Monday Morning Livestock Market Update - JBS Plant Strike to Take Center Stage

GENERAL COMMENTS:

Cash cattle finished the week lower following the pattern seen earlier in the week. Southern cattle were $4.00 to $5.00 lower, with Northern dressed cattle $8.00 lower. Unfortunately, the early expectations are for lower cash this week. The reduced slaughter pace has bolstered boxed beef values, moving packers' margins into the black. Boxed beef prices were higher, with choice up $0.83 and select up $0.72. With margins being positive, most often packers will increase slaughter to take advantage of positive margins. However, that may not take place this week, with the strike taking place at the JBS Greeley plant and cattle being shifted to other facilities. Last week, the April live cattle futures contract had a price range of $5.72 last week, with April feeders posting a price swing of $11.72. This was rather calm considering the previous weeks. The Commitment of Traders report showed fund traders reducing their net-long live cattle futures positions by 6,134 contracts to 105,910. Funds were net sellers of 229 feeder cattle futures, reducing their net-long position to 18,712 contracts.

Hog futures completed three days of liquidation on Friday, which may set the stage for some buying interest to surface, which would provide support. Packers were surprisingly aggressive on Friday, with the National Daily Direct Afternoon Hog report showing a gain of $0.43. Packers are expected to be somewhat aggressive to begin the week. Pork cutouts were down $0.10 at 100.19. Even though cutouts were slightly lower, this should not be viewed as negative due to the continued increase in the slaughter pace. Packers have been increasing slaughter to keep up with demand, and yet cutouts are trending higher. The Commitment of Traders showed fund traders adding 3,009 net-long futures contracts, increasing their long position to 120,610.

	BULL SIDE		BEAR SIDE
1)	Tight cattle supplies should limit the losses in the cash market in time. Boxed beef prices have been increasing as consumers demand beef.	1)	The strike at the JBS plant will create some uncertainty and potentially lower cattle prices as slaughter will be disrupted.
2)	Cattle futures hold a significant discount to cash. If there is any evidence of stability, futures should rebound.	2)	Cattle futures may see further pressure as the market continues to see pressure from the outside markets.
3)	The strong hog slaughter pace has increased the aggressiveness of packers to purchase the hogs they need.	3)	Hog futures completed three days of liquidation, but further weakness may unfold as the market continues to correct.
4)	Hog futures have completed three days of liquidation and may find buying interest after the correction.	4)	The increased slaughter pace will keep the market supplied with pork, potentially limiting the upside potential for cutout prices.