Monday Morning Livestock Market Update - Hog Futures Need to Hold Support

GENERAL COMMENTS:

Cattle futures pushed to new contract highs on Friday, but they slipped as sellers became more aggressive ahead of the weekend. Strong cash cattle trade dominated the week, with cash trade having already developed on Tuesday. This carried throughout the week with Southern live cattle trading as much as $10.00 higher and Northern dressed cattle up to $14.00 higher. Boxed beef prices were lower on Friday, with choice down $0.41 and select down $1.12. However, that does not change the fact that beef demand is strong, and packers need to step up slaughter. It is doubtful that cash this week will repeat last week's performance, but cash prices may remain steady. The Texas Department of Agriculture confirmed a New World screwworm case about 119 miles from the Texas border near Zapata, Texas. This will assuredly keep the border closed indefinitely. The Commitment of Traders report showed the fund traders as net sellers of 1,256 live cattle contracts, reducing their net-long position to 131,560. They reduced their long position in feeder cattle by 1,740 contracts to a net long of 18,608.

Hog futures showed further weakness with the August contract closing the chart gap and most contracts closing at or near support. Futures will need to hold support, or contracts may make another leg down. A close below support would move futures to the lowest level since the beginning of the year. Packers were able to procure the hogs they needed without being aggressive. The National Daily Direct Afternoon Hog report showed cash down $0.10. Pork cutout values gained $0.83. The expected demand for pork due to the high beef prices has developed to some degree, but not enough to support pork prices. The Commitment of Traders report showed fund traders reducing their net-long position by 8,774 contracts to a net long of 46,102.

	BULL SIDE		BEAR SIDE
1)	The strong cash cattle trade last week will continue to support the market as beef demand remains strong.	1)	Cattle futures are overbought and may see a continued correction to begin the week.
2)	New contract highs in cattle futures were made before the market fell back into the close. The trend remains up.	2)	High fuel prices impacting the cost of almost everything will eventually limit demand for high-priced beef.
3)	The August hog contract closed the chart gap. Other contracts held support, which may increase technical buying interest.	3)	Traders remain negative on the hog market, as it lacks strong fundamentals.
4)	Packers were light buyers last week, remaining unaggressive. They may step up more aggressively this week.	4)	If support does not hold, hog futures may decline as further liquidation would take place.