GENERAL COMMENTS
Active futures contracts were higher for live cattle and feeders Monday, supported by the anticipated stress of bitter cold weather this week and by the anticipation of USDA getting ready to report a smaller U.S. cattle herd Tuesday afternoon.
April lean hogs tried to trade higher Monday after a lower start, but ended up just 0.07 at 86.52, anchored down by what appears to be a plentiful supply of available hogs. March corn was up 3/4 cent per bushel and March soybean meal was up $15.20 to a new contract high of $488.70. The Dow Jones Industrial Average was down 261 points Monday afternoon.
LIVE CATTLE:
April cattle closed up $2.52 at a new contract high of $163.35 Monday, finding support from bitter cold weather stressing livestock in the northern and western U.S. Plains and from the anticipation of seeing a lower inventory number from USDA in Tuesday afternoon's Cattle Inventory report. Traders will also be watching Tuesday's report to see if the number of beef cows falls below the 50-year low of 29 million, a record set in 2014. Anything close to the record is a strong argument for higher cattle prices down the road, but to see greater profitability for producers, the western Plains are going to need some rain in 2023 and an opportunity to stop the liquidation of beef cows to build a herd.
Monday's weekly slaughter summary showed a national weighted average of $155.31 for live steers, down 9 cents from the previous week. National dressed steers brought an average of $247.71, 55 cents lower than the previous week. For much of January, packers showed little need for negotiated trade, posting volume of 71,178 for the week ending Jan. 29.
USDA's comprehensive boxed beef prices were unsurprisingly lower for the week Jan. 27, but also showed 7.305 loads reported, an encouraging increase in retail demand. Monday's cattle slaughter was estimated at 126,000, up 2,000 from last week.
TUESDAY'S CATTLE CALL: Steady to lower with cautious trading ahead of Tuesday afternoon's inventory report.
FEEDER CATTLE:
March feeder cattle traded higher most the day and finished up 45 cents at $183.92 Monday, continuing to get a nice bounce of support off the three-month low that was tested on Jan. 19. Monday's feeder prices were helped by the encouragement of a new contract high in live cattle as well as the stress put on all livestock by this week's bitter cold weather. It also helped feeders for corn to have a quiet day of trading and while the stock market traded lower, it did not have much bearish influence on Monday's commodity prices. Feeder cattle prices remain limited by this year's high feed costs but do have a chance to benefit later this year if a diminishing La Nina gives way to more normal rainfall patterns. Even with high feed costs, however, it is difficult to see too much downside risk in feeder cattle prices after so much liquidation has taken place. So far, economic worries have been larger than actual problems. The CME Feeder Index showed $179.57 for Thursday, up $2.54 from a week ago.
LEAN HOGS:
April lean hogs traded lower after the open, reversed higher a short time later and ended Monday up just 7 cents at $86.52, a lot of wasted effort in a day. While futures prices have been continuously optimistic for hogs and even now are making a case for support from its lowest level in three months, the cash market seems stubbornly bearish. Monday afternoon's pork carcass edged up $1.03 to $80.28, helped by modest gains in picnics and ham, but still couldn't budge cash prices far from recent lows. USDA's national cash average price for cash hogs ended in the dumps again at $70.08 Monday, a little less than the swine/pork formula price of $71.12.
The stubbornly low prices and lack of strain on packers' part continue to suggest hogs are easily available for slaughter needs and are likely more plentiful than USDA estimated in December. We can't blame a lack of slaughter. Last week's slaughter was slightly higher than the previous week and Monday started with an estimate of 491,000, 2,000 more than last week and 14,000 more than a year ago.
Concerns about the economy are always hanging over livestock prices and could rise up again this week with a rate hike expected Wednesday and an unemployment report due on Friday. For the moment however, hog supplies appear to be the main bearish influence so it will be interesting to see if last Thursday's low of $83.70 will hold as support. The CME Hog Index projected $72.21 for Friday, up 8 cents on the week.
TUESDAY'S HOG CALL: Steady, with a quiet outside market expected Tuesday.
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