Monday Morning Livestock Market Update - Mixed Futures Trade Expected to Begin Week

GENERAL COMMENTS:

Cattle futures are a sight to behold with new all-time highs made last week. Packers held back most of the week in hopes that feedlots would need to sell cattle at even money as some early initial cash trade indicated. But the feedlots had none of it and were determined to hold cattle another week if they did not receive higher prices. Southern cattle traded up to $5.00 higher with Northern dressed cattle as much as $6.00 to $8.00 higher Friday. Cattle futures continue to defy gravity as cattle supplies remain tight and demand remains strong. The Cattle on Feed report was supportive to the market with on-feed numbers on Jan. 1 at 99% compared to the estimate of 99.8%. Placements were 97% compared to the estimate of 101.8% and marketings were 101% compared to the estimate of 101.3%. The report may be factored, in leaving futures mixed Monday as traders wait for further direction. The Commitments of Traders report showed the funds adding just 31 contracts to their net-long position in live cattle bringing their total to 149,756 contracts. The funds added 1,215 long futures contracts, bringing their net-long futures position to 27,983 contracts and the third week of a record-long position.

Hog futures traded on both sides of unchanged Friday, but eventually found the support needed to push the market higher into the close. This was somewhat of a feat as both cash and cutouts were lower. The National Dairy Direct Afternoon Hog report was $1.87 lower with cutouts down $0.08. Last week, cash traded higher on Monday, but packers are not expected to be as aggressive to begin this week. Technically, the futures might be developing a sideways trading pattern in the June through August contracts but also a potential head-and-shoulders bottom. However, it will take supportive cash and cutouts to turn the market higher. The Commitments of Traders report showed fund traders reducing their net-long futures positions by 7,622 contracts with their net-long position at 90,693.

	BULL SIDE		BEAR SIDE
1)	New contract highs and new all-time highs in cattle futures keep the upward momentum strong and traders bullish.	1)	Cattle futures are overbought and with another week of record-long feeder cattle futures, it is only a matter of time before a price correction will take place.
2)	Feedlots had a big win last week with higher cash. They will try to do the same this week as the fundamentals remain supportive.	2)	Boxed beef prices show signs of weakness as demand may become impacted as beef prices remain high.
3)	Hog futures are finding sufficient support from traders for the long term. They continue to buy the break with the anticipation that strong prices will unfold.	3)	Hogs have been unable to find consistent support from cash and cutouts. This will leave the upside limited.
4)	Hog slaughter remains strong to fulfill demand. This will keep supplies from backing up in the market.	4)	Some hog contracts may be developing a sideways trading pattern, leaving the market choppy in the near term.