GENERAL COMMENTS:
It was a quiet day for the livestock complex as Friday's trade was mostly uneventful and led the contracts into a mixed close ahead of the weekend. Hog prices closed lower on the National Direct Afternoon Hog Report, down $1.65 with a weighted average of $66.95 on 5,174 head. March corn is up 3 cents per bushel and March soybean meal is up $14.00. The Dow Jones Industrial Average is down 4.81 points and NASDAQ is down 144.96 points.
From Friday-to-Friday livestock futures scored the following changes: February live cattle down $2.37, April live cattle down $2.77; January feeder cattle down $4.78, March feeder cattle down $3.27; February lean hogs down $1.82, April lean hogs up $0.63.
LIVE CATTLE:
I do not appreciate fear mongering, rumor spreading or anything that's not concrete and factual as the markets have enough turmoil and volatility as it is. That being said, I tell this to you so you're aware and fully informed on the matters at hand. This past week's dip in processing speeds could be a problem moving forward if plants don't soon run daily speeds at or near 120,000 head. With Friday's cattle carrying the weight they are, a glut in production could greatly impact the market's ability to chase price discovery this spring and ultimately hinder the spring rally. Actual slaughter data for the week ended 12/25/2021: steer carcasses averaged 925 pounds (up 1 pound from the previous week and up 12 pounds from a year ago); heifers averaged 851 pounds (up 1 pound from a week ago and up 12 pounds from a year ago). The market's slower speeds are stemming from worker absenteeism and illness -- so knowing when production will run normally again is a tough card to call.
The live cattle futures closed mixed as the summer months of 2022 saw modest interest, but the nearby contracts of February and April closed lower. February live cattle closed $0.02 lower at $137.32, April live cattle closed $0.40 lower at $142.05 and June live cattle closed $0.12 higher at $137.70. Thankfully, beef demand is still gaining momentum, so packers have some incentive to continue to buy cattle and participate in the cash market. This week Southern live deals had a range of $136 to $138, mostly $138, fully steady with last week's weighted averages. Northern dressed trade had a range of $219 to $220, mostly $220, generally steady to $1 lower than last week's weighted average basis Nebraska.
Friday's slaughter is estimated at 112,000 head -- uncomparable to a week ago and 7,000 head less than a year ago. Saturday's slaughter is projected to be 58,000 head -- 8,000 head less than a year ago. This week's slaughter is estimated at 620,000 head -- 32,000 head less than a year ago.
Boxed beef prices closed higher: choice up $3.26 ($271.82) and select up $0.46 ($261.10) with a movement of 96 loads (61.10 loads of choice, 10.07 loads of select, 11.56 loads of trim and 13.26 loads of ground beef). Throughout the week choice cuts averaged $268.03 (up $3.00 from a week ago) and select cuts averaged $259.90 (up $3.25 from a week ago) and the week's total movement of cuts, grinds and trim totaled 695 loads.
MONDAY'S CASH CATTLE CALL: Steady. Until we know at what rate processing speeds will run, calling the cash market is difficult. If chain speeds are back to 120,000 head per day, then steady trade is attainable. But if chain speeds lag again next week, then lower trade is inevitable.
FEEDER CATTLE:
As the corn market rounded out 2 to 4 cents higher in the nearby contracts, the feeder cattle complex closed modestly lower as the market wasn't able to cling to much support from the live cattle futures. January feeders closed $0.47 lower at $162.10, March feeders closed $0.60 lower at $166.67 and April feeders closed $0.20 lower at $170.87. Demand for feeders and calves has been hit and miss through the week. Early this week demand was strong, but upon the corn market's jump to prices over $6.00 per bushel, some buyers shrugged off the corn market's rally while others drew back as they're worried about their cost of gains. And despite the corn market's pressure, feeders continue to look at the live cattle contracts and can't help but be somewhat hopeful as April live cattle are still trading above $140 and, as crazy as it may seem, June live cattle are actually trading slightly above February live cattle. Heading into next week, feeders will be conscious of monitoring the corn market's behaviors, as well as processing speeds. At Mitchell Livestock Auction in Mitchell, South Dakota, compared to last week feeder steers weighing 600 to 650 pounds traded $2.00 higher, steers weighing 650 to 1,000 pounds sold $2.00 to $4.00 lower with instances of $7.00 to $9.00 lower, and steers weighing 1,000 to 1,100 pounds sold $1.00 to $4.00 lower. Heifers weighing 600 to 950 pounds traded $2.00 to $4.00 lower. The CME Feeder Cattle Index 1/6/2022: down $0.49, $161.79.
LEAN HOGS:
The lean hog market was in for a wild, choppy ride through the first week of 2022. Early in the week, the market fell slightly, then at midweek prices jumped considerably higher. But, by Friday the complex fell out of bed and closed $1.00 to $3.00 lower. Part of the pressure that Friday's market undoubtedly felt was slow processing speeds and the worry of hogs getting backed up if this persists for an extended period of time. Thankfully, right now the market is current and hog weights are steady to a pound lower based on the USDA's Actual Slaughter data. But the question of how long are processors going to run these lukewarm chain speeds still remains unanswered. It also didn't help matters that pork cutouts closed $3.66 lower, which was mostly pushed by the ham's $11.48 drop to $53.31. Pork cutouts totaled 392.15 loads with 360.26 loads of pork cuts and 31.89 loads of trim. Pork cutout values: down $3.66, $85.90. Friday's slaughter is estimated at 463,000 head -- uncomparable to a week ago and 22,000 head less than a year ago. Saturday's kill is projected to be around 262,000 head -- 122,000 head less than a year ago. The CME Lean Hog Index 1/5/2022: down $0.30, $73.57.
MONDAY'S CASH HOG CALL: Steady. Unless processing speeds pick back up to normal levels, packers may not need to chase the cash market early next week.
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