GENERAL COMMENTS:
The cattle contracts face uncertain bearish pressure, but the lean hog complex fired higher throughout Tuesday's trade, rallying on both the futures market and cash hog trade. Hog prices shot higher Tuesday afternoon on the National Direct Afternoon Hog Report, up $2.65 with a weighted average of $73.17 on 7,155 head. March corn is up 2 3/4 cents per bushel and March soybean meal is up $3.40. The Dow Jones Industrial Average is up 15.66 points and NASDAQ is down 67.85 points.
LIVE CATTLE:
Even though slaughter speeds are hitting the ground running, attempting to make up for the ground lost last week, the live cattle contracts are pressured to trade lower. Come Friday, the February live cattle contract will expire, and the market's heart and soul will lie in the beloved April contract. It's disappointing to see the bearish movement pulling on the April contract, as just last week the contract was trading for $126.00. April live cattle closed $1.85 lower at $121.20, June live cattle closed $1.12 lower at $119.12 and August live cattle closed $0.87 lower at $117.52. If there's anything that's going to help this week's cash cattle market, it's going to be packers' sheer desire to get cattle processed in order to receive this week's stronger boxed beef prices, and feedlots' unwavering spirit, which is tired of cash cattle trading at these minimal prices. With the spot February contract weakening from $116 to $115, the cash cattle market most likely will fall right there -- anywhere from $115 to $116 if feedlots push hard. It was another quiet day for the cash cattle market with just a little dressed trade developing in the North but certainly not on enough cattle to call an accurate trend. Tuesday's slaughter is estimated at 122,000 head, 31,000 head more than a week ago and 1,000 head less than a year ago.
Tuesday's Cold Storage report shared that the total pounds beef in freezers were down 3% from January but up 6% from last year, totaling 519,186,000 pounds.
Tuesday's Texas Cash Pool showed mixed regards for this week's cash market as 986 head sold at $114.05. Bids from other packers ranged from $112.01, to $112.99 and to $113.50. Compared to two weeks ago (because last week's cash pool was dismissed with the weather) this week's trade was $0.15 less, but on 215 more cattle.
Boxed beef prices closed higher: choice up $0.31 ($240.29) and select up $0.55 ($230.53) with a movement of 132 loads (76.78 load of choice, 16.50 loads of select, 27.68 loads of trim and 10.59 loads of ground beef).
WEDNESDAY'S CASH CATTLE CALL: $1.00 to $2.00 higher. There could be some cash cattle trade develop as early as Wednesday, but it's most likely that the market sees its trade develop later in the week. This week's slaughter is going to rely heavily on an aggressive Saturday kill, so feedlots shouldn't get in a hurry if the price they desire isn't appearing at the market's first offer.
FEEDER CATTLE:
The feeder cattle contracts would have loved to keep rallying from Monday's stronger close, but as the contracts eyed Tuesday's business, the market wasn't strong enough to push past the uncertainty in the live cattle arena and past the uncertainty of where corn prices will level off to keep trading higher. March feeders closed $0.75 lower at $138.57, April feeders closed $0.67 lower at $142.60 and May feeders closed $0.97 lower at $145.10. Regardless of how this week's futures market trades for the feeder cattle contracts, cattle buyers are not used to having to sit an entire week out of the market and they are buying up calves with vengeance. At Joplin Regional Stockyards in Carthage, Missouri, compared to two weeks ago (as last week there was no sale due to weather), steers under 600 pounds traded $9.00 to $15.00 higher, which steers over 600 pounds traded $3.00 to $4.00 higher. Heifers under 600 pounds traded $5.00 to $12.00 higher with those over 600 pounds trading up to $3.00 higher. Demand was exceptionally strong for large strings of good, quality cattle. The CME Feeder Cattle Index for Feb. 22: down $0.73, $140.39.
LEAN HOGS:
The lean hog contracts fought some pressure around the noon hour, but low and behold the complex did what it's been doing best lately and decided to push past the bearish pressure and close higher. April lean hogs closed $1.30 higher at $86.42, June lean hogs closed $0.52 higher at $93.62 and July lean hogs closed $0.37 higher at $93.52. The market's strength is honestly unmatched as both the technical and fundamental components of the marketplace walk hand-in-hand to higher levels, which is making the rally a hard force to recon with. Tuesday's afternoon cash market was on fire as packers continue to throw out money so they can secure ample supplies of hogs. Pork cutouts totaled 349.81 loads with 323.53 loads of pork cuts and 26.28 loads of trim. Pork cutout values: up $0.64, $92.75. Tuesday's hog slaughter is estimated at 497,000 head, 86,000 head more than a week ago and 4,000 head more than a year ago. Monday's hog slaughter was revised to 489,000 head. The CME Lean Hog Index for Feb. 19: up $0.31, $77.74.
Tuesday's Cold Storage Report shared that frozen pork supplies were up 11% from January's report but down 26% from a year ago, totaling 459,947,000 pounds.
WEDNESDAY'S CASH HOG CALL: Steady. I'm torn between the bearish and bullish mentalities. Looking at how aggressively the market has rallied, there's got to be a top in sight, but looking at the market from both perspectives -- with technical support from the board and stout demand from both the cash hog and pork cutout values -- the market is yearning to keep its drive. Needless to say, given how aggressive packers have been over the last two weeks leads me to believe that once they sit on a secure number of hogs, their desire to continue to play in the cash market will grow null in a hurry.
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