Monday Morning Livestock Market Update - Uncertainty May Result in Mixed Trade

GENERAL COMMENTS:

Cash cattle traded lower last week, but Friday's trade did not reflect that. Lower cash had already been factored in, allowing the market to correct into the weekend. It is uncertain whether the strong gains in boxed beef will provide further support today. Boxed beef prices on Friday showed choice up $3.50 and select up $3.49. Cattle futures closed lower for the week, but it is uncertain whether the trend will continue. High fuel prices, which are impacting food prices, are affecting consumer buying habits. Consumers are turning toward lower-priced beef cuts and may be turning toward other sources of meat. The Commitment of Traders showed the fund traders trimming their long positions by 23 contracts, reducing their net-long position in live cattle to 132,816. They were net sellers of 1,603 contracts in feeder cattle, reducing their long position to 20,348.

Hog futures closed lower on Friday, but closed higher for the week. There was little fundamental news last week to establish a change in trend. Without much change in the fundamentals, technical trade seemed to be the activity of the week. The May and June contracts closed the chart gap that had remained since earlier in the week. Some later contracts still retain their gaps, but without strong support, those may be filled soon. As expected, there was no change released on the National Daily Direct Afternoon Hog report, with only a weighted average price of $90.42 reported. Pork cutouts were higher, posting a gain of $1.79. However, that in itself will have little impact on the market today. The Commitment of Traders report showed the fund traders selling 23,155 futures contracts, reducing their net-long position to 54,876.

	BULL SIDE		BEAR SIDE
1)	Higher boxed beef prices may indicate that some stability is developing at the lower prices.	1)	The bounce of cattle futures on Friday may be the result of short covering into the weekend and not that support has been found.
2)	Even though consumers seem to be turning toward lower price cuts of beef, demand should remain strong overall.	2)	The Commitment of Traders report showed the first decrease in long positions seen for a while. Traders may continue to liquidate to reduce their exposure.
3)	Hog futures may have found support, but technical trade may result in closing the chart gaps. Once close, aggressive buying may again resume.	3)	Some hog futures contracts have chart gaps below the market that need to be filled and likely will happen soon.
4)	Hog slaughter remains aggressive and will continue to keep supply from backing up in the market and eventually tighten supply.	4)	Packers are not expected to be aggressive with their hog purchases to begin the week, but will see how many they have available.