Monday Midday Livestock Market Update - Prices Start Higher in Cold Week

GENERAL COMMENTS:

Livestock prices are starting higher Monday with traders anticipating USDA to publish lower numbers of Jan. 1 cattle inventory on Tuesday afternoon. Prices also continue to benefit from last week's report of higher export sales and calmer market view of the rate hike expected Wednesday.

LIVE CATTLE:

Live cattle futures are higher at midday Monday with the April contract up $2.22 at $163.05, pushing into new high territory. After colder air descended into the western Plains Sunday, Monday morning temperatures were below zero in the Northern Plains and down to single digits as far south as Kansas. Those lower temperatures are expected to hang around most of the week, turning gradually warmer by the weekend. The cold makes travel difficult and will keep weights down, possibly spurring higher packer bids.

Last week's cash trade was roughly steady to a dollar higher in the South and steady in the North. Fairly soon Monday, USDA will release its weighted averages for the week. So far this month, packers haven't shown much need for negotiated trade, but there is no question supplies of available cattle are down from a year ago. Tuesday afternoon's inventory report will back that up, possibly showing U.S. cattle inventory down 3% or 4% from a year ago on Jan. 1.

The slaughter pace was slightly higher last week, up 13,000 to 659,000 and remains active with Dow Jones estimating 125,000 cattle Monday, down 2,000 from last week. Choice boxed beef prices were up $0.07 at $267.83 early Monday after finishing down $3.96 last week at $267.76. Selects were up $1.14 to $251.68 early Monday after finishing down $5.89 last week at $250.54. USDA reported 36 loads early Monday. Thursday's USDA report of 25,100 mt of beef export sales for the previous week was an encouraging sign of international demand, despite concerns in the news headlines.

FEEDER CATTLE:

March feeder cattle are up 77 cents at $184.25 at midmorning Monday after having pivoted off the three-month low of $179.17 on January 19, a distinct change in short-term momentum. March corn is roughly steady Monday after Argentina got some beneficial rain over the weekend, but chances remain limited in the week ahead. The new burst of cold air invading the northern and western Plains is obviously stressful to cattle and will make conditions difficult this week before more moderate temperatures are expected to return by the weekend. As with live cattle, the feeder trade will pay attention to Tuesday afternoon's inventory report for guidance on just how much liquidation has taken place over the past year. Overall, feeder prices remain well-supported despite high feed costs and would be most helped by better prospects for precipitation in 2023 -- a possibility as the La Nina influence is expected to turn neutral by April. The CME Feeder Index posted $179.57 for Friday, Jan. 27, up $2.54 from a week ago.

LEAN HOGS:

At midmorning Monday, April hog futures are trading a little higher, up 35 cents at $86.80 after a lower start. Hog futures are still showing signs of support after Thursday's bullish price reversal responded to prices testing their lowest levels since early October. Part of Thursday's buying enthusiasm was likely triggered by USDA's report of 44,700 mt of pork export sales to Mexico, China and others. China's interest in U.S. pork at a time when China's hog prices are depressed is curious but may have to do with distribution problems in the country, while COVID-19 infections remain high.

Also adding to the bullish change of heart, USDA's morning pork report posted Monday's cutouts up $2.21 at $81.46 with help from an $8.64 gain in hams. USDA reported 155.43 loads of pork cuts and 30.88 loads of trim. Of course, morning carcass reports are notoriously flighty and Monday morning's Daily Direct Hog report from USDA was not so encouraging. USDA's report showed a national negotiated price of $70.25 on scant trade, still a depressed level and below the swine formula base of $71.64. Hog slaughter remains active and was slightly higher last week at 2.54 million head. On Monday, Dow Jones estimates 488,000 head, down 2,000 from last week. CME's Lean Hog Index was projected at 72.21 for Friday, up 8 cents from a week ago. Despite futures prices finding support, the recent cash trade in U.S. hogs suggests inventory is easily available for packers, regardless of what USDA's December inventory report said.