Thursday Morning Livestock Market Update - Markets Seem to be Bearishly Optimistic

General Comments:

Just when we thought traders gained confidence to buy the break, the opposite happened. Cattle plummeted Wednesday, erasing the gains of Tuesday. Increasing grain prices are relentless, and feedlots do not want to play poker, so they folded in order to move market-ready cattle as quickly as possible. Packers took advantage of the current weakness of futures and increasing feed prices to bid lower. Some feedlots took those bids Wednesday anywhere from steady to $3.00 lower. Accepting lower bids might be the lesser of two evils. It is almost a given that cash will not trade higher the rest of this week. The selling pressure Wednesday might carry over Thursday before traders will turn their attention to the Cattle on Feed report due to be released on Friday. Boxed beef was again solidly higher, indicating strong demand. This has packers giddy as they can pay less for cattle and get more for product.

Hogs futures turned tail after initially opening higher. Spillover pressure from cattle seems to have had an influence. Higher grain prices are also beginning to have an impact on trader psychology. Farmers may want to move more hogs to the market pressuring prices, but that will also compound the tightness of supply later this year. Cash was higher Wednesday, but cutouts were lower. Demand resistance still has not been reached and should limit downward pressure on futures. Pork exports will be key to price direction Thursday as well as Friday. Saturday hog slaughter is projected to be 63,000 head.

	BULL SIDE		BEAR SIDE
1)	Boxed beef showed significant gains Wednesday, indicating continued strong demand.	1)	Cattle futures could not hold the bounce on Tuesday, increasing the bearishness of the market.
2)	Futures are oversold and ready to bounce and potentially retrace some of the heavy losses over the past two weeks.	2)	Escalating grain prices will put pressure on feedlots to move cattle as quickly as possible, resulting in lower cash.
3)	May hogs made a new contract high before falling back. This keeps the market in an uptrend for the front-month contract potentially moving later contracts into a sideways range.	3)	Recent hog futures price action seems to indicate a top has been reached for the time being in later contracts.
4)	Chinese officials indicate pork imports will continue to increase over the level they imported in 2020. First quarter imports already have been higher than the same period last year.	4)	Another week of lower pork exports could have a substantial impact on the market. Supplies would begin to back into the domestic market, requiring continued strong demand to absorb it.

Wednesday Closing Livestock Market Update - Pressure Is Building

GENERAL COMMENTS:

It was a brutal day watching the livestock contracts trade lower, but it was even more painful to see the corn market work over the feeder cattle contracts and equally as painful to see the cash cattle market's developments. Hog prices closed higher on the National Direct Afternoon Hog Report, up $0.80 with a weighted average of $106.88 on 11,159 head. May corn is up 19 cents per bushel and July soybean meal is up $1.40. The Dow Jones Industrial Average is up 316.01 points and NASDAQ is up 163.95 points.

LIVE CATTLE:

Tuesday's trade was a nice little surprise and feedlots relished the higher trade, but when you look at the recent live cattle charts and see the stark descend before that and sharp decline of Wednesday's trade -- it's a gruesome reality. Even though slaughter speeds are running vigorously, and boxed beef prices are closing higher day in and day out -- packers worked their magic on the Wednesday's fat cattle market. Sitting on ample supplies of committed cattle, packers waltzed into the market around the noon hour, offered up a couple of bids, and feedlots (who are weary of the week's outcome at this point) gobbled them up amid sweaty palms, a red futures market and $6.00 corn. There was a light trade that broke out in the South where live cattle sold for $119 to $120, which is steady to $2.00 lower than a week ago. There was some Northern cattle traded at $121 to $124, which is steady to $3.00 lower, and there was some dressed trade that developed in Iowa for $192, which is $3.00 lower than las week's weighted average. April live cattle closed $0.80 lower at $119.77, June live cattle closed $1.95 lower at $117.25 and August live cattle closed $1.42 lower at $119.97. Wednesday's slaughter is estimated at 120,000 head -- 5,000 head more than a week ago and 34,000 head more than a year ago (year-ago numbers were affected by COVID-19).

