GENERAL COMMENTS
Active futures contracts were higher for live cattle and feeders Wednesday, helped by an easing of concerns about the banking sector. June lean hogs fell $1.90, showing concerns about a possibility of higher-than-expected hog and pig inventories in Thursday's USDA report.
LIVE CATTLE:
June cattle closed up 75 cents at $159.65 Wednesday, a fourth consecutive higher close as concerns around this month's bank failures continue to ease. Dow Jones futures were trading over 200 points higher Wednesday afternoon, a sign of those easing concerns. With traders more focused on the cattle market again, June cattle prices are back above the 100-day average and are once again focused on this year's smaller herd.
USDA estimated Wednesday's cattle slaughter at 127,000, up from 126,000 a week ago and a little more than expected Wednesday morning. So far in 2023, the cattle slaughter pace is down 2.6%, but beef production is down 4.4%, reflecting not only fewer cattle, but lighter cattle weights. It is in this bullish atmosphere that packers try to secure their weekly needs and have often relented to higher prices late in the week. That appears to be the case again this week as cash trade has been slow to develop.
Wednesday afternoon's boxed beef prices were down 34 cents at $280.29 for choice and were down $1.46 at $268.90 for selects. Both are holding small gains from Friday's close.
THURSDAY'S CATTLE CALL: Steady.
FEEDER CATTLE:
May feeder cattle traded higher most the day and finished up $1.72 at $202.52 Wednesday, a second impressive gain this week. Even in the middle of March when traders were panicked by three U.S. bank failures and possibilities for more, May feeder cattle stayed well above their 100-day average and only fell to their one-month low, a sign of how strong demand is in this market. Now that those outside concerns have eased, prices have resumed their upward path. There is no secret more cattle will be needed in the months ahead, barring a bearish surprise in the economy.
Technically speaking, spot prices of feeder cattle are at their highest level since 2015 and show no sign yet of ending the uptrend. With more snow in the northwestern Plains heading into spring, it will be interesting to see if there will be enough green pastures to hold back cattle for breeding in 2023. The CME Feeder Cattle Index posted $191.27 for Tuesday, March 28, up $3.58 from a week ago.
LEAN HOGS:
Hogs started the week trying to trade higher with help from relief over outside banking concerns, but there just hasn't been enough demand. June lean hogs closed down $1.90 at $90.82 and the next challenge will be to see if prices can hold above last week's low of $87.80, the lowest June hog price in a year and a half.
USDA estimated hog slaughter at 477,000 Wednesday, less than was estimated Wednesday morning and down from 478,000 a week ago. So far in 2023, hog slaughter is up 1.6% from a year ago, a pace that has bearish implications for Thursday's Hogs and Pigs report. In its December report, USDA found 73.1 million head of hogs and pigs in inventory, down 2% from the previous year. On Thursday, many are expecting March 1 inventory slightly higher than a year ago, near 72.9 million head. Given the recent lack of demand for cash hogs, an upward revision of December totals is possible in Thursday's report.
Wednesday afternoon's Daily Direct Hog report showed an average negotiated hog price of $75.51 and a market formula average of $73.83, continuing the bearish trend in cash hogs. Wednesday afternoon's carcass value was up 26 cents at $80.26, helped by a $7.85 gain in bellies.
THURSDAY'S HOG CALL: Steady to lower with traders cautious ahead of USDA's 2 p.m. CDT Hogs and Pigs report for March 1.
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