Friday Morning Livestock Market Update - Weekend Profit Taking Expected in Hog Futures

GENERAL COMMENTS:

Boxed beef prices continued higher but that was not enough to support the market after cash traded generally steady for the week. Traders are cautious over the potential for cash prices over the next few weeks. The market looks more bullish over the long term, but with packers purchasing the required cattle for immediate slaughter as well as for the next few weeks, it leaves the market with potentially limited upside. Boxed beef prices continue higher, but that is not translating into cash prices. Heavier cattle weights and plentiful supply for the near term leaves the market is the position of limited upside. Trading activity may be two-sided as the market moves into the weekend.

Hogs are on a roll with the strong uptrend and new contract highs pulling more traders into the market and forcing short covering. The rally Thursday was not supported by stronger cash as the National Direct Afternoon report showed a decline of $3.72 after two days of strong gains. Cutouts also showed weakness with a decline of $3.23. The July contract was able to close above $104. Traders are concerned over tightening supply as the year progresses and are anticipating what it will take to purchase hogs for domestic and export demand through the first half of the year. Saturday hog slaughter is a moving target with the current estimate for slaughter at 215,000 head.

	BULL SIDE		BEAR SIDE
1)	Boxed beef continues higher with prices moving to the highest level since early October. This should support the market.	1)	Once April cattle close the chart gap above the market, futures may slide lower due to the lack of current cash support.
2)	There are some signs that slaughter pace is picking up. As slaughter increases, so will the need for more cattle.	2)	Some cattle already being forward contracted for the next few weeks leaves little support for higher cash next week.
3)	Hogs continue to make new highs as traders seem confident supplies will tighten during the first half of the year.	3)	Some hog contracts left a gap Thursday that will be closed sooner rather than later. The sharp rise this week may run out of steam Friday.
4)	Bullish weekly export sales would continue to support the market.	4)	Hog futures are overbought and ripe for a correction after an incredible week of price increases.

Thursday Closing Livestock Market Update - Lean Hogs Run Away With Market

GENERAL COMMENTS:

It was a lower day for cattle futures as traders let the markets fall, but the lean hog contracts leaped higher as traders wanted all they could take in that market! Hog prices closed lower on the National Direct Afternoon Hog Report, down $3.72 with a weighted average of $66.56 on 4,554 head. March corn is up 1/2 cent per bushel and March soybean meal is up $2.50. The Dow Jones Industrial Average is down 313.26 points and NASDAQ is down 186.24 points.

LIVE CATTLE:

Live cattle futures were stronger for a short while Thursday but, by noon, the market's outlook was pretty grim. February live cattle closed $0.22 lower at $138.32, April live cattle closed $0.17 lower at $143.17 and June live cattle closed $0.10 lower at $138.37. Thursday's weaker trade stemmed from traders' unwillingness to drive the market any higher following Wednesday's aggressive push. The cash cattle market was quiet with just a little clean-up trade. So far this week, Northern dressed deals have been mostly $218, fully steady with last week's weighted averages. Many of these cattle are set for delivery the weeks of Jan. 31 and Feb. 7. Southern live transactions have been mostly $137, $1 to $1.50 higher than last week's weighted averages. Thursday's slaughter is estimated at 116,000 head -- 2,000 head more than a week ago and 6,000 head less than a year ago.

Thursday's actual slaughter data showed for the week ended 1/8/2022 steers stayed steady at 928 pounds (but that's 16 pounds heavier than the same week a year ago) and heifers dropped four pounds from the previous week to average 851 pounds. It's important to not overlook how big these carcass weights are getting -- and this data represents the time before reduced slaughter speeds of 2022 hit the market. The market could be in for a big wake-up call in the next couple of weeks as weights are likely growing heavier and heavier as cattle are sitting in feedlots for longer than anticipated.

Boxed beef prices closed higher: choice up $1.38 ($292.98) and select up $1.75 ($282.18) with a movement of 129 loads (94.59 loads of choice, 14.45 loads of select, 3.88 loads of trim and 15.94 loads of ground beef).

