Tuesday Midday Livestock Market Update - Slight Increase in Corn Sends Complex Lower

GENERAL COMMENTS:

It's been an uneventful, lackluster day for the livestock complex with the only substantial development throughout Tuesday's market thus far is that corn prices are slightly higher, which is pressuring livestock to trade lower. It will be interesting to see how the cash cattle market fares this afternoon as demand hasn't been strong Tuesday morning, but packers were aggressive in the market Monday afternoon. March corn is up 7 3/4 cents per bushel and March soybean meal is down $0.30. The Dow Jones Industrial Average is up 10.69 points.

LIVE CATTLE:

The live cattle complex is in the same boat as the rest of the livestock market as weaker, lower tones dominate its market. The live cattle contracts are only trading mildly lower, and the spot April contract is holding above its 40-day moving average, which is a positive technical sign. The market doesn't expect to see much interest develop throughout the cash sector as trade will likely hold off until Thursday or potentially even Friday. Asking prices are noted in the South at $157, but remain unestablished in the North. Given that packers only bought 63,000 head in the cash market last week and are anticipated to process more than 645,000 head this week, it's likely that they'll need to become more aggressive in this week's cash market. February live cattle are down $0.40 at $157.07, April live cattle are down $0.15 at $160.40 and June live cattle are down $0.17 at $157.12.

Boxed beef prices are lower: choice down $0.47 ($270.97) and select down $0.72 ($253.77) with a movement of 63 loads (39.82 loads of choice, 8.90 loads of select, 5.03 loads of trim and 8.92 loads of ground beef).

FEEDER CATTLE:

The feeder cattle and corn contracts are again playing a game of cat and mouse as the feeder cattle contracts sink lower and the corn market posts a mild $0.02 to $0.06 rally into Tuesday's noon hour. With the live cattle contracts not lending any support, and it being too early for the cash cattle market to swoop in potentially lend support, the feeder cattle market is eyeing every move the grain sector makes and trading adversely. March feeders are down $0.45 at $182.82, April feeders are down $0.42 at $187.50 and May feeders are down $0.65 at $191.60.

LEAN HOGS:

One would have hoped that, with pork cutout values closing almost a $1.00 higher Monday afternoon, the lean hog contracts would be able to trade higher, but, with the pressure of a mild rally in the corn market, traders are sending the lean hog contracts lower. February lean hogs are down $1.07 at $76.50, April lean hogs are down $1.32 at $84.12 and June lean hogs are down $1.35 at $101.02. The cash hog market hasn't seen much interest thus far throughout Tuesday's trade, but interest could grow stronger as the afternoon passes by.

The projected lean hog index for Jan. 23 is down $0.02 at $72.11 and the actual index for Jan. 20 is down $0.52 at $72.13. Hog prices are lower on the Daily Direct Morning Hog Report, down $0.21, with a weighted average of $70.06, ranging from $67.00 to $72.00 on 3,073 head and a five-day rolling average of $70.21. Pork cutouts are unavailable due to packer submission issues.

Cattle on Feed Report Shows Feedlots Have Fewer Heifers Than a Year Ago

Friday's Cattle on Feed report came with neutral/slightly bullish tones for the cattle complex, as both on-feed and placement numbers were lighter than a year ago, but they were just a fraction of a percent higher than what analysts predicted.

Nevertheless, there was still a lot to be learned in Friday's COF report, and thankfully, the combination of a mixed report and lower corn prices throughout Monday's market allowed cattle contracts to rally throughout Monday's trade.

It was especially interesting to see that on Friday's COF report, the total number of cattle on feed was broken down into steer and heifer classifications and by the different quarters of the year. As of Jan. 1, 2023, there were 4.65 million head of heifers and heifer calves in feedlots across the United States, which is 25,000 head fewer than a year ago.

This data highlights one key point: that, largely, cattlemen haven't begun to keep back replacement females. While we know that the market is expected to be stronger for the next two to potentially even three years, cattlemen haven't been in a position either financially or with enough feed resources to justify keeping replacement-type females just yet.

There are two things necessary for the beef cow herd to grow: green grass and profitability. While we expect drought conditions could improve throughout the year, any seasoned cattlemen will say you can't measure the rain until it's fallen.

And, while prices are expected to be higher in the year ahead, so are inputs, which means profitability will continue to be a concern for our industry moving forward.

Nevertheless, while the market's fundamentals are extremely bullish, cattlemen haven't begun keeping replacement females back, as they desire to see more promise in the market and yearn to see drought conditions improve before they do so.

Saying that cattlemen haven't begun to keep back replacement-type females while the number of heifers and heifer calves in feedlots is lighter than a year ago may be incorrect. But when you account for how many fewer beef cows there are in today's market as opposed to a year ago, the statement remains correct. Next week, we will see the latest Cattle Inventory report released on Jan. 31, and the market is expecting to see as many as 1 million fewer beef cows in the market compared to a year ago.

In conclusion, both the attitude of January's market and the findings of Friday's COF report leave me feeling one thought, and that's, "The bullish market is coming, but it ain't here yet."

Tuesday Morning Livestock Market Update - Hogs May Develop Support

GENERAL COMMENTS:

The cattle complex closed higher with feeder cattle leading the way. Traders bought feeder cattle due to lower corn futures with some support spilling over into live cattle. With the neutral Cattle of Feed report behind, traders felt the market was a bit overdone to the downside resulting in a price correction. Boxed beef did not provide support with choice down $0.28 with select down $1.94. This does not bode well but the supportive factor is that packers did not purchase a large amount of cattle ahead for this week. That may mean that they need to step up this week to purchase the cattle they need. However, that may not garner much more than steady money unless feedlots hold out even if it means carrying cattle over into next week. I doubt that will happen which may leave cash no better than steady.

