Monday Morning Livestock Market Update - Cattle Imports From Mexico to Resume

GENERAL COMMENTS:

The Cattle on Feed report was neutral and may have limited influence on the market. Cattle on feed on July 1 was 102% and slightly below the average estimate of 102.2%. Placements in June were 97%, with the average estimate at 98.8%. Even though placements were lower, they were well within the estimated range. Cattle marketed in June were 97%, with an average estimate of 97%. The greater influence Monday will likely be the continued weakness of cash, boxed beef and the reopening of the Mexican border. Last week, Southern cattle traded $7.00 to $8.00 lower. Northern dressed cattle traded $12.00 to $15.00 lower. Boxed beef prices on Friday were lower, with choice down $1.63 and select down $2.04. Choice has now fallen to $361.24 and select to $346.71. The big news is that USDA is lifting a ban on live cattle imports from Mexico. Trade will restart at the Douglas, Arizona, port in about 30 days, with two more ports in New Mexico expected later. Rollins said the situation is under control and that Mexican feeder cattle will move through a disinfectant dip vat when entering a U.S. port of entry. It is uncertain how much of this is already factored into the market. The Commitment of Traders report showed the fund traders as net sellers of 22,454 live cattle futures, reducing their long position to 75,681. They were net sellers of 1,941 feeder cattle futures, reducing their net-long position to 9,345 contracts.

Hogs found further support on Friday, finishing a good week of higher prices. Futures moved to higher highs again as trader optimism remains. Cash was lower as packers had purchased most of their needs for the week. The National Daily Direct Afternoon Hog report was down $2.77 with light sales. Packers may begin the week somewhat aggressively as slaughter was low on Friday and demand remains strong. They will need to purchase hogs to maintain pork supplies. Pork cutouts on Friday were up $0.15. Traders remain bullish on the market with futures moving back to the highest level since May 20. The Commitment of Traders report showed the fund traders as net buyers of 15,390 futures contracts, reducing their short position to 27,791.

	BULL SIDE		BEAR SIDE
1)	The Cattle on Feed report was neutral. Now that the numbers are known, traders may be more confident to buy back into the market.	1)	The reopening of the U.S. border to Mexican cattle is likely to be viewed as negative to the market.
2)	The resumption of the importation of cattle from Mexico has been talked about and is not a surprise to the market. It may not push futures lower.	2)	Boxed beef prices continue to weaken as demand has slowed. High prices seem to have cured high prices.
3)	Hog futures pushed to new highs on Friday, keeping the uptrend intact.	3)	Hog futures are now overbought, and the market could correct at any time.
4)	The fund traders are liquidating their short positions in hogs and should continue to do so as cutout and cash improve.	4)	The October hog futures hold a significant discount to cash. Traders anticipate demand to slow over time.