FRIDAY'S CASH CATTLE CALL: Steady with the week's trend. It's looking like the bulk of this week's business is essentially done. There may be some clean-up trade Friday but largely the week's trade is wrapped up.

FEEDER CATTLE:

Feeder cattle futures can't even blame their weaker close on the corn market as the corn complex also closed lower Thursday. Traders took one look at Thursday's market early in the day and, after driving the market higher through Wednesday's close, traders got cold feet and opted to move their positions to the sidelines and let the feeder cattle complex flop lower. January feeders closed $0.22 lower at $161.17, March feeders closed $0.67 lower at $164.95 and April feeders closed $0.52 lower at $169.52. With the live cattle contracts also closing lower, and not much optimism in the cash cattle market, the feeder cattle contracts didn't have much support. At Torrington Livestock Action in Torrington, Wyoming, compared to last week, on a run of 7,639 head, steer calves weighing 450 to 700 pounds traded $2.00 to $4.00 stronger, while all other steer calves traded mostly steady. Heifer calves weighing 500 to 550 pounds traded $3.00 higher, and all other weight groups traded mostly steady. The CME Feeder Cattle Index 1/19/2022: down $0.04, $161.20.

LEAN HOGS:

Despite all the fundamental factors of the market closing weaker (slaughter lower, cash prices lower, pork cutouts lower) traders drove the futures higher through Thursday's close. For the nearby contracts, both the April and June made new contract highs, as traders wasted no time rallying the market before the day's last bell. February lean hogs closed $2.62 higher at $84.92, April lean hogs closed $2.65 higher and June lean hogs closed $1.95 higher at $103.82. The wild ride in pork cutout values is enough to give you whiplash. While ham prices were up over $30.00 on Wednesday's close, come Thursday the market tumbled lower and ham prices alone fell $25.80. Unfortunately, this type of volatility isn't expected to lessen until processing speeds get back to normal. Pork cutouts total 296.32 loads with 263.90 loads of pork cuts and 32.41 loads of trim. Pork cutout values: down $3.23, $92.24. Thursday's slaughter is estimated at 457,000 head -- 4,000 head less than a week ago and 41,000 head less than a year ago. The CME Lean Hog Index 1/18/2022: up $0.07, $76.85.

Thursday's actual slaughter data for the week ended 1/8/2022 showed live carcass weights averaged 294 pounds (up two pounds from the previous week) and dressed weights averaged 219 pounds (up one pound from the previous week).

FRIDAY'S CASH HOG CALL: Lower. Given that packers were aggressive earlier in the week, and that absenteeism has been an issue at plants, I think it is safe to bet Friday's cash hog market will be weaker as packers give the market a rest ahead of the weekend.

 

Thursday Midday Livestock Market Summary - Live Cattle, Feeder Cattle Sink Lower

GENERAL COMMENTS:

Live and feeder cattle futures jumped into Thursday's market, hoping to keep with Wednesday's higher trend. But traders quickly rerouted their trajectory and are leading both the markets lower. It's looking like cash cattle trade is all but done with, though some light clean-up deals could develop. March corn is up 1 1/2 cents per bushel and March soybean meal is up $4.20. The Dow Jones Industrial Average is up 328.50 points and NASDAQ is up 231.11 points.

LIVE CATTLE:

Live cattle futures started strong, thinking Thursday may be another day with rallying potential. But as traders sat down and got to business, they quickly rethought their position. February live cattle are down $0.30 at $138.25, April live cattle are down $0.47 at $142.87 and June live cattle are down $0.30 at $138.17. Heading into Thursday afternoon, it will be interesting to see how carcass weights fluctuated from the last report of actual slaughter data. And, again, it will be crucial to keep close tabs on the day's slaughter. The cash cattle market has been quiet Thursday and it's likely the week's business is done.

So far this week, Northern dressed deals have been marked at mostly $218, fully steady with last week's weighted averages. A good many of these cattle are set for delivery the week of Jan. 31 and Feb. 7. Southern live transactions have been at mostly $137, $1 to $1.50 higher than last week's weighted averages.