Hogs slipped back after opening stronger and trading higher for a while. The lack of strong underlying fundamentals could not trigger further buying interest from traders. Cash continued to struggle with the National Direct Afternoon Hog report showing a loss of $0.28 with a high volume of hogs sold. However, cutouts were positive with a gain of $0.93. This does not yet indicate cutouts have found support as there is plenty of pork available to the market. Slaughter pace was strong far exceeding the pace of last week and a year ago. Futures may trade sideways at best until traders feel confident that support has been found.

	BULL SIDE		BEAR SIDE
1)	Packers did not purchase many cattle for differed delivery last week leaving them with more slots to fill this week and possibly having to be more aggressive.	1)	Even though corn prices dropped Friday, price is still high and feedlots do not want to feed cattle longer than they need to.
2)	The Cattle on Feed report showed heifers and heifer calf inventory down one percent from a year ago. This will limit the growth of the cattle herd for a time.	2)	Boxed beef prices have been struggling recently which may have a greater impact on cash prices.
3)	Hog futures bounced from the lows last week and held the past two days. Traders could begin to do some bottom picking.	3)	There is little support under the hog market at the present time. There needs to be evidence of greater and more consistent demand.
4)	Continued strength of cutouts could provide support and result in short liquidation which could run futures higher.	4)	China's pork production last year increased 15.8% with the expectation that there will be little change in their production this year. That may limit some import demand from that country.

Monday Closing Livestock Market Update - Lower Corn Sends Cattle Higher

GENERAL COMMENTS

Both the live cattle and feeder cattle markets were able to round out Monday's trade fully higher, but the lean hog complex wasn't as fortunate as the market's support grew weary as the day traded on. Hog prices closed lower on the Daily Direct Afternoon Hog Report, down $0.28 with a weighted average of $70.62 on 7,464 head. March corn is down 10 cents per bushel and March soybean meal is down $1.80. The Dow Jones Industrial Average is up 217.75 points.

LIVE CATTLE:

The live cattle contracts traded higher throughout Monday's market as the complex rallied on thanks to cheaper corn prices and thanks to Friday's neutral to somewhat bullish Cattle on Feed report. April live cattle closed $0.62 higher at $160.55, June live cattle closed $0.72 higher at $157.30 and August live cattle closed $0.85 higher at $157.60. The spot April contract was able to close above its 40-day moving average, which may lend support to Tuesday's market and allow traders to feel confident in trading its market higher. The market is far from any resistance pressure and should have no problem trading higher, so long as fundamental support develops. Packers are expected to run aggressive processing speeds again this week, which will likely mean that they need to buy more cattle in the cash market. Trade won't likely develop until Thursday or Friday again this week. New showlists appear to be lower in all major feeding states. Monday's slaughter is estimated at 124,000 head, 1,000 head less than a week ago and 6,000 head less than a year ago.

Most of last week's cash cattle trade developed on Thursday and Friday. Northern cattle traded for $243 to $252, but mostly at $248 which is $3.00 lower than the previous week's weighted average. Southern live cattle traded for $154.50 to $156, but mostly at $155, which is $1.00 lower than the previous week's weighted average. Last week's negotiated cash cattle trade totaled 63,454 head. Of that, 83% (52,835 head) were committed for the nearby delivery, while the remaining 17% (10,619 head) were committee for the deferred delivery.

TUESDAY'S CATTLE CALL: Higher. Packers have successfully kept cash cattle prices at bay over the last two weeks but, moving forward, they'll need to secure more inventory if they're going to continue to run aggressive chain speeds. It's very likely that prices trade steady to $1.00 higher this week.

FEEDER CATTLE:

The feeder cattle complex closed fully higher as the market waded through Friday's Cattle on Feed report and is thankful to see fewer numbers of cattle on feed and lighter placements. In addition to rallying on Friday's COF report, the market was also supported by the day's weaker corn complex, which ended the day $0.08 to $0.10 softer. March feeders closed $2.30 higher at $183.27, April feeders closed $2.15 higher at $187.92 and May feeders closed $1.90 higher at $192.25. At Oklahoma National Stockyards in Oklahoma City, Oklahoma, compared to last week, and at their midsession point, feeder steers and heifers were trading steady to $4.00 lower. Steer calves were trading steady to $4.00 lower, but heifer calves were trading $12.00 to $14.00 lower, with instances of a much as $19.00 to $22.00 lower. Demand was light for calves. Rain and snow are expected in the area early this week, which could be part of the reason why calf prices were so much lower given that receiving feedlots don't want to run the risk of buying calves and then having them get risk with winter weather blowing in. The CME Feeder Cattle Index for Jan. 20: up $0.66, $177.69.

LEAN HOGS:

Even though the lean hog contracts ran out of support by the day's end and closed fully lower, the market surprisingly had some victories fundamentally. First, it was impressive that the market moved 7,463 head of cash hogs on a Monday. The cash hog market hasn't seen much action over the last few weeks, so seeing nearly 7,500 head trade on Monday must mean that packers are needing to restock their inventory. Second, pork cutout values closed higher. Steady gains were seen in all the cuts, expect the belly, which fell $3.98, but the cut with the biggest gain was the picnic, which added $4.99 to its price. February lean hogs closed $0.25 lower at $77.57, April lean hogs closed $0.