Monday Morning Livestock Market Update - Cattle Futures Should Rebound

GENERAL COMMENTS:

Cattle futures lost ground during the second half of the week as boxed beef prices struggled and traders positioned ahead of the Cattle on Feed report. The report was released and is considered neutral to bullish. Cattle on feed were at 101% of a year ago. Bear in mind that many of these cattle are at heavier weights than a year ago. Placements were bullish, as they were 91% of a year ago and well under the trade estimate of 96.7%. Marketings were 97% of a year ago and slightly above the estimate of 96.1%. There is some indication that the report is mostly neutral, as the trend of higher weights and lower marketing will offset the lower placement number. Some of that will be true, but on feed and marketed numbers were very near the trade estimates. However, placements were substantially below the trade estimates, which is likely to result in higher trade. Cash cattle trade last week was generally steady and should be considered a victory. Boxed beef prices were mixed, with choice down $0.21 and select up $1.38. The Commitment of Traders report showed the funds as net sellers of 1,209 live cattle futures contracts, reducing their long position to 47,696. Feeder cattle showed they were net sellers of 237 contracts, reducing their long positions to 7,211.

Hog futures closed out a dismal week with an oversold market and new contract lows. The market is unable to find support as cash and cutouts continue to show weakness and the slaughter pace remains strong. The National Daily Direct Afternoon Hog report showed cash down $0.84, with the weighted average down to $81.76. Pork cutout values declined $0.56. It will take a monumental effort for the market to close the chart gaps and regain the losses of the past 1 1/2 weeks. With sufficient hogs readily available to the market, there is little reason for the packers to bid up to purchase them. The Commitment of Traders report showed fund traders as net sellers of 8,134 contracts, increasing their net short position to 37,768.

	BULL SIDE		BEAR SIDE
1)	August placements were significantly under the trade estimates. This will keep supplies tight for some time.	1)	There are more cattle on feed than a year ago, and many of those cattle are at heavier weights.
2)	Steady cash trade should be considered a victory and should provide support due to the futures discount to the market.	2)	Slower marketings will back up cattle in the feedlots, resulting in heavier cattle and more beef tonnage.
3)	Hog futures are oversold, and a market that falls fast tends to bounce back faster.	3)	Hog futures continue to market new contract lows with no support in sight. Bullish traders keep getting stopped out of the market.
4)	A chart gap remains above the market in all contracts. Gaps are generally filled before the contracts go off the board.	4)	Hogs have been unable to find support in cash and cutouts, indicating lackluster demand.