GENERAL COMMENTS:
June live cattle and May feeder cattle posted small gains Thursday with trading still limited by concerns about the presence of avian influenza in dairy cattle. June lean hogs settled up 25 cents at $105.00 for the first time in over a year, supported by strong packer demand for cash hogs.
LIVE CATTLE:
June live cattle closed up $0.25 at $175.85 Thursday, sneaking a higher close in a bearish minefield of news this week, regarding the presence of highly pathogenic avian influenza (HPAI) in dairy cattle and one dairy worker. The number of states with infected cattle increased to six this week, but three of the states either are Texas or appear to have received infected cattle from Texas. Even so, veterinarians and health officials are working to learn more, and we can still say that the nation's milk and beef supplies are safe for consumers.
One concern from all the publicity is that consumers may shy away from beef for a while, and we are seeing lower boxed beef prices this week. Thursday afternoon's report from USDA showed choice boxed beef dropped $4.15 to $297.15, the lowest in over a month. Select prices fell 87 cents to $296.05 and the load count totaled 162. Also concerning this week, cash trade started $3 to $5 lower in the North on Wednesday, followed by reports of some heifers sold for $2 lower in Iowa on Thursday. Before this week, cash prices were still close to their record highs. Most of the selling in the futures market has likely come from specs responding to the news, but it remains to be seen if producers will be as eager to let go of cattle in the cash market, knowing overall numbers are historically low.
So far in 2024, the slaughter pace for cattle is down 5.8% from a year ago, largely due to fewer numbers of cattle available. USDA estimated Thursday's slaughter at 122,000, up from 116,000 a week ago. Thursday's weights for the week ending March 23 pegged dressed steers up 2 pounds to 924 pounds and heifers up 2 pounds at 850 pounds. With U.S. cattle inventory down and cash prices near record highs, it's not surprising to see beef exports down 5% year-to-date, but there was a little encouragement in Thursday's weekly report. USDA said 18,700 metric tons of beef were sold for export last week, thanks to the top buyers of South Korea and Japan.
FRIDAY'S CATTLE CALL: Steady to lower with concerns about the impact of HPAI weighing on prices.
FEEDER CATTLE:
May feeder cattle closed up $1.30 at $243.87 Thursday, staying close to the 100-day average near $244.00 and refraining from extending Monday's new low, at least for now. Before the news of HPAI in dairy cattle was confirmed on March 27, the need for more calves this year was clear from USDA's January inventory report. It is important to remember that is still true and we have yet to see signs of herd expansion. Obviously, the issue of infected dairy cattle has put the bullish factors for beef cattle on hold, but for how long is the big question.
As of Wednesday, the CME Feeder Index was at $249.90, up $1.13 from a week ago and above Thursday's April close at $242.70. Technically speaking, May feeder prices are wrestling with the 100-day average near $244.00 and Friday's close should offer a good hint of future direction.
LEAN HOGS:
After a brief bout of early selling, June hogs were higher most of the day and closed up $0.25 at $105.00 Thursday, another new one-year high. More importantly, negotiated national cash hog prices ended at $87.23 Thursday, up over $40 since December and at its highest price since August 2023. USDA's swine formula price ended at $84.79, near its highest price since September 2023. The premium of the negotiated price over formula remains a bullish sign of packer demand, not seen in the market since July 2023.
Thursday afternoon's cut-outs ended up $3.24 at $98.15, up over $4.00 since last Friday and helped by an $11.53 jump in the price of bellies. Even though cash hogs are on the rise, cut-out values are maintaining a comfortable margin, a good sign of active retail demand that should keep packers buying.
After the close, USDA estimated 491,000 hogs were slaughtered Wednesday, up from 489,000 a week ago. Year-to-date hog slaughter is up just 0.2% from a year ago. The CME Hog Index was projected at $85.88 as of Wednesday, up $1.28 on the week, but below the April futures price of 88.35 on Thursday.
FRIDAY'S HOG CALL: Steady to lower in June hogs with traders leery about prices near new one-year highs.
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