GENERAL COMMENTS:
It was a brutal day watching the livestock contracts trade lower, but it was even more painful to see the corn market work over the feeder cattle contracts and equally as painful to see the cash cattle market's developments. Hog prices closed higher on the National Direct Afternoon Hog Report, up $0.80 with a weighted average of $106.88 on 11,159 head. May corn is up 19 cents per bushel and July soybean meal is up $1.40. The Dow Jones Industrial Average is up 316.01 points and NASDAQ is up 163.95 points.
LIVE CATTLE:
Tuesday's trade was a nice little surprise and feedlots relished the higher trade, but when you look at the recent live cattle charts and see the stark descend before that and sharp decline of Wednesday's trade -- it's a gruesome reality. Even though slaughter speeds are running vigorously, and boxed beef prices are closing higher day in and day out -- packers worked their magic on the Wednesday's fat cattle market. Sitting on ample supplies of committed cattle, packers waltzed into the market around the noon hour, offered up a couple of bids, and feedlots (who are weary of the week's outcome at this point) gobbled them up amid sweaty palms, a red futures market and $6.00 corn. There was a light trade that broke out in the South where live cattle sold for $119 to $120, which is steady to $2.00 lower than a week ago. There was some Northern cattle traded at $121 to $124, which is steady to $3.00 lower, and there was some dressed trade that developed in Iowa for $192, which is $3.00 lower than las week's weighted average. April live cattle closed $0.80 lower at $119.77, June live cattle closed $1.95 lower at $117.25 and August live cattle closed $1.42 lower at $119.97. Wednesday's slaughter is estimated at 120,000 head -- 5,000 head more than a week ago and 34,000 head more than a year ago (year-ago numbers were affected by COVID-19).
The Fed Cattle Exchange Auction listed a total of 4,972 head, of which 1,517 actually sold at $120 and $124, 2,252 head were listed as unsold, as they did not meet the reserve price that ranged from $120 to $125, and 1,203 head in Nebraska were scratched from the auction. Opening prices ranged from $118.50 to $125, high bids ranged from $119 to $124. The state-by-state breakdown looks like this: Kansas 884 total head, with 58 head sold at $120, 826 head unsold; Nebraska 2,080 total head, with 457 head sold at $124, 420 head unsold, and 1,203 head scratched from auction; Texas 2,008 total head, with 1,002 head sold at $120, 1,006 head unsold.
Boxed beef prices closed higher: choice up $2.20 ($280.46) and select up $1.41 ($271.88) with a movement of 114 loads (74.38 loads of choice, 10.58 loads of select, 10.09 loads of trim and 18.60 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Steady. Seeing that packers have been able to buy both live cattle and dressed cattle in both the North and the South this week, their willingness to buy cattle for more than steady is going to be slim.
FEEDER CATTLE:
With corn prices closed upward of $0.19 higher in the spot May contract and both the May and July contract closing about $6.00 per bushel, the feeder cattle contracts had little choice but to trade lower. The current equation in the feeder cattle complex isn't favorable to feedlots whatsoever (high inputs + low outputs = red ink). The market wouldn't be in as tough of a position if cattle prices would rally alongside the corn market, but when only one side of the equation is rallying, feedlot margins and producer's bottom dollar suffer together. April feeders closed $2.47 lower at $135.10, May feeders closed $3.17 lower at $139.60 and August feeders closed $2.60 lower at $151.92. At OCK West Livestock Auction in El Reno, Oklahoma, compared to last week, feeder steers traded $2.00 to $5.00 lower with the exception of heavier weight cattle that could come out against the October Live CME contract selling $1.00 to $3.00 lower. Feeder heifers sold $2.00 to $3.00 lower. The CME Feeder Cattle Index for April 20: down $0.15, $138.33.
LEAN HOGS:
The lean hog contracts seemed to have picked up some of the bearish framework that the cattle contracts are suffering from and closed lower, even though the market's fundamentals are still bullish. Even though the cash hog market closed $0.80 higher on over 11,000 head, and the day's slaughter is estimated at respectable 485,000 head, the future contracts still closed lower. Some of the market's anxiousness is in preparation for Thursday's export report, which could very likely be bearish as U.S. pork prices are lofty. June lean hogs closed $1.82 lower at $104.52, July lean hogs closed $1.25 lower at $103.00 and August lean hogs closed $0.92 lower at $99.32. Pork cutouts totaled 288.77 loads with 252.68 loads of pork cuts and 36.10 loads of trim. Pork cutout values: down $1.39, $113.64. Wednesday's hog slaughter is estimated at 485,000 head -- 5,000 head more than a week ago and 126,000 head more than a year ago (year-ago numbers were affected by COVID-19). The CME Lean Hog Index for April 19: up $0.66, $104.42.
THURSDAY'S CASH HOG CALL: Steady. Wednesday's advancement showed that packers are most certainly willing to continue to invest as they continue to throw bids on the table and were aggressive enough up buy 11,000 head Wednesday afternoon. With demand as stellar as it is, aggressive cash buying is expected to continue so long as demand holds.
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