GENERAL COMMENTS:
Only the nearby lean hog futures contract closed lower Wednesday; all other livestock contracts moved higher and, in some cases, established fresh contract highs. Livestock traders reacted to double-digit losses in corn prices and also anticipated the logistical effects of a major winter storm moving across the eastern United States. Hog prices closed higher on the National Direct Afternoon Hog Report, up $6.46 with a weighted average of $60.31 on 567 head. March corn is down 12 1/4 cents per bushel to $6.22 1/2 and March soybean meal is down $0.90 per ton to $435.10. The Dow Jones Industrial Average closed up 224 points and the NASDAQ closed up 120 points.
LIVE CATTLE:
On its fourth straight day of gains, the April live cattle contract established a fresh contract high at $146.95 and closed the day almost that high, up $1.525 at $146.90. Most deferred contracts posted similar gains. Eager trading activity lately may be both a medium-term reaction to this week's Cattle Inventory report that showed a diminished U.S. herd, and a short-term reaction to the healthy slaughter pace packers are maintaining. Wednesday's slaughter at 121,000 head was 3,000 higher than a week ago and 1,000 higher than a year ago. Feedlots must now position themselves to receive a fair share of this bullishness before beef prices lose any more of their luster. Some Nebraska dressed trade on Wednesday did just that: receiving $222 per cwt, or $4 higher than last week's level. Cash cattle asking prices remain mostly above $140 in the South and above $223 in the North.
Boxed beef prices closed lower: choice down $2.29 ($283.15) and select down $0.65 ($279.57) with a movement of 130 loads (89.44 loads of choice, 9.15 loads of select, 9.96 loads of trim and 21.05 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: $1.00 to $4.00 higher. What we've seen so far this week suggests prices are strong: some limited online trade above $138 and dressed trade in Nebraska at $222, which will lend a tone to the rest of this week's business. With packers running vigorous processing speeds, their need for cattle remains reliable.
FEEDER CATTLE:
March feeders closed up $3.175 at $167.225; April feeders closed up $2.675 at $171.825; and May feeders closed up $2.225 at $175.85, which is a fresh contract-high close. The momentum in this market was already higher after Monday's Cattle Inventory report showed the beef cow herd down 2% year-over-year, with droughty western regions hit particularly hard, like Montana, which now has 10.2% fewer cattle and calves than it did a year ago. But on top of that, Wednesday delivered a sudden double-digit drop in corn prices, so feeder cattle traders kept up their enthusiasm. The CME Feeder Cattle Index for 1/31: up $0.33, $158.77, where it has been fairly steady through the past week.
LEAN HOGS:
The April lean hog contract tested the air above $100 amid Wednesday's active trading session, but ultimately ended up "only" $1.45 higher at $99.125. Other deferred contracts posted similar gains, but the nearby February contract was the lone red spot on the livestock board: down $0.80 at $87.35. The enthusiasm of the deferred futures market may be somewhat detached from the very near-term logistical reality on the ground, as a fierce winter storm sweeps across the eastern United States and snarls trucking from Illinois to North Carolina. As a result, daily hog slaughter Wednesday at 432,000 is 43,000 below week-ago numbers and 67,000 below year-ago numbers. If the packers resume their appetite for business after the storm has passed, and if the U.S. Dollar Index stays moderate to encourage a steady export pace, prices and reality will likely all match up again soon. Meanwhile, the wholesale market still wants its pork, and especially its hams: the afternoon pork cut-out report showed prices up $3.47 to $96.44, with 294.70 total loads (269.81 loads of cuts and 24.89 loads of trim). The CME Lean Hog Index for 1/31: up $0.99, $83.14, and the projected Index for 2/1 is up $0.15, $82.29.
THURSDAY'S CASH HOG CALL: Lower. Packers may be limited in what they can logistically manage late this week.
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