GENERAL COMMENTS:
A surge of speculative buying activity has driven up the prices of lean hog futures Wednesday, and also live cattle and feeder cattle as well. The three nearby lean hog contracts have been up by triple digits through most of Wednesday morning, and the more illiquid feeder cattle futures markets have also displayed some streaky gains. COVID-19 lockdowns have eased in some Chinese provinces in response to citizen protests, and the broader commodity markets -- notably including crude oil -- seem to interpret this as a sign that Chinese imports of certain products may not suffer as much as feared earlier this week. December corn is down 4 cents per bushel and December soybean meal is up $9.30 per ton. The Dow Jones Industrial Average is down 177.25 points.
LIVE CATTLE:
Live cattle futures are following along with the livestock sector's generally bullish mood, with a relatively active volume of futures trade for a Wednesday morning. December live cattle are up $0.475 at $153.15, February live cattle are up $0.925 at $155.725 and April live cattle are up $0.80 at $159.375. These gains are still only a small gesture to counteract the slide of the past few trading sessions, and the December contract, for instance, remains more than $1 below the contract high from a week ago. The market is still waiting for cash cattle trade to develop this week, but so far, early asking prices have been noted in the South at $156 to $157. The Fed Cattle Exchange Auction held today reported 07 lots (all in TX), totaling 1,506 head of cattle, none of which sold. Opening prices were at $153, high bids had a range of $155 to $155.25, but none of these bids met reserve prices of $155.50 to $156.
Wednesday's slaughter is estimated at 128,000 head, which is 4,000 more than a week ago and 4,000 more than a year ago.
Boxed beef prices are lower Wednesday morning: choice down $2.51 ($252.23) and select down $0.43 ($225.39) with a movement of 84 loads (59.95 loads of choice, 9.77 loads of select, 0 loads of trim and 13.78 loads of ground beef).
FEEDER CATTLE:
Feeder cattle are posting impressive gains so far Wednesday, but these may merely be a feature of spotty trading volume and lots of room on the chart for contracts to move back higher without encountering sell orders. January feeders are up $1.70 at $179.70, March feeders are up $1.675 at $182.85 and April feeders are up $1.55 at $186.40. The March contract, for instance, would have to churn another $2.50 higher to retake its high from last week. However, there's no arguing that the market has recognized the looming shortage of beef animals in this drought-plagued country, particularly in the longer-term horizon. The October 2023 contract has traded above $200 per cwt throughout this whole month, and opportunities exist for cow-calf operators confident of supply to lock in 2023 hedges or insurance policies at prices that are likely to support profits.
LEAN HOGS:
Lean hog futures are leading the livestock sector higher Wednesday, with a bullish narrative from outside markets as China eases some COVID-19 restrictions, promising improved consumer demand for things like pork, and crude oil regains $80 per barrel. December lean hogs are up $1.55 at $82.625, February lean hogs are up $1.425 at $85.575 and April lean hogs are up $1.375 at $91.125. The concentration of buying activity in the front-month December futures contract is a sign that short-term speculators are the ones driving Wednesday's price action. While the day-to-day sentiment of lean hog futures traders remains in thrall to the story of China and its consumer demand, there is going to be continued risk of volatile up-or-down days, because the effectiveness of citizen protests or government reactions will evolve over time. Here in the U.S., Wednesday's slaughter is seen at 492,000 head, which is 4,000 more than a week ago and 13,000 more than a year ago at this time.
The projected CME Lean Hog Index for Nov. 28 is down $0.43 at $84.21, and the actual index for Nov. 25 was down $0.93 at $84.63. Hog prices were higher in Wednesday's Daily Direct Morning Hog Report, with the weighted average price $86.20 up $4.16 on 23,226 head. Base prices ranged from $77.50 to $88, bringing the five-day rolling average to $84.73. Pork cutouts total 180.81 loads with 153.49 loads of pork cuts and 27.49 loads of trim. Pork cutout values: up $2.52, $88.20.
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