Monday Morning Livestock Market Update - Selling Pressure May Continue in Cattle Futures

GENERAL COMMENTS:

Cattle futures continued to fall, with new lows made in live cattle. The October, December and February contracts fell below support, adding to the technical bearishness. Packers lowered their bids last week, and feedlots moved cattle. Southern live cattle traded $10.00 to $11.00 lower, with Northern dressed cattle $12.00 to $15.00 lower. Cash had declined nearly $25.00 over the past month. Adding to the bearishness was the decline in boxed beef, with choice down $1.57 and select down $0.40 on Friday. Over the past month, choice cutouts have declined $31.20. The weakness of cash and boxed beef is likely to put further pressure on cash cattle and cattle futures. The Commitment of Traders report showed fund traders reducing their long cattle positions in live cattle by 4,532 futures contracts to a net-long position of 114,908. They reduced their net-long positions in feeder cattle futures by 1,041 contracts to a net long of 14,566.

Hogs had another positive day in the August through April contracts, with the August and October posting triple-digit gains. Hog futures have come to life over the past month and may continue to show further strength. Pork demand has improved, and packers have become more aggressive in their purchases as there is some evidence of reduced market-ready hogs. The National Daily Direct Afternoon Hog report showed cash down $ 0.94 on moderate volume, as most of the required hogs had been purchased for the week. Packers may be aggressive to begin the week. Pork cutout values increased $1.99 with gains in all categories except ribs. The Commitment of Traders report showed fund traders as net sellers, increasing their short positions to 40,390. This may leave substantial room for further short-covering.

	BULL SIDE		BEAR SIDE
1)	Cattle futures are oversold and could see some short covering at any point in time.	1)	Cash cattle trade is expected to be lower again this week as packers pull back amid weakness in boxed beef.
2)	Cattle supplies remain low, and beef demand will return once the summer-season decline runs its course.	2)	Cattle futures closed below support on Friday, with feeder cattle not far behind. This may result in further long liquidation.
3)	Pork demand has improved, resulting in packers being more aggressive in purchasing hogs.	3)	Hog futures have had strong gains and may be at levels that may trigger selling.
4)	The combination of reduced market-ready hogs and increasing pork cutout prices has turned the market bullish. Further short-covering should take place.	4)	If weakness in boxed beef surfaces, the current bullish attitude may temper and long liquidation might take place.