GENERAL COMMENTS:
Technically speaking, Thursday's trade treated the livestock complex well as futures closed mostly higher. But from a fundamental sense, the slower slaughter speeds are troubling. Hog prices closed higher on the National Direct Morning Hog Report, up $0.78 with a weighted average of $68.60 on 11,662 head. March corn is up 1 1/2 cents per bushel and March soybean meal is down $2.40. The Dow Jones Industrial Average is down 170.64 points and NASDAQ is down 19.31 points.
LIVE CATTLE:
Throughput is on the forefront of everyone's mind in the cattle business. With production lagging this week from both worker absenteeism and sickness, processing speeds have been running slower and, frankly, given the backlog of cattle that built up from the COVID shutdown in 2020, cattlemen aren't comfortable with any lag in processing.
The market can bounce back from a week of slower speeds and packers have every incentive they need to process cattle vigorously right now. Beef demand is excellent and boxed beef prices continue to strengthen their margins. It's hard telling if this talking point is going to be one we continue to bring up in the weeks ahead, or if it's one that will pass with the week itself. For sanity's sake, I pray production gets back to 120,000 head per day next week.
Live cattle futures grew stronger as the day traded on, aided by continued support from boxed beef prices. February live cattle closed $0.10 higher at $137.35, April live cattle closed $0.50 higher at $142.45 and June live cattle closed $0.32 higher at $137.57. The cash cattle market just saw a little bit of trade with prices fully steady with the week's trend. Thus far this week, Northern dressed business has been marked at $220, which is steady to $1.00 lower than last week; Southern live cattle have traded at $138, fully steady with last week's business.
Thursday's slaughter is estimated at 113,000 head -- 4,000 head less than a week ago and 6,000 head less than a year ago. Wednesday's cattle slaughter was revised to 113,000 head -- 3,000 head less than what was originally stated.
Beef net sales of reductions of 3,900 metric tons (mt) for 2021 -- a marketing year low -- were down noticeably from both the previous week and four-week average. The increases were primarily for Taiwan (100 mt), the Netherlands (100 mt) and Indonesia (100 mt).
Thursday's actual slaughter data for the week ended 12/25/2021: steer carcasses averaged 925 pounds (up one pound from the previous week and up 12 pounds from a year ago); heifers averaged 851 pounds (up one pound from a week ago and up 12 pounds from a year ago).
Boxed beef prices closed higher: choice up $1.63 (268.56) and select up $1.03 ($260.64) with a movement of 154 loads (122.09 loads of choice, 15.62 loads of select, 5.43 loads of trim and 11.13 loads of ground beef).
FRIDAY'S CASH CATTLE CALL: Steady. Given that cattle have traded in both regions, any trade that develops on Friday will likely be steady with the week's trend.
FEEDER CATTLE:
Feeder cattle futures rounded out the day fully higher as the market rallied on strong demand for feeder cattle throughout the nation's sale barns and was aided on by the slightly higher close the live cattle contracts accomplished as well. January feeders closed $0.45 higher at $162.57, March feeders closed $1.10 higher at $167.27 and April feeders closed $1.30 higher at $171.07. Given that it's the first normal week after the holiday run, feeders have been met with excellent demand, even amid the corn market's jump to $6.00 per bushel. Moving forward, the feeders will heavily rely on strength from the live cattle market as it will dictate whether or not order buyers and traders feel comfortable supporting the feeder cattle market in the long term. At Kist Livestock Auction in Mandan, North Dakota, compared to their last sale held before Christmas, feeder steers weighing 500 to 550 pounds traded on average $12.00 higher, steers weighing 550 to 600 pounds traded $3.00 higher, 600 to 700 pounds teers traded steady to $8.00 stronger, and steers weighing 700 to 800 pounds traded steady to $1.00 higher. Feeder heifers weighing 500 to 600 pounds traded $6.00 higher, and those weighing 600 to 700 pounds traded steady to $4.00 higher. The CME Feeder Cattle Index 1/5/2022: up $0.15, $162.28.
LEAN HOGS:
Well, if the market had to waste time worrying about the New Year, Prop 12 and what would come to fruition, I'm glad we did it during the holiday slug instead of doing so now as the lean hog market has flat performed in this first full week of 2022. February lean hogs closed $0.67 higher at $82.95, April lean hogs closed $0.60 higher at $89.27 and June lean hogs closed $0.70 higher at $100.10. Like the cattle industry, the hog market is seeing a slowdown in processing speeds as well. The market can manage a week of dismal throughput, but an extended period of time of lower processing speeds is what hurts the industry long-term. The lean hog market doesn't seem too worried about the lull in production and instead has chosen to focus on the cash markets' immense interest and the gains in pork cutouts. Pork cutouts total 411.16 loads with 360.83 loads of pork cuts and 50.33 loads of trim. Pork cutout values: up $3.64, $89.56. Thursday's slaughter is estimated at 465,000 head -- 7,000 head more than a week ago and 29,000 head less than a year ago. Wednesday's slaughter was revised to 463,000 head -- 4,000 head less than what was originally stated. The CME Lean Hog Index 1/4/2022: up $1.12, $73.87.
Pork net sales of 19,400 mt for 2021 were up noticeably from the previous week, but down 6% from the prior four-week average. The three largest buyers were Mexico (16,100 mt), Canada (1,400 mt) and China (1,200 mt).
Thursday's actual slaughter data for the week ended 12/15/2021: live hog weights held steady from the previous week at 291 pounds, but dressed carcasses fell by a pound to average 216 pounds.
FRIDAY'S CASH HOG CALL: Steady. Packers flat-out ran to find hogs this week, so whether they'll support the cash market as aggressively come Friday or not is anyone's guess. Given that production has waned and we're heading into the weekend, I could see them waiting until next week before they buy many more hogs.
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