Boxed beef prices are higher: choice up $1.50 ($293.10) and select up $2.40 ($282.83) with a movement of 78 loads (56.44 loads of choice, 10.75 loads of select, zero loads of trim and 10.90 loads of ground beef).

FEEDER CATTLE:

Starting Thursday, feeder cattle futures were rallying as traders still seemed interested. But as the noon hour nears, feeder cattle contracts are retreating. January feeders are down $0.22 at $161.17, March feeders are down $0.95 at $164.67 and April feeders are down $0.77 at $169.27. The corn market isn't even to blame for Thursday's weakness as corn contracts are trading mostly steady after Wednesday's wild advancement. Largely, the feeder cattle contracts are lower on a pullback from traders and with the live cattle contracts now lower too, the market is apprehensive about being too bullish.

LEAN HOGS:

Lean hog futures don't seem to care that the cattle contracts are backing off their bullish push as the hog contracts just keep reaching for more. February lean hogs are up $0.82 at $83.15, April lean hogs are up $1.17 at $92.52 and June lean hogs are up $1.15 at $103.02. The push is largely technically driven as fundamentals are sinking backward. Cash hog prices are down hard and pork cutout values are retracking. But the day isn't over until we've seen the afternoon reports.

The projected CME Lean Hog Index for 1/19/2022 is down $0.06 at $76.79, and the actual index for 1/18/2022 is up $0.07 at $76.85. Hog prices are lower on the National Direct Morning Hog Report, down $8.93 with a weighted average of $61.14, ranging from $60.00 to $73.00 on 2,622 head and a five-day rolling average of $66.40. Pork cutouts total 132.17 loads with 114.07 loads of pork cuts and 18.10 loads of trim. Pork cutout values: down $3.04, $92.43.

Thursday Morning Livestock Market Update - Hogs Lead the Complex Higher

GENERAL COMMENTS:

Cash cattle did not trade higher than what took place on Tuesday, but traders anticipated continued strong boxed beef prices would keep packers aggressive, even though they are contracting cattle a couple of weeks out. It may take a few weeks for cattle supply to become current, but traders seem to believe this may take place over the next few weeks as slaughter slowly improves. Most business is done for the week with no change expected for cash. Boxed beef prices continue to show strength with choice up $2.11 and select up $2.04. Consumers have not reached price resistance, and in some cases, they are stocking up on beef ahead of time. Feeder cattle did not post the same strength as live cattle futures. Feeder and calf prices have slumped a bit for the time being.

Cash hogs increased substantially again Wednesday with the National Direct Afternoon report posting a gain of $4.09. This was on the heels of a gain of $4.08 on Tuesday. This was very impressive and indicates strong demand by packers. Cutouts jumped $8.26 showing strong consumer demand. As with beef, consumers are stocking up on pork due to some shortages seen in the retail meat case. New contract highs were seen in May and later futures contracts with July futures solidly over $102. Saturday slaughter is estimated at 244,000 head.

	BULL SIDE		BEAR SIDE
1)	April live cattle futures still need to close the chart gap on the upside. Follow-through price strength Thursday would accomplish that task.	1)	Cattle futures have rallied despite lower cash and plentiful supply of cattle. Technical buying may have run its course. Once the April chart gap is filled, futures may fall back.
2)	Strong boxed beef price should keep packers somewhat aggressive as they want to supply that demand.	2)	Packers are purchasing cattle ahead which minimizes their need to be aggressive in the cash market.
3)	Prop 12 has not had any bearish influence on the market with hog futures continuing to make new highs. Overall demand remains strong.	3)	Hog futures have had a strong rally over the past week with the likelihood of a price correction into the end of the week.
4)	Packers have been very aggressive so far this week and may continue that way as cutouts are very strong retailers want to stock the meat counter.	4)	The strong increase in cutouts may begin to temper consumer demand as price resistance develops.