GENERAL COMMENTS
It was rather impressive that the live cattle contracts were able to round out Friday's market slightly higher despite the fact that cash cattle traded $1.00 to $2.00 lower. The feeder cattle market, unfortunately, can't say the same as higher corn prices kept its market depressed, but the lean hog complex did close mostly higher as pork cutout values closed higher. Hog prices closed lower on the Daily Direct Afternoon Hog Report, down $0.80 with a weighted average of $71.80 on 3,652 head. March corn is up 4 cents per bushel and March soybean meal is down $5.00. The Dow Jones Industrial Average is up 112.64 points.
From Friday to Friday, the livestock futures scored the following changes: February live cattle up $0.95, April live cattle up $0.22; January feeder cattle down $1.45, March feeder cattle down $2.78; February lean hogs down $1.63, April lean hogs down $2.38; March corn up $0.21, May corn up $0.20.
LIVE CATTLE:
Friday's market didn't pan out exactly how feedlots were hoping. but that's not to take away from the successes that the week did have. The disappointing factor of Friday's market is that cash cattle prices traded lower. Southern live cattle traded at mostly $156, which is $1.00 lower than last week's weighted average, and Northern dressed cattle traded at mostly $250, which is $2.00 lower than last week's weighted average. Still, the futures complex remained steady and even closed higher despite cash cattle trading lower and boxed beef prices being lower at Friday's end too. February live cattle closed $0.17 higher at $157.72, April live cattle closed $0.02 lower at $160.90 and June live cattle closed $0.15 higher at $157.07. It will be especially interesting to see on Tuesday how the cattle bought this week were committed as that will determine whether or not the cash cattle market will be able to trade higher in the weeks to come. If packers bought most of this week's cattle for the nearby delivery, then feedlots stand a chance at continuing to advance the market, but if they were bought for the deferred delivery, feedlots could be in for a battle. The bright side continues to be that packers are keeping processing speeds extremely aggressive.
The fact that this week's slaughter was 661,000 head is rather impressive and if speeds remain at this level, packers will undoubtedly need more cattle.
Friday's slaughter is estimated at 123,000 head, 2,000 head less than a week ago and 11,000 head more than a year ago. Saturday's slaughter is projected to be around 33,000 head. This week's total slaughter is estimated at 661,000 head, incomparable to last week but 43,000 head more than a year ago.
Boxed beef prices closed lower: choice down $0.87 ($276.62) and select down $0.12 ($256.89) with a movement of 104 loads (75.69 loads of choice, 9.85 loads of select, 6.39 loads of trim and 12.53 loads of ground beef). The choice/select spread sits at $19.73. Throughout the week choice cuts averaged $281.10 (down $2.51 from last week) and select cuts averaged $257.99 (up $1.16 from last week) and the week's total movement of cuts, grinds and trim totaled 586 loads.
TUESDAY'S CATTLE CALL: Steady. Until we know exactly how many cattle sold and for what delivery option they were schedule for, it's a tough call saying how cattle will trade next week.
FEEDER CATTLE:
Late in the week, the corn complex became problematic for the feeder cattle market and, -- combine the onset of higher corn prices with a weaker fed cattle market -- one can easily see why the feeder cattle contracts closed lower Friday afternoon. January feeders closed $0.87 lower at $181.25, March feeders closed $1.40 lower at $182.87 and April feeders closed $1.35 lower at 187.05. In order for feeder cattle buyers to justify paying these high prices, they need cost of gains to decrease and fat cattle prices to increase; both of which were hard sells this week. Nevertheless, the market will likely trade hesitantly early next week until it sees better support from the live cattle/cash cattle market and/or a decline in corn prices. Oklahoma's Weekly Cattle Auction Summary shared that, throughout the entire state, and when compared to last week, feeder steers traded steady to $4.00 lower, but the biggest decline was on those weighing less than 750 pounds. Steers calves traded $3.00 to $5.00 lower. Feeder heifers and heifer calves both traded steady. Lighter weight cattle are seeing limited outlets as much of the wheat pasture has not had enough moisture for growth. Slaughter cows traded $3.00 to $4.00 lower and slaughter bulls sold $2.00 lower. The CME Feeder Cattle Index for Jan. 12: down $0.33, $182.03.
LEAN HOGS:
Has the lean hog complex finally found some technical support or did the afternoon's higher close in pork cutout values tip the scale and allow for the nearby contracts to close higher? Truthfully, I think it was a combination of both, which led to the lean hog complex's higher end. The spot February contract has been holding above $78.50 and doesn't seem to want to break below that support plane. The support in pork cutout values largely stemmed from the $7.61 jump in the ham, and the $6.02 increase in bellies. And while the increase in hams may be comforting, the increase in bellies in not, as we know supplies are ample of bellies and prices are likely to be volatile still in the upcoming weeks. February lean hogs closed $0.10 lower at $78.65, April lean hogs closed $0.10 higher at $87.27 and June lean hogs closed steady at $103.87. Pork cutouts totaled 344.82 loads with 313.03 loads of pork cuts and 31.80 loads of trim. Pork cutout values: up $2.31, $81.64. Friday's slaughter is estimated at 486,000 head, 33,000 head more than a week ago and 62,000 head more than a year ago. Saturday's slaughter is projected to be around 281,000 head. The CME Lean Hog Index for Jan. 11: down $0.47, $75.49.
TUESDAY'S HOG CALL: Lower. Packers won't show the market much support on Monday as they'll want to gauge demand early in the week before buying.
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