GENERAL COMMENTS:
It was good to read the morning's WASDE report as it was encouraging for both the cattle and hog markets. The cash cattle market hasn't traded yet, but feedlots are determined to get higher prices this week and seem unwilling to accept lower offers at this point. March corn is down 6 1/4 cents per bushel and March soybean meal is up $1.90. The Dow Jones Industrial Average is up 128.24 points.
LIVE CATTLE:
The live cattle market is trading lower as the market longs for direction -- direction from the cash market and clear direction from the morning's WASDE report. Thankfully the morning's WASDE report was extremely supportive and paints a positive outlook for the year ahead. As traders are given more time to absorb the report, the market could begin to trade higher, especially if cash cattle begin to trade as well. February live cattle are down $0.55 at $157.20, April live cattle are down $0.50 at $160.82 and June live cattle are down $0.57 at $156.75. The cash cattle market currently has bids of $154 to $155 being offered in Kansas, and bids of $156 live to $250 dressed being offered in Nebraska. Asking prices remain at $158 to $159 in the South and $253-plus in the North. Trade is expected to develop later Thursday and at this point feedlots seem firm in holding the market at steady (worst case scenario) but ideally, they'd like to advance the market if at all possible.
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 quarter 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.
Boxed beef prices are lower: choice down $2.61 ($278.12) and select down $1.03 ($257.07) with a movement of 92 loads (63.59 loads of choice, 11.90 loads of select, zero loads of trim and 16.87 loads of ground beef).
FEEDER CATTLE:
The feeder cattle complex is again trading lower as the market longs for support from the live cattle/cash cattle market. Corn prices are trending lower and currently adding merely no pressure to the market -- it's solely the lack of interest from traders and the fact that the cash cattle market hasn't traded cattle yet holding feeders back from trading higher. January feeders are down $0.27 at $182.85, March feeders are down $0.55 at $185.00 and April feeders are down $0.72 at $188.85. The cash cattle market is expected to trade later Thursday afternoon, which could help drive the feeder cattle contracts higher if the market can maintain at least steady prices.
LEAN HOGS:
Even with the extremely supportive USDA WASDE report, the lean hog complex is still trading lower. But as the report depicted, demand isn't expected to help the market trade stronger until the second and third quarters of 2023. February lean hogs are down $0.60 at $78.70, April lean hogs are down $1.50 at $86.90 and June lean hogs are down $0.72 at $103.52. Midday cash and pork cutout prices are higher, but unfortunately that's not helping ease trader concerns for the time being.
The projected CME Lean Hog Index is delayed from the source. Hog prices are higher on the Daily Direct Morning Hog Report, up $0.39 with a weighted average of $72.38, ranging from $72.00 to $75.00 on 3,655 head and a five-day rolling average of $72.93. Pork cutouts 180.72 loads with 148.31 loads of pork cuts and 32.40 loads of trim. Pork cutout values: up $0.39, $81.07.
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.
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