The Fed Cattle Exchange Auction listed a total of 4,972 head, of which 1,517 actually sold at $120 and $124, 2,252 head were listed as unsold, as they did not meet the reserve price that ranged from $120 to $125, and 1,203 head in Nebraska were scratched from the auction. Opening prices ranged from $118.50 to $125, high bids ranged from $119 to $124. The state-by-state breakdown looks like this: Kansas 884 total head, with 58 head sold at $120, 826 head unsold; Nebraska 2,080 total head, with 457 head sold at $124, 420 head unsold, and 1,203 head scratched from auction; Texas 2,008 total head, with 1,002 head sold at $120, 1,006 head unsold.

Boxed beef prices closed higher: choice up $2.20 ($280.46) and select up $1.41 ($271.88) with a movement of 114 loads (74.38 loads of choice, 10.58 loads of select, 10.09 loads of trim and 18.60 loads of ground beef).

THURSDAY'S CASH CATTLE CALL: Steady. Seeing that packers have been able to buy both live cattle and dressed cattle in both the North and the South this week, their willingness to buy cattle for more than steady is going to be slim.

FEEDER CATTLE:

With corn prices closed upward of $0.19 higher in the spot May contract and both the May and July contract closing about $6.00 per bushel, the feeder cattle contracts had little choice but to trade lower. The current equation in the feeder cattle complex isn't favorable to feedlots whatsoever (high inputs + low outputs = red ink). The market wouldn't be in as tough of a position if cattle prices would rally alongside the corn market, but when only one side of the equation is rallying, feedlot margins and producer's bottom dollar suffer together. April feeders closed $2.47 lower at $135.10, May feeders closed $3.17 lower at $139.60 and August feeders closed $2.60 lower at $151.92. At OCK West Livestock Auction in El Reno, Oklahoma, compared to last week, feeder steers traded $2.00 to $5.00 lower with the exception of heavier weight cattle that could come out against the October Live CME contract selling $1.00 to $3.00 lower. Feeder heifers sold $2.00 to $3.00 lower. The CME Feeder Cattle Index for April 20: down $0.15, $138.33.

LEAN HOGS:

The lean hog contracts seemed to have picked up some of the bearish framework that the cattle contracts are suffering from and closed lower, even though the market's fundamentals are still bullish. Even though the cash hog market closed $0.80 higher on over 11,000 head, and the day's slaughter is estimated at respectable 485,000 head, the future contracts still closed lower. Some of the market's anxiousness is in preparation for Thursday's export report, which could very likely be bearish as U.S. pork prices are lofty. June lean hogs closed $1.82 lower at $104.52, July lean hogs closed $1.25 lower at $103.00 and August lean hogs closed $0.92 lower at $99.32. Pork cutouts totaled 288.77 loads with 252.68 loads of pork cuts and 36.10 loads of trim. Pork cutout values: down $1.39, $113.64. Wednesday's hog slaughter is estimated at 485,000 head -- 5,000 head more than a week ago and 126,000 head more than a year ago (year-ago numbers were affected by COVID-19). The CME Lean Hog Index for April 19: up $0.66, $104.42.

THURSDAY'S CASH HOG CALL: Steady. Wednesday's advancement showed that packers are most certainly willing to continue to invest as they continue to throw bids on the table and were aggressive enough up buy 11,000 head Wednesday afternoon. With demand as stellar as it is, aggressive cash buying is expected to continue so long as demand holds. 

Wednesday Midday Livestock Market Summary - Contracts Head South

GENERAL COMMENTS:

The higher-and-lower, choppy, volatile trade that's developed this past week has been a whirlwind for the livestock contracts. Looking at the markets through a technical perspective, there's plenty of pressure as traders are apprehensive. But fundamentally, demand is still strong. May corn is up 18 3/4 cents per bushel and July soybean meal is up $0.30. The Dow Jones Industrial Average is up 206.40 points and NASDAQ is up 92.75 points.

