Tuesday Midday Livestock Market Update - Cattle Tread Cautiously Into New Week

GENERAL COMMENTS:

After the long weekend, lean hog futures are rallying to new highs yet again, while the cattle contracts trade with hesitation. Heading into Tuesday afternoon the market will be closely watching boxed beef prices as the choice/select spread was inverted at midday. March corn is up 11 3/4 cents per bushel and March soybean meal is up $4.20. The Dow Jones Industrial Average is down 327.67 points and NASDAQ is down 165.41 points.

LIVE CATTLE:

The live cattle complex is seeing mixed interest as the market gets back to work after the long weekend. The February contract expires Monday (Feb. 28), but most traders have already jumped ship and are looking to April to set the spot market's tone. April live cattle are down $0.12 at $145.75, June live cattle are up $0.02 at $141.52 and August live cattle are down $0.02 at $140.47. Watching processing speeds will be important in the weeks ahead as it will directly indicate how many cattle packers need to procure. Packers have been strategic in their buying over the last month and, as you'll note, they're slowly stacking supplies around them as they buy cattle with time for deferred delivery. This negatively affects the spot cash cattle market as feedlots will see less interest from packers in the weeks to come. Thus far there's been no interest in the cash cattle market but asking prices in the South are noted at $144 to $145 and the North has yet to disclose what they're asking. New showlists appear to be mixed, higher in Texas, somewhat lower in Kansas and lower in Nebraska/Colorado.

Last week's negotiated cash cattle trade totaled 98,691 head. Of that 83% (81,691 head) were committed for the nearby delivery, while the remaining 17% (17,000 head) were committed for the deferred delivery.

Boxed beef prices are mixed: choice down $2.07 ($262.02) and select up $0.94 ($262.78) with a movement of 57 loads (30.82 loads of choice, 5.53 loads of select, 3.27 loads of trim and 16.94 loads of ground beef). The choice/select spread at midday is printing at -$0.76. When select cuts become worth more than choice cuts, the market has some evaluating to do. This could be the market's way of saying choice prices are simply too high. Before too much time is spent on the matter, we need to see how the afternoon's boxed beef prices close, so stay tuned.

FEEDER CATTLE:

With Russia deciding to enter two Ukraine provinces Monday, the grain complex jumped higher on the market's volatile, uncertain nature and it's likely this type of anxious environment continues to plague the grain markets until tensions decrease. That being the case, the feeder cattle contracts have taken to lower prices as feeders become worried about their breakeven and what their cost of gains could become. March feeders are down $1.57 at $163.85, April feeders are down $1.47 at $169.37 and May feeders are down $1.20 at $174.70. For the feeder cattle complex to trade higher, the market is going to need to see immense support from both the live cattle futures and the cash cattle market.

LEAN HOGS:

While the cattle contracts spend the early part of Tuesday trading lower, the lean hog contracts have wasted no time jumping to higher prices and continuing their upward surge. April lean hogs are up $1.12 at $110.52, June lean hogs are up $1.32 at $119.95 and July lean hogs are up $1.40 at $118.92. The cash hog market hasn't seen much interest, but that doesn't come as a surprise as in the last few weeks packers have been extremely aggressive in the cash market for two days, but then left the market mostly alone throughout the rest of the week. If pork cutout prices continue to see the type of interest and demand they saw last week, the market stands an excellent chance at keeping its momentum given that supplies are as thin as they are.

The projected CME Lean Hog Index for 2/21/2022 is up $1.04 at $98.16, and the actual index for 2/18/2022 is up $1.89 at $97.12. Hog prices on the National Direct Morning Hog Report average $83.64, ranging from $83.00 to $94.97 on 2,900 head with a five-day rolling average of $87.54. Pork cutouts are unavailable due to technical difficulties at the USDA.