Monday Morning Livestock Market Update - Fund Traders Hold a Record-Long Hog Futures Position

GENERAL COMMENTS:

Even though cash cattle traded higher last week, live and feeder cattle futures closed lower for the week. Northern dressed cattle traded $2.00 higher with Southern live cattle trading steady to $2.00 higher. Traders did not get too excited over the higher cash but remained cautious over the upside price potential. Boxed beef prices were mixed with choice up $4.20 and down select down $0.37. Packers will try their best to improve margins and may continue to slow the slaughter pace to accomplish that task. Cattle imports from Mexico remain restricted, which may continue to provide support as long as that remains in place. It is uncertain how many cattle packers have purchased for deferred delivery but one major packer had already purchased some cattle for delivery during the last week of December. The fund traders added 5,528 long futures positions in live cattle over the week ended Dec. 3, increasing their net-long positions to 123,878 contracts. They added 2,054 futures positions bringing their net-long position in feeder cattle to 17,521.

Hogs continue to hold well despite the recent pressure on the cash market. The National Direct Afternoon Hog report Friday showed cash down $5.21 with the weighted average price down to $80.13. Traders remain friendly to the market but with another record-long fund futures position and the end of the year moving closer, there could be a significant price correction if those positions are liquidated to close out the books for the year. Pork demand is good and may provide fundamental support to the market. The large drop of cash Friday is expected to be short-lived with the packers likely stepping back up early this week to purchase their required supply. Pork cutouts were up $2.52 on Friday. The Commitments of Traders report showed fund traders adding 8,471 futures, bringing their net-long position to 138,640 contracts and another new record.

	BULL SIDE		BEAR SIDE
1)	Steady to higher cash may continue as cattle imports from Mexico remain restricted. Supply may tighten further the longer this remains in place.	1)	Cattle futures may be rolling over with further liquidation possible ahead of the end of the year. There is more downside risk than upside potential.
2)	Choice boxed beef prices continue to push higher, moving the choice/select spread to a wide $35.31, indicating solid demand.	2)	There has been no new news about the screwworm found in a cow in Mexico. There could be an announcement that imports could resume at any time.
3)	Hog traders continue to trade the trend and are not shy about adding to their long positions to support it.	3)	The fund traders hold record-long positions in hog futures which could see some liquidation ahead of the end of the year and a large price correction.
4)	Pork demand is good and the packers maintain a strong slaughter pace. Hog supplies are current.	4)	The large drop in cash hogs Friday may put pressure on the market Monday. Traders may be cautious about adding to their long positions.