GENERAL COMMENTS:
The cattle complex continued to struggle throughout Wednesday's trade, but the lean hog market couldn't have cared less that grains rallied Tuesday. Heading into Thursday's trade, the market will be anxious to see how the first export report of the year treats the complex. Hog prices closed higher on the National Direct Afternoon Hog Report, up $4.73 with a weighted average of $67.82 on 13,445 head. March corn is down 7 1/4 cents per bushel and March soybean meal is down $1.30. The Dow Jones Industrial Average is down 392.54 points and NASDAQ is down 522.55 points.
LIVE CATTLE:
Live cattle futures had another rough day where most of the complex closed lower and the cash cattle market traded steady to $1.00 lower. February live cattle closed $0.57 lower at $137.25, April live cattle closed $0.72 lower at $141.95 and June live cattle closed $0.40 lower at $137.25. Trade in the North took place at $220 dressed, which is steady to $1.00 lower than last week; Southern live cattle traded at $138, which is fully steady with last week's business. Long-term speaking, it's positive that boxed beef prices are continuing to print higher and largely packers were able to get the cash cattle market to trade steady/$1.00 lower because of the psychological toll the grain market's rally had on the cattle complex.
Production has been an issue this week, enough to the point where it's something we need to discuss. A lag in production is not only an issue for the week's performance, but if it drags on long enough it can affect showlists and negatively weigh on feedlots' ability to demand higher prices. Some rumors have floated around that plants are struggling to run full shifts as workers are calling in sick. Wednesday's slaughter is estimated at 116,000 head -- 4,000 head less than a week ago and 2,000 head less than a year ago.
The Fed Cattle Exchange Auction listed a total of 2,059 head, of which 239 actually sold, and 1,820 head were listed as unsold, as they did not meet the reserve prices, which ranged from $130 to $138.50. Opening prices ranged from $128 to $136, high bids ranged from $136 to $138. The state-by-state breakdown looks like this: Texas 1,117 total head, with 149 head sold at $138, and 968 head went unsold; Kansas 813 total head, with 90 head sold at $138, and 723 head went unsold; California 129 total head, all of which went unsold.
Boxed beef prices closed higher: choice up $0.11 ($266.93) and select up $0.38 ($259.61) with a movement of 156 loads (91.34 loads of choice, 30.49 loads of select, 12.98 loads of trim and 21.01 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Steady. Given that cattle have now traded in both the North and South, prices will hold true to the week's trend.
FEEDER CATTLE:
Feeder cattle futures closed lower in the spot and nearby contracts, but the deferred contracts all closed modestly higher. The grain market's Tuesday rally still has the nearby feeder cattle contracts on edge. But the deferred contracts of 2022 were able to overlook the corn rally and are relying on the fundamental fact that supplies of feeder cattle are going to be less this summer, which should drive prices higher in the long term. January feeders closed $0.55 lower at $162.12, March feeders closed $0.17 lower at $166.17 and April feeders closed steady at $169.77. At Winter Livestock Auction in La Junta, Colorado, compared to the last sale the week before Christmas, steers under 550 pounds traded $3.00 to $5.00 higher, except for those weighing 400 to 450 pounds which traded steady. Steers weighing 550 to 700 pounds traded steady to $3.00 pounds lower, and those weighing over 700 pounds traded steady to $2.00 lower. Heifers under 500 pounds traded $5.00 to $8.00 higher, those weighing 500 to 700 pounds traded $2.00 to $3.00 lower, and those weighing over 700 pounds traded $1.00 lower. The CME Feeder Cattle Index 1/4/2022: down $0.22, $162.13.
LEAN HOGS:
Long-term pork demand is continuing to find strength as market-ready supplies tighten. It's great the sharp selloff the cattle contracts endured Tuesday afternoon didn't spillover into the lean hog complex and given that prices are rallying again through Wednesday's trade, the market's tone is only gaining more and more strength. If Thursday's export report can yield favorable figures for the hog side of things, the market stands a strong chance at rallying through the second half of the week. February lean hogs closed $2.12 higher at $82.27, April lean hogs closed $1.67 higher at $88.67 and June lean hogs closed $1.12 higher at $99.40. Pork cutouts totaled 326.53 loads with 296.59 loads of pork cuts and 29.95 loads of trim. Pork cutout values: up $0.45, $85.92. Wednesday's slaughter is estimated at 470,000 head -- 4,000 head less than a week ago and 22,000 head less than a year ago. Tuesday's hog slaughter was revised to 467,000 head -- 5,000 head less than what was originally stated. The CME Lean Hog Index 1/3/2021: up $0.90, $72.75.
THURSDAY'S CASH HOG CALL: Steady to somewhat higher. The lean hog market is being sought with extreme aggression as packers want to get hogs committed for the weeks ahead. It is to some degree worrisome that the day's slaughter estimates have been revised lower every day this week ,but given that supplies of market-ready hogs are waning, the bobble in production won't likely hurt the latter half of the week's cash market too terribly.
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