Monday Morning Livestock Market Update - Market Uncertainty May Maintain Pressure

GENERAL COMMENTS:

Selling pressure surfaced on cattle futures on Friday as cash traded lower. Southern cattle declined $4.00, with Northern dressed cattle down $3.00. Packers gained the upper hand by slowing the slaughter pace, with the feedlots finally having to move cattle at lower prices. Liquidation may continue as workers at the JBS plant in Greeley, Colorado, gave notice over the weekend of a possible strike on March 16. The union gave the required seven-day notice that it is canceling its contract extension, which will end at 11:59 p.m. Sunday, March 15. This is likely to put further pressure on the cattle markets today. Boxed beef prices closed mixed on Friday, with choice up $0.33 and select down $1.66. The Commitment of Traders report showed that fund traders were net sellers of 4,919 futures contracts, reducing their net-long position to 112,044. They reduced their net-long position in feeder cattle by 693 contracts to 18,941.

Hog futures continue to regain strength in nearby contracts while making new highs in the August and later contracts. Traders remain optimistic amid rising demand, a potentially tighter supply, and higher prices as the year progresses. The substantial increase in crude oil prices may either further increase demand, as consumers turn to pork instead of high-priced beef, or reduce overall demand for red meat. Packers were aggressive on Friday, with the National Daily Direct Afternoon Hog report up $1.95. With their aggressiveness on Friday, it is likely that further gains may be seen today. Pork cutout values declined by $0.95. The Commitment of Traders report showed fund traders increasing their net-long position by 6,468 futures contracts to 117,601.

	BULL SIDE		BEAR SIDE
1)	The cattle market may have overcorrected to the downside after the decline in cash cattle trade. This may result in a bounce in futures.	1)	Lower cash cattle trade may put further pressure on the market as packers may have been able to purchase cattle for deferred delivery, reducing the need to be aggressive this week.
2)	Cattle supplies remain tight, and the beef herd shows little sign of rebuilding. This will take some time to change.	2)	The strike at the JBS plant may begin on March 16, as the union has given the required notice of the termination of the contract extension.
3)	Deferred hog futures contracts continue to make new highs, keeping the uptrend intact and buyers confident in holding long positions.	3)	The jump in the crude oil price may impact demand for red meat even though pork is less expensive than beef.
4)	Higher cash to close the week may indicate packers are short bought on hogs and may bid aggressively today.	4)	Deferred hog futures contracts have been increasing steadily and may be ripe for a price retracement.