GENERAL COMMENTS:
It was a day of higher closes throughout the livestock complex. Lean hogs led the rally with the most gusto, but the cattle contracts were thankful to have support, given the depressed state this week has presented. Hog prices closed higher on the National Direct Afternoon Hog Report, up $2.53 with a weighted average of $75.70 on 8,824 head. March corn is up 5 1/2 cents per bushel and May soybean meal is up $1.30. The Dow Jones Industrial Average is up 424.51 points and NASDAQ is up 132.77 points.
LIVE CATTLE:
After trailing lower Monday and Tuesday, the live cattle contracts were happy to finally close higher. Looking at the complex and seeing where traders are most willing to invest their positions, it's key to note that August and October had stronger closes, along with the April contract. The second half of the year is looking better as feedlots pray that packers will keep processing speeds wrapped up to maximum and get front-end supplies completely worked through. At that point, feedlots will be sitting in a completely different position as the cattle that line their bunks won't be nearly as heavy, and from a numbers standpoint, there will simply be less cattle throughout the country. April live cattle closed $1.02 higher at $122.22, June live cattle closed $0.97 higher at $120.10 and August live cattle closed $1.10 higher at $118.62. In the meantime, the battle between packers and feedlots continue as packers look to add as little to the cash market as possible, and feedlots was the exact opposite outcome. There was some light trade that developed Wednesday afternoon for mostly $114 in the South, which is fully steady with last week's business, and there was some light trade that developed in Nebraska for $181, which is considered $0.50 higher than a week ago. Seeing that slaughter speeds are pushing aggressively this week, and that a hefty Saturday kill is expected, it wouldn't be surprising to see packer bids get more aggressive the longer time plays out. Wednesday's slaughter is estimated at 121,000 head, 22,000 head more than a week ago ad 2,000 head less than a year ago.
The Fed Cattle Exchange Auction Wednesday listed a total of 1,199 head, of which 409 actually sold, 790 head were listed as unsold, as they did not meet the reserve prices, that ranged from $114 to $116. Opening prices ranged from $112 to $113.50, high bids ranged from $114 to $114.25. The state-by-state breakdown looks like this: Texas 1,071 total head, with 409 head sold at $114.25, 662 head unsold; Oklahoma 74 total head, all of which went unsold; Kansas 54 total head, all of which went unsold.
Boxed beef prices closed mixed: choice up $0.46 ($240.75) and select down $0.74 ($229.79) with a movement of 129 loads (78.36 loads of choice, 13.10 loads of select, 16.07 loads of trim and 21.53 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Steady to somewhat higher. Packers aren't going to be easily swayed and have enough committed cattle in their supply right now to not have to dive into the cash market wildly, but with the speeds they are trying to run, they may have to give $1.00 more before the week is over if feedlots let the week play out.
FEEDER CATTLE:
The feeder cattle contracts were bound and determined to close higher when traders jumped into the market midmorning and showing the market support that it hadn't seen in the since the week began. March feeders closed $1.80 higher at $140.37, April feeders closed $2.15 higher at $144.75 and May feeders closed $1.70 higher at $146.80. With the commendable interest that feeder cattle are demanding throughout sale barns this week, the feeder cattle contracts are far enough away from resistance pressure to confidently trade higher, with fundamental backing to support traders in their decisions. At Kingsville Livestock Auction in Kingsville, Missouri, compared to their last sale two weeks ago, steers sold mostly $3.00 to $8.00 higher except for those weighing 500 to 550 pounds, which traded steady. Heifers sold steady to $5.00 higher, with the exception of the fancier heifers weighing 400 to 500 pounds, which traded as much as $10.00 higher. A heavy supply of quality cattle made their way to town and buyers were lined up ready to do business on all weights. These cattle marketed in February have battled through the temperature swings of the fall and brutal cold this winter, which makes for attractive weigh ups and less health problems for their new owners, resulting in some premium prices. The CME Feeder Cattle Index for Feb. 23: not available at this time.
LEAN HOGS:
Sporting a flashy $3.00 close, the April lean hog contract led the lean hog marketplace to higher closes, unwilling to weaken in any of its position before the day's end. April lean hogs closed $3.00 higher at $89.42, June lean hogs closed $2.27 higher at $95.90 and July lean hogs closed $1.90 higher at $95.42. The market did see a slight regression in the afternoon pork cutout value, which comes as a mixed bag to evaluate. With hog prices closing sharply higher again Wednesday afternoon (up $2.53), it doesn't seem like the market's rally is completely done with, given the higher closes on both cash and on the board. But it is undoubtedly important to note that we saw a weaker pork cutout value close. If Thursday can jump back into the market and close higher, then it simply could have been a lower day with no near-term implications, but if there's another weaker close Thursday, the market may be starting to show signs of an exhausted rally.
Pork cutouts totaled 371.34 loads with 326.39 loads of pork cuts and 44.95 loads of trim. Pork cutout values: down $0.61, 92.14. Wednesday's slaughter is estimated at 497,000 head, 22,000 head more than a week ago and steady with a year ago. The CME Lean Hog Index for Feb. 22: up $0.42, $78.16.
THURSDAY'S CASH HOG CALL: Steady. If Thursday presents another weaker pork cutout close, packers may trail off into the end of the week on a lighter note, but for now their aggression remains strong.
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