Monday Morning Livestock Market Update - Support May Remain Elusive

GENERAL COMMENTS:

The news of Tyson closing two processing facilities and putting another facility up for sale coupled with lower cash cattle trade, eliminated nearly $8.00 for live cattle futures and $9.00 from feeder cattle over the past week. We have seen this before, but seeing it happen after the market has already declined substantially since June 25 is difficult to swallow. Cash cattle traded lower, with Northern dressed cattle averaging $5.00 lower while Southern live cattle averaged $7.00 lower. Packers will further attempt to leverage the market this week as feedlots may have little influence for higher prices. Boxed beef prices were mixed on Friday with choice down $0.60 and select up $2.00. Feeder cattle cash prices in the country were lower for the week but held up rather well considering the losses on the board. The Commitment of Traders report showed fund traders adding 983 futures contracts, increasing their net-long position to 65,949. They added 582 long futures positions, increasing their net-long position in feeder cattle to 10,902 contracts.

Hog futures broke through and closed below support in the December and later contracts, making new contract lows. The market could not bind support after the large increase at the beginning of the week. The weakness of cash most of the week took futures below the trading range and showed that the discount the market held was warranted. The National Daily Direct Afternoon Hog report showed cash down $4.07 with light volume traded. Pork cutout values increased $0.98, but had little influence on the market. The Commitment of Traders report showed the fund traders as net sellers of 5,184 futures contracts, increasing their short position to 24,363 contracts.

	BULL SIDE		BEAR SIDE
1)	Much of the negative news of last week may have been factored in, possibly triggering some short-covering and buying interest.	1)	Further weakness in cattle futures may unfold as the market is in bearish downdraft with little positive news.
2)	Beef is in demand and cattle will need to be processed. Cattle will be shifted from closed plants to other plants operating below capacity.	2)	Beef packers have gained further leverage and will use it to their advantage to improve their margins.
3)	Hog futures falling below support may have triggered stops that pushed the market lower than necessary. It may have been overdone with futures correcting Monday.	3)	Hog futures falling to new contract lows will make it difficult for buyers to step into the market with confidence.
4)	Lower pork prices should stimulate demand.	4)	Cash hogs continue to show weakness, putting increased pressure on the market.