of cash and cutouts. The market may correct in the near term.
4)	Packers should be more aggressive Monday and purchase hogs to maintain the strong slaughter pace. They may be early in the week rather than later.	4)	Cash hogs have been struggling recently and traders may be unwilling to maintain the uptrend of futures without seeing further strength.