Monday Morning Livestock Market Update - Cattle Futures Are Expected to Open Higher

GENERAL COMMENTS:

Cattle futures closed lower despite ongoing positive fundamentals. Traders decided to err on the side of caution ahead of the cash trade and the Cattle on Feed report. Surprisingly, traders were cautious despite some light trading ahead of the close, indicating higher cash trade. History has shown that even a negative Cattle on Feed report has had a negative reaction of limited duration. Yet, traders were cautious. Cash cattle traded higher, with Southern cattle $1.00 to $2.00 higher. Northern dressed cattle traded $6.00 higher. The Cattle on Feed report was neutral to slightly bullish, with Cattle on Feed at 98% of a year ago, placements at 95%, and marketings at 87%. The on-feed and marketings were close to expectations, while placements were 1.7% below expectations, providing the bullish aspect of the report. Cattle futures should trade higher today as traders focus on the fundamentals. Boxed beef prices were higher, with choice up $1.53 and select up $0.95. The Commitment of Traders report showed the fund traders adding 8,413 live cattle futures contracts, bringing their net-long position to 115,052. Traders added 797 long feeder cattle futures contracts, bringing their net-long positions to 18,766.

Hog futures closed higher as the market slowly regains the losses. It was expected that cash would be lower as packers showed little interest on Friday. However, that was viewed by traders as temporary and that packers were going to retain higher slaughter speeds and may be more aggressive this week. The National Daily Direct Afternoon Hog report showed cash down $2.08. Pork cutout values declined by $0.67. Hog futures may follow the strength that is expected in the cattle market, as continued high beef prices should support pork demand. The Commitment of Traders report showed the fund traders selling 17,245 futures positions, reducing their net long to 111,218 contracts.

	BULL SIDE		BEAR SIDE
1)	Placements in January were below the average trade expectation and 5% below a year ago. On-feed numbers were slightly below the average expectation.	1)	Cattle marketings in January were 3% below a year ago. This was in line with expectations and reflects the slower slaughter pace.
2)	Cash cattle traded higher as packers needed to step up to purchase what they needed. This will give traders confidence to buy into the market.	2)	Cattle futures may maintain a sideways pattern for the time being despite the neutral to friendly report.
3)	The hog market has been trending higher, regaining some of the losses of the recent downturn. Traders have been regaining confidence to buy into the market.	3)	Cash hogs continue to struggle to move above and maintain a cash price above $90.00.
4)	Hog futures should gain support from a higher cattle market, as higher beef prices should stimulate higher pork demand.	4)	The higher slaughter pace has not tightened the hog supply. Packers have little difficulty purchasing what they need without being too aggressive.