GENERAL COMMENTS:
Remember when you learned that Santa wasn't real? Your parents still got you presents and you still had Christmas, but there was a sense of excitement that was never going to be the same about the Christmas holiday. Thursday was the day the market learned that Santa wasn't real. Wednesday the phase one trade agreement was signed but there wasn't enough time for the factual components of the agreement to set in. Now the U.S. and China signed the agreement and agricultural products are going to be sought out from China more so than they have been in years, but the market didn't jump limit up, cash prices didn't soar and we don't know on when China is going to be making their purchases. Just like kids need a day or two to absorb the Santa shock, the market needs its time to understand the agreement's role. Christmas still rocks, and the phase one trade agreement is still a blessing, change just takes time understanding and coming to terms with. Hog prices are lower on the National Direct Afternoon Hog Report, down $0.56 with a weighted average of $51.18. March corn is down 12 cents per bushel and March soybean meal is up $0.50. The Dow Jones Industrial Average is up 267.42 points and NASDAQ is up 98.43 points.
LIVE CATTLE:
Given the phenomenal market, cash cattle feeders were able to navigate through the last quarter of 2019 and we started to believe that feeders had learned the magic lesson in order to bump prices higher -- sell late in the week and sell unified. We have all fallen victim to being trigger happy when moving parts of market are dwindling lower. But selling cattle for steady money Thursday morning after a trade agreement when the market is lower does not sound like an equation for higher cash prices and fat checks for feeders; rather a lucky week for packers and a chance to buy up cattle in a hurry. Thursday afternoon trade in the South was established at $124, fully steady with last week and sources note that trade could essentially be done for those regions. Some cattle in the North have traded for $198 to $199, mostly $1.00 lower than last week's weighted average.
Boxed beef prices close higher: choice up $0.37 ($212.90) and select up $1.80 ($211.47) with a movement of 115 loads (76.15 loads of choice, 17.56 loads of select, 9.05 loads of trim and 12.20 loads of ground beef). Thursday's slaughter is estimated at 122,000 head, steady with both a week ago and a year ago.
FRIDAY'S CASH CATTLE CALL: Steady. Feeders know that when you sell out cheaper or steady, it's harder than hell to pump prices higher up later in the week. The South could be done trading but there are still cattle that need to sell in the North. It wouldn't be unlikely to see them sell for only steady prices.
FEEDER CATTLE:
Feeder cattle contracts closed the day the least damaged and surprisingly higher in deferred contracts. January feeders closed steady at $145.42, March feeders closed $0.35 lower at $144.82 and April feeders closed $0.40 lower at $147.80. Wednesday's signing of the phase one trade agreement most obviously played its toll on the market, but the beautiful thing about the feeder cattle market right now is that calves and feeders are selling, and some buyers are already looking for grass calves, which is helping spur some price jumps in these early winter sales. Wednesday at OKC West Livestock Auction in El Reno, Oklahoma, 9,493 feeders steers and heifers compared to a week ago sold most steady, but a few time of $1.00 higher. Steer and heifer calves sold $3.00 to $6.00 higher, with the exception of calves under 500 pounds selling as much as $8.00 to $10.00 higher. Calves that were weaned and ready to go to wheat pasture sold with a notable premium. The CME feeder cattle index 1/15/2020: down $0.22, $146.35.
LEAN HOGS:
Closing the day lower in nearby contracts -- potentially because of the disappointment in not knowing when the fruit from the phase one trade agreement will flourish -- and only slightly lower in deferred, the lean hog sector had a tough Thursday following the signing of the trade agreement with China. February lean hogs closed $1.00 lower at $66.87, April lean hogs closed $1.20 lower at $73.77 and May lean hogs closed $0.75 lower at $80.72. Pork cutouts total 283.53 loads with 242.50 loads of pork cuts and 41.03 loads of trim. Pork cutout values: up $0.80, $75.45. Thursday's slaughter is estimated at 497,000 head, 2,000 head more than a week ago and 24,000 head more than a year ago. The CME lean hog index 1/14/2020: up $0.53, $59.53.
FRIDAY'S CASH HOG CALL: Lower. It's going to take a while for the market to wipe away its tears and move on from this week's phase one trade agreement signing. A lesson to learn from and certainly not to forget in the future, let's not bolster the market leading up to an event, then sellout when the fireworks cease to shoot and life goes on as normal.
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