Thursday Closing Livestock Market Update - Lean Hogs Fully Recover From Earlier Panic

GENERAL COMMENTS

When the lean hog market decided to correct its bearish overreaction from earlier in the week, it chose to do it in a big, sudden way Thursday, with gains of more than $4 per cwt at one point during the trading session. Feeder cattle futures also closed with gains, and the live cattle futures market is lingering near recent contract highs. In the cash cattle market, southern live business has taken place at $155 to $157, steady to $2 higher than last week's weighted averages, and northern dressed business has seen some light trade Thursday at $249 or $4 higher than last week's weighted averages. The National Direct Afternoon Hog Report showed purchased swine prices down $0.80 to a weighted average of $85.26 on 10,542 head. Prices ranged from $77 to $88.50, and the five-day rolling average is now $85.00. December corn moved down 12 cents to $6.50 per bushel and December soybean meal closed up $3.80 per ton to $421.60. The Dow Jones Industrial Average was down 194.76 points and the NASDAQ was up 11.84 points.

LIVE CATTLE:

Live cattle futures will struggle to attract enthusiastic buyers until the charts can break through to fresh highs, and contracts traded both sides of unchanged through Thursday's trading session. The December contract closed down $0.025 at $153.05; the February contract closed down $0.25 at $155.425, and the April contract closed down $0.025 at $159.25. In the cash cattle market, light trade started in parts of the North at $249 (dressed), which is $4 higher than last week's weighted averages -- delivering an impressive jump two weeks in a row. For southern live cattle, light to moderate trade Wednesday took place at $155, fully steady with last week's weighted averages, but cleanup trade through the end of the week will take place referencing asking prices around $157 in the South and $250 to $252 in the North. 

Boxed beef prices were lower Thursday afternoon: choice down $1.31 ($253.57) and select down $0.01 ($225.00), with a movement of 161 loads (124.36 loads of choice, 17.27 loads of select, 4.72 loads of trim and 14.36 loads of ground beef).

FRIDAY'S CASH CATTLE CALL: Steady to $2.00 higher versus last week's prices. To keep the lines moving at their recent aggressive pace, packers have demonstrated a willingness to explore higher prices.

FEEDER CATTLE:

Corn futures falling to $6.50 per bushel still don't present much of a 'bargain' to livestock feeders, but any day the feed markets drop by double digits, it's going to be easier for feeder cattle futures to churn moderately higher. At Thursday's close, the January contract was up $0.60 at $181.075, the March contract was up $0.85 at $184.30, and the April contract was up $1.00 at $187.80. At the sale barns where large numbers of weaned spring calves are still coming in after last week's Thanksgiving holiday, demand has been noted as good or very good and active. For instance, the Wednesday sale at Hub City Livestock in Aberdeen South Dakota saw 450 to 600-pound steer calves perform $6 or $7 better than the previous sale date (e.g. $225 per cwt for those averaging around 525 pounds), and 601 to 700-pound steers perform $10 to $12 higher (e.g. $192 per cwt for those averaging around 675 pounds), although results varied according to quality.

LEAN HOGS:

Several 2023 lean hog futures contracts experienced enthusiastic intraday gains of more than $4 per cwt Thursday, making the bearish Chinese COVID-19 lockdown panic from earlier in the week seem like nothing but a bad dream. The December contract closed up $0.225 at $83.125; the February contract closed up $3.85 at $89.20; and the April contract closed up $3.60 at $94.25. This puts the most actively traded February contract comfortably back inside its trading range from last week. That chart may be rangebound and struggle to attract much buying interest above the $90 level, but at least for now the headline-driven international bearishness seems to have passed, and the market can concentrate once again on the fundamental supply and demand of hogs destined for domestic packing facilities. The U.S. slaughter pace remains strong -- 492,000 head on Thursday -- and while lackluster pork prices may keep packers from bidding aggressively for hogs, at least the cloud of external bearish sentiment has cleared. The weekly export sales report showing 20,100 metric tons of pork sales was a disappointment compared to last week's big number, but the overall outstanding sales for the marketing year continue to run 10% above year ago numbers. The afternoon pork cut-out showed the overall carcass value down $0.81 to $86.52. There were 276.55 total loads (226.45 loads of cuts and 50.09 loads of trim). The CME Lean Hog Index for Nov. 29: down $0.32, $83.89.

FRIDAY'S CASH HOG CALL: $1 lower to $1 higher. With pork values struggling to find momentum, a recovery in the cash market for hogs may not be forthcoming.