LIVE CATTLE:

A shake up in the livestock contracts wasn't what feedlots were hoping for; but nevertheless, traders have backed away from the complex and are letting the market fall lower. April live cattle are down $0.75 at $119.82, June live cattle are down $1.77 at $117.42 and August live cattle are down $1.25 at $118.15. There's been a few (a very slim few) cattle trade in the South for $120, and bids are being offered in the North at $192. The $120 trade is steady to $1.00 lower than last week's business. Asking prices in the South are pinned at $122 to $125 and in the North cattle are priced at $205-plus. There is no doubt feedlots are concerned with how the board is trading, but that's only one sector of the market -- don't forget about the strength in boxed beef prices and the vigorous kill speed at which this week is running. If feedlots can let the week's early bids pass them by there is a chance at least steady trade could be attained.

The Fed Cattle Exchange Auction listed 4,972 head, of which 1,517 actually sold at $120 and $124; 2,252 head were listed as unsold, as they did not meet the reserve price that ranged from $120 to $125; and 1,203 head in Nebraska were scratched from the auction. Opening prices ranged from $118.50 to $125, high bids ranged from $119 to $124. The state-by-state breakdown looks like this: Kansas 884 total head, with 58 head sold at $120, 826 head unsold; Nebraska 2,080 total head, with 457 head sold at $124, 420 head unsold, and 1,203 head scratched from auction; Texas 2,008 total head, with 1,002 head sold at $120, 1,006 head unsold.

Boxed beef prices are higher: choice up $1.84 ($280.10) and select up $2.06 ($272.53) with a movement of 83 loads (57.62 loads of choice, 5.52 loads of select, 6.14 loads of trim and 13.98 loads of ground beef).

FEEDER CATTLE:

Tuesday's flutter of support quickly dissipated Wednesday morning as the corn market is posting another successful rally where nearby contracts are gaining $0.10 to $0.16 per bushel and the May and July contracts are both trading above $6.00. These high corn prices, coupled with the fact that hay and grass are both trending higher as well, really put feedlots in a pinch as their inputs are increasing and they've yet to see a higher end dollar for fat cattle. April feeders are down $1.90 at $135.67, May feeders are down $2.60 at $140.15 and August feeders are down $1.80 at $152.77. Until the feeder cattle complex can see some steady trade throughout the corn market and some gains made throughout the live cattle complex -- trade could continue to be brutal.

LEAN HOGS:

Lean hog futures are fighting some technical pressure, but the fundamental support is still extraordinary. June lean hogs are down $1.72 at $104.62, July lean hogs are down $1.15 at $103.10 and August lean hogs are down $0.80 at $99.45. After two days of rallying vigorously, traders could be hesitant in supporting the market too much more before seeing Thursday's export report. Given the level hog prices have climbed to, it wouldn't be all that surprising to see a weaker export report again. A weaker export report isn't necessarily a bad thing right now for the U.S. market as domestic consumers are thoroughly supporting the hog market and with supplies as tight as they are it's hard for the market to keep up with both domestic and international demand.

The projected two-day CME Lean Hog Index for 4/20/2021 is up $0.70 at $105.12, and the actual index for 4/19/2021 is up $0.65 at $104.42. Hog prices are higher on the National Direct Morning Hog Report, up $1.09 with a weighted average of $104.97, ranging from $102.00 to $110.50 on 6,439 head and a five-day rolling average of $103.66. Pork cutouts total 184.39 loads with 158.88 loads of pork cuts and 25.51 loads of trim. Pork cutout values: up $2.76, $117.79.

Tuesday Closing Livestock Market Update - Contracts Savor the Victory of a Fully Higher Close

GENERAL COMMENTS:

It was a rather impressive day throughout the livestock sector, as nearly the entire complex closed higher, and the market's fundamentals are aligning for a strong trade later in the week as well. Hog prices closed higher on the National Direct Afternoon Hog Report, up $1.14 with a weighted average of $106.08 on 6,205 head. May corn is up 14 1/2 cents per bushel and July soybean meal is up $3.40. The Dow Jones Industrial Average is down 256.33 points and NASDAQ is down 128.50 points.

