GENERAL COMMENTS
It was a mixed day for the livestock complex as both the cattle and hog markets received a fairly supportive WASDE report, but its positive nature wasn't enough to push the contracts higher ahead of closing Thursday. The cash cattle market has yet to trade, meaning that packers are going to have to get serious come Friday if they're going to get any cattle bought this week. Hog prices closed lower on the Daily Direct Afternoon Hog Report, down $0.39 with a weighted average of $72.60 on 5,630 head. March corn is up 15 cents per bushel and March soybean meal is up $6.70. The Dow Jones Industrial Average is up 216.96 points.
LIVE CATTLE:
It's been a long time since the cash cattle market has waited until Friday to trade, and as feedlots know that they possess the majority of the market's leverage, they're willing to wait until the week's bitter end to trade cattle and ensure they get the prices they want. Bids started being offered early Thursday morning, but as the trading day has come and gone, feedlots let the bids grow cold and sit on the table. Bids of $154 to $155 live were offered in Kansas, $156 to $157 live and $250 to $252 dressed in Nebraska and $158 live and $252 dressed in Iowa. Currently, asking prices remain firm at $158 to $159 in the South and $253 plus in the North. It's a wildcard as to what could happen Friday, but the two realities are that either cattle will trade or this week's volume will be incredibly thin. Either way, feedlots remain in a strong position as they can endure to have some cattle roll over without it affecting them too negatively. The futures market wasn't much help throughout Thursday's trade as it clipped along, trading mostly sideways as traders weren't comfortable doing much until they see how the week's cash market fairs. February live cattle closed $0.20 lower at $157.55, April live cattle closed $0.40 lower at $160.92 and June live cattle closed $0.40 lower at $156.92. Thursday's slaughter is estimated at 122,000 head, 5,000 head less than a week ago and 6,000 head more than a year ago.
Thursday's WASDE report painted a supportive outlook for the 2023 cattle market. For 2023, beef production was raised by 170 million pounds, with the first quarter of the year being the most aggressive in terms of slaughter. Strong boxed beef prices will entice packers to continue to run aggressive chain speeds. But if boxed beef weakens, we could see chain speeds drastically reduced. Noting the quarterly price projections for 2023 was interesting as the first, second and third quarters are all expected to average $157, and the fourth quarter of 2023 is expected to average $162. Compared to last month, the first quarter of 2023 increased in price expectation by $4.00, the second quarter increased by $3.00 and the third quarter increased by $2.00. Beef imports for 2023 were raised by 50 million pounds (of which Brazil is expected to be the biggest supplier), but exports for 2023 remained unchanged from last month.
Thursday's actual slaughter data shared that, for the week ending Dec. 31, steers averaged 915 pounds, which is 5 pounds less than the previous week and 10 pounds lighter than a year ago. For the same week, heifers averaged 839 pounds, which is 5 pounds lighter than the previous week and 12 pounds lighter than a year ago.
Boxed beef prices closed lower: choice down $3.24 ($277.49) and select down $1.09 ($257.01) with a movement of 132 loads (87.88 loads of choice, 17.11 loads of select, 6.16 loads of trim and 21.01 loads of ground beef). The choice/select spread sits at $20.48.
FRIDAY'S CATTLE CALL: $1.00 to $2.00 higher. With feedlots being extremely adamant in getting their full asking price, I'm led to believe cattle will trade higher Friday.
FEEDER CATTLE:
The feeder cattle market told a story similar to that of the live cattle complex -- but not entirely. The nearby contracts closed lower as the market felt anxious about the cash cattle market having not traded yet, and corn closed $0.13 to $0.15 higher in its nearby contracts. The corn sector shot higher as USDA's WASDE report shared that an estimate of the 2022-23 U.S. ending corn stocks of 1.242 billion bushels would be the lowest in three years. But the deferred contracts looked past the day's WASDE report and kept their eyes focused on supply and demand mechanics in the cattle market. January feeders closed $1.00 lower at $182.12, March feeders closed $1.27 lower at $184.27 and April feeders closed $1.17 lower at $188.40. At Kist Livestock Auction in Mandan, North Dakota compared to last week's sale feeder steers weighing below 650 pounds traded $6.00 to $13.00 higher, and steers weighing 650 to 800 pounds sold $6.00 to $8.00 higher. Feeder cattle supply over 600 pounds was 59%. The CME Feeder Cattle Index for Jan. 11: up $0.04, $182.36.
LEAN HOGS:
The day's WASDE report was able to lend support to the deferred contracts, but the nearby contracts came up short and closed lower as the market knows that demand in the short term is bleak. February lean hogs closed $0.55 lower at $78.75, April lean hogs closed $1.22 lower at $87.17 and June lean hogs closed $0.37 lower at $103.87. Neither the cash market nor pork cutout values were able to lend any support to the nearby contracts, which will also likely be the theme seen in Friday's market. Pork cutouts totaled 351.72 loads with 286.40 loads of pork cuts and 65.32 loads of trim. Pork cutout values: down $1.35, $79.33. Thursday's slaughter is estimated at 488,000 head, 2,000 head less than a week ago and 25,000 head more than a year ago. The CME Lean Hog Index for Jan. 10: down $0.48, $75.96.
Thursday's WASDE report laid out a hopeful and mostly supportive outlook for the 2023 hog market. For 2023, pork production was increased by 135 million pounds as demand in the second and third quarters is expected to increase, which also affected quarterly price projections. For the first quarter of 2023, hog prices are expected to average $63, which is unchanged from last month. For the second quarter, hog prices are expected to average $71, which is $1.00 higher than last month. And for the third quarter of 2023 hog prices are expected to average $69, which is $4.00 more than what last month's report depicted. Hog imports for 2023 were decreased by 395 million pounds, but exports for 2023 did increase by 70 million pounds.
FRIDAY'S HOG CALL: Lower. Packers have shown very little interest in this week's cash market and it's highly unlikely that the begin to support the market on Friday.
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