Monday Morning Livestock Market Update - Hog Futures May Show Further Short-Covering

GENERAL COMMENTS:

There had been hope that feedlots would again gain the upper hand and hold for higher cash. That was true for Northern dressed cattle as cash was $1.00 higher; however, Southern live cattle traded $1.00 lower. We will know the full impact of cash trade today, as the final number and prices will be released, with more cattle likely trading later in the day on Friday. But it usually does not change as early trade, even if it is light, usually sets the stage for the rest of the trade. Feeder cattle backed away from potentially reaching contract highs. Boxed beef prices took a large hit, with choice down $5.29 and select down $3.16. The May Livestock Slaughter report showed cattle slaughter at 2.184 million head. This is the lowest May slaughter since 1960. The Commitment of Traders report showed fund traders adding 2,778 long futures positions, increasing the net-long live cattle position to 125,583. There were 2,339 positions added to feeder cattle, bringing the net-long position to 15,695.

Hog futures reacted positively to the Quarterly Hogs and Pigs report in the deferred contracts. October and later contracts posted triple-digit gains. The July and August contracts held their own, but could not find sufficient support to keep pace. Packers were not aggressive in the cash market, with the National Daily Direct Afternoon Hog report declining $1.85 with very light trade. Packers may be aggressive at the start of the week, purchasing early due to the upcoming July 4th weekend. Pork cutout values gained $0.15. The Commitment of Traders report showed the fund traders increasing their net-short position to 33,652 contracts, up 5,012 from the previous week.

	BULL SIDE		BEAR SIDE
1)	The cattle market remains bullish, and price declines may remain temporary.	1)	Feeder cattle futures have not been able to revisit and penetrate contract highs. This may be an area of strong technical resistance.
2)	The fund traders continue to add to their long positions as the market remains supported and supplies tight.	2)	The large decline in boxed beef on Friday may put further pressure on the market today.
3)	Hog futures rebounded in response to the Hogs and Pigs report. This could carry over today as further short-covering could take place.	3)	The bounce in hog futures on Friday may be short-lived unless there is greater fundamental support.
4)	Stronger futures prices on Friday could be the catalyst to fuel the correction of the oversold market.	4)	Pork cutout values continue to flounder, being unable to find solid support and trend higher. Pork supplies remain plentiful.