Monday Morning Livestock Market Update - Cattle Futures May Show Volatile Trade

GENERAL COMMENTS:

Cash cattle traded lower for the week. Northern dressed cattle were as much as $10.00 lower while Southern live cattle traded as much as $3.00 lower than the previous week. Cash had fallen around $35.00 over the past number of weeks, moving some feedlots into the red. The news on Friday of President Trump announcing the elimination of all quotas on imported beef as well as tariffs had already been anticipated; there was an actual number associated with it. Trump indicated he will sign an executive order to import 300,000 metric tons of beef over the next 90 days and promised to reduce ground beef prices by 25%. There is no indication as to where the beef will come from. Boxed beef prices fell on Friday with choice down $4.24 and select down $2.42. The Cattle on Feed report was neutral to bullish but may not have much impact. On feed as of Aug. 1 was 102.0% with an average estimate of 102.5%. Placements in July were 89.0% with an estimate of 93.5%. Marketings in July were 93.0% with an estimate of 92.5%. The Commitment of Traders report showed fund traders as net sellers of 2,982 live cattle futures contracts, reducing their long position to 62,967. They were net sellers of 641 contracts in feeder cattle, reducing their net-long position to 10,261.

Hog futures posted a higher close on the likelihood that short-covering took place ahead of the weekend. Traders have not been taking long-term positions, and those holding short positions did not want to hold them over a weekend during which unexpected news could develop. Both cash and cutouts were higher on Friday, which could provide support to begin the week. The National Daily Direct Afternoon Hog report was up $1.93 on good volume. Pork cutouts were up $1.47. The Commitment of Traders report showed fund traders as net sellers of 4,634 futures contracts, increasing their net-short position to 28,997.

	BULL SIDE		BEAR SIDE
1)	Placements in July were 11% below a year ago and 4.5% below the trade estimates.	1)	More beef imports to increase the supply of ground beef and lower prices may further negatively impact cash cattle prices.
2)	Cattle futures reversed on Friday after a gap-lower opened, then closed higher and near the highs in most contracts. Bearish news may be factored in.	2)	Packers paid lower prices for cattle and were able to purchase some for deferred delivery.
3)	Both cash hogs and pork cutouts closed higher on Friday. It is not usual to see packers being aggressive at the end of the week.	3)	The strength in hog futures on Friday may just have been the result of short-covering and not a change in trend.
4)	Hog futures are oversold, and traders may not be willing to press the market lower.	4)	Traders increased their net-short position in the hog market, according to the Commitment of Traders report. The overall attitude remains bearish.