GENERAL COMMENTS:
On a day when everyone else is making big, dramatic moves (including the Russian Army), we can't expect the livestock markets not to do the same. Futures prices have been collapsing by triple digits since USDA revealed its baseline crop acreage projections on Thursday morning, suggesting only 88 million acres of soybeans but 92 million acres of corn will be planted in 2022. Light cash cattle trade so far this week has shown roughly steady live prices at $142 and dressed prices at $227. March corn is up 15 cents per bushel and March soybean meal is down $7.30 per ton. The Dow Jones Industrial Average is down 677 points and NASDAQ is down 39 points.
LIVE CATTLE:
Losses of more than $2 per cwt in the live cattle futures market have given back nearly all of this month's hard-won gains, putting the April contract as low as $142.20 midway through Thursday morning. This may not be the ultimate direction the livestock markets need to move to respond to the changes in geopolitical trade fundamentals, but it was the obvious direction to take on a day when Europe is now facing a war, the stock market is plunging, crude oil has tested the air above $100 per barrel, and grains are whipsawing up or down by double digits throughout the session. The nearby February live cattle contract is down $1.825 at $141.225 and the April contract is down $2.450 at $142.30. Otherwise, it might have been a relatively calm, bullish day in this market, with a strong Thursday slaughter projection at 122,000 head and more cash cattle trade still expected in line with last week and the light business seen so far around $142 live and $227 dressed. No matter what happens in Ukraine, Americans are still going to want their hamburgers.
The Special Fed Cattle Exchange Auction held Thursday listed a total of 2,229 head (Texas 1,650 head, Kansas 192 head, Iowa 115 head, California 140 head, Nebraska 69 head, and Oklahoma 63 head), all of which went unsold again, as they did not meet the reserve prices, which ranged from $142 to $145. Opening prices ranged from $139 to $140; high bids ranged from $139 to $141.50.
Meanwhile, the beef market continues to slip lower, with choice values landing almost back at their December 2021 lows. Choice prices are down $0.12 Thursday morning ($260.76) and select down $3.48 ($255.48) with a movement of 101 total loads (59.85 loads of choice, 16.35 loads of select, 9.75 loads of trim, and 14.77 loads of ground beef).
FEEDER CATTLE:
The March feeder cattle contract is down $4.00 to $158.775 and the April contract is down $3.775 at $164.50. But, these losses have been even more grievous at various points in the morning, with the steepest temporary losses seen in the April contract down by $6.25 per cwt right away when the session opened amid very heavy trading volume. This has clearly left a gap on the chart that may eventually be filled in once the global panic has worked its way through the system. In fact, it's hard to say if the volatility that's spilling over from the feed markets is entirely due to Russian aggression and geopolitical trade risk, or how much of it might instead be related to USDA's new baseline 2022 acreage projections, which suggested 92 million acres of corn could be planted this spring. On its own, that number might even look a little bearish for new-crop corn prices and relieve some of the pressure from the long-term outlook for cattle feeders' profitability. For now, though, $7 nearby corn futures and a European war are not positive for the feeder cattle market.
LEAN HOGS:
On Thursday, all the lean hog futures contracts between April and August 2022 are trading lower in sympathy with the volatile outside markets; but the deferred contracts past October remain lightly higher amid quiet trade. The April lean hog contract is down $1.30 at $106.725 and the May contract is down $0.875 at $111.775. This week's export sales report won't be released until Friday after the President's Day holiday shortened the week; but even then it won't show Thursday's bearish impacts to export pork prices when the U.S. dollar is skyrocketing amid geopolitical fear-based trade. Meanwhile, snarly winter weather is hitting Missouri and North Carolina Thursday, which may limit some movement of both animals and product. There are 476,000 head projected to be slaughtered Thursday, which is down 1,000 head from a week ago and down 18,000 from a year ago.
The CME Lean Hog Index from 2/21 was 98.16 (up $1.04) and the projected index for 2/22 is also $98.16 (unchanged). Pork cutouts Thursday morning total 128.77 loads with 11.94 loads of pork cuts and 16.83 loads of trim. Pork cutout values: up suddenly $8.05, to $117.17.
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