LIVE CATTLE:

With the board closing fully higher, boxed beef prices higher again and slaughter running aggressively to hopefully process somewhere between 650,000 to 660,000 head this week, the cash cattle market has stars aligning in its favor if feedlots can wave by the week's early bids. April live cattle closed $0.22 higher at $120.57, June live cattle closed $0.60 higher at $119.20 and August live cattle closed $0.75 higher at $119.40. The June contract flirted with the idea of trading below the support plane at $118.00, but thankfully the market had a surge of support favor the market early in the day, which allowed for a successfully higher close. The deferred contracts fared the best as their gains were well over $1.00. The cash cattle market has yet to see any bids surface and asking prices are still unestablished. The Texas Cash Pool didn't sell any cattle this week as their highest bid was $120.55 with time -- the only other packer to offer a bid was at $119.02. Tuesday's slaughter is estimated at 121,000 head, 5,000 head more than a week ago and 36,000 head more than a year ago (year ago levels were greatly affected by COVID-19).

Boxed beef prices closed higher: choice up $2.09 ($278.26) and select up $1.34 ($270.47) with a movement of 91 loads (51.01 loads of choice, 11.01 loads of select, 11.37 loads of trim and 17.87 loads of ground beef).

WEDNESDAY'S CASH CATTLE CALL: Steady to $1.00 higher. This week's cash cattle market has a chance at trading higher, but it won't come easy as packers sit on supplies of cattle that they've bought with time. Packers knew that the cash market was going to continue to creep higher and that supplies were going to only become thinner as the spring continues to trade on, so they were wise and have been buying a significant volume of cattle with time. That's disheartening to this week's cash cattle market, but the fact remains that packers need cattle in order to push slaughter above 650,000 head and to keep up with consumer's demand. Bids will most likely begin to surface Wednesday.

FEEDER CATTLE:

Even though the nearby corn contracts closed $0.09 to $0.14 higher and the May corn contract closed above $6.00 -- the feeder cattle contracts were able to hold above the $142 support plane and rally on the momentum that stemmed throughout the livestock complex. April feeders closed $0.15 lower at $137.57, May feeders closed $0.30 higher at $142.77 and August feeders closed $1.75 higher at $154.52. With corn prices continuing their scorching rally, the cattle contracts need to see some upward progression to ensure profitability. At Callaway Livestock Center in Kingdom City, Missouri, compared to last week, steer calves weighing 450 to 500 pounds sold steady to $3.00 lower, steer calves weighing 500 to 550 pounds sold steady to $5.00 lower, and steers weighing 550 to 600 pounds sold $4.00 to $8.00 lower. Feeder heifers weighing 400 to 500 pounds sold steady to firm, heifers weighing 500 to 600 pounds sold $3.00 to $5.00 lower and heifers weighing 600 to 750 pounds sold mostly steady. The CME Feeder Cattle Index for April 19: down $1.65, $138.48.

LEAN HOGS:

The lean hog complex was elated to close mostly $1.00 to $2.00 higher Tuesday afternoon after last week's downward spiraling trade Thursday and Friday. The contracts were able to rally amid strong pork demand without worrying about a lack of technical support. Pork cutout values were able to close higher and cash prices saw a significant jump Tuesday afternoon as cash prices rose $1.14. Still, the cash hog movement for the day only totaled 6,205 head, which most likely stems from the fact supplies are so hard to come by, not that packers are only selectively buying. Pork cutouts totaled 353.13 loads with 330.99 loads of pork cuts and 22.14 loads of trim. Pork cutout values: up $0.95, $115.03. Tuesday's slaughter is estimated at 485,000 head, 1,000 head more than a week ago and 125,000 head more than a year ago (year ago levels were greatly affected by COVID-19). Monday's hog slaughter was revised to 485,000 head -- down 5,000 head from the originally stated 490,000 head. The CME Lean Hog Index for April 16: up $0.52, $103.76.

­­­­­WEDNESDAY'S CASH HOG CALL: Steady. With pork prices jumping over $1.00 Tuesday afternoon, packers will most likely support a steady, if not somewhat higher market, as market-ready hog supplies are hard to come by. Yes, Monday's slaughter was revised lower but only by a mere 5,000 head, which won't hinder packer's buying quotas significantly this week if the market continues to process at that 485,000 head mark.