Monday Closing Livestock Market Update - Uncertainty and High Corn Prices Weaken Cattle Contracts

GENERAL COMMENTS:

It was a brutal day to watch the cattle contracts trade lower, but with the onset of a new year comes some kinks to work out. With corn prices at levels not seen in the last six years and uncertainty amongst traders, the contracts were left unsupported and unable to do anything but scale lower. Meanwhile, the lean hog contracts soaked up all that the market had to offer and closed fully higher. Hog prices averaged $55.10 on the National Direct Afternoon Hog Report, on 5,550 head and a five-day rolling average of $50.60. March corn is down 1/4 cent per bushel and March soybean meal is down $5.70. The Dow Jones Industrial Average is down 382.59 points and NASDAQ is down 189.83 points.

LIVE CATTLE:

It was a painful Monday for the live cattle contracts as pressure continued to grow stronger throughout Monday and left the market to close sharply lower. February live cattle closed $2.72 lower at $112.30, April live cattle closed $3.00 lower at $116.25 and June live cattle closed $2.12 lower at $112.57. Thankfully it's still early in the week and the cash cattle market isn't expected to trade until later in the week. For the most part, the day was quiet for the cash cattle market other than some trade that developed in Iowa for fully steady prices with a week ago, but it was on such a light test that it's not an accurate measure of this week's trade. Even though the board is pressured to trade lower with the onset of high, high corn prices getting another $1.00 to $2.00 for cash cattle isn't out of the question. Monday's slaughter is estimated at 115,000 head, 4,000 head less than a week ago and 6,000 head less than a year ago.

Boxed beef prices closed higher: choice up $0.52 ($209.87) and select up $1.56 ($196.53) with a movement of 102 loads (59.99 loads of choice, 20.33 loads of select, 7.57 loads of trim and 14.38 loads of ground beef).

TUESDAY'S CASH CATTLE CALL: Higher. Even though the market's technical pressure is stout, packers want to process cattle seeing that boxed beef prices are scaling higher and demand is present. Adding another $1.00 or $2.00 to the marketplace isn't unachievable if feedlots rally together.

FEEDER CATTLE:

If it's not one thing, it's another, and the feeder cattle market is feeling a little uneasy given how the strong corn prices have rallied and thus taken the confidence out of the feeder cattle complex. Corn prices thankfully closed mixed, but still trades at levels not seen in the last six years, which puts a great burden on buyers looking to buy calves as their cost of gain is going to be stout unless the market deems a correction necessary in the near future. January feeders closed $4.00 lower at $134.95, March feeders closed $4.20 lower at $136.02 and April feeders closed $3.72 lower at $138.05. Thankfully, with the onset of the new year, the feeder cattle sales throughout the countryside are back to normal schedules. At Oklahoma National Stockyards in Oklahoma City, Oklahoma, compared to the last sale in December, feeder steers sold $1.00 to $4.00 lower while feeder heifers sold steady to $3.00 lower. Steer calves sold steady to $3.00 lower while heifer calves sold steady to $3.00 higher. Demand was light as many buyers were apprehensive about the sharply lower trading futures market. It also doesn't help that, last week, large amounts of snow hit the area and have made wheat fields extremely muddy. But feeder cattle didn't sell lower throughout the countryside. At Joplin Regional Stockyards in Carthage, Missouri, compared to the last auction two weeks ago, feeder steers and heifers under 600 pounds sold steady to $2.00 higher, but those over 600 pounds did sell steady to $3.00 lower. The CME feeder cattle index for Jan. 1: down $2.22, $136.55.

LEAN HOGS:

While the cattle contracts suffered Monday, the lean hog contracts rallied modestly and gladly took any support that the market had to offer. February lean hogs closed $0.95 higher at $71.22, April lean hogs closed $1.37 higher at $73.62 and June lean hogs closed $1.05 stronger at $83.87. Pork cutout values weren't able to close stronger, but the technical support that the market rallied still allowed for a stronger close. Pork cutouts totaled 330.05 loads with 303.68 loads of pork cuts and 26.37 loads of trim. Pork cutouts closed lower: down $0.81, $77.77. Monday's slaughter is estimated at 490,000 head, steady with a week ago and 7,000 head less than a year ago. The CME lean hog index for Dec. 31: not available at this time.

TUESDAY'S CASH HOG CALL: Steady. Packers slaughtered a considerable number of hogs Monday and will most likely continue to do so throughout the rest of the week. It would surely help if pork cutout values could steadily close higher.