Cattle futures are set to encounter early pressure on Monday, presenting an interesting scenario in the agricultural markets. The cattle complex showed signs of strength on Friday, with feeder cattle taking the lead and pushing through technical resistance. This marks the second week where feeder cattle have outperformed live cattle, attracting increased buying interest.

Unraveling the Dynamics of Cattle Futures on Monday

BULL SIDE

Feeder cattle continue to drive the cattle complex higher, with the March contract reaching its highest level since July 26. This upward momentum indicates a positive sentiment among traders, who are optimistic about the future of the cattle market. The continued tightness in cattle numbers is seen as a key factor limiting the downside price potential of beef prices, providing a solid foundation for bullish traders.

Moreover, July hog futures closed above $100 and achieved a new contract high, while June is knocking on the door of a new high. Traders are bullish on the demand for hogs as the year progresses, suggesting a broader positive trend in the livestock sector. The packers' potential aggression early in the week to obtain the hogs they need before the Thanksgiving holiday adds another layer of excitement to the market.

BEAR SIDE

The Cattle on Feed report came in slightly bearish across all three categories. This unexpected development may trigger selling at the start of the day as traders may not have been properly positioned ahead of the report. Cash cattle did not perform as well as some early trade had indicated, with prices showing only a steady to $1.00 increase. This could be a disappointment for those expecting more significant price movements.

The further weakness of pork cutouts on Friday added to the overall weakness seen throughout the week. This may lead to renewed liquidation as traders reassess their positions. Additionally, the holiday-shortened week may cause the packers to be less aggressive in their purchasing, as they may have already met a significant portion of their needs. This could put downward pressure on futures prices.

For our next livestock update, be sure to visit our Midday Livestock comments between 11 a.m. and noon CST. We will also provide periodic updates on the futures markets through our Quick Takes throughout the day.

Robin Schmahl can be reached at rschmahl@agdairy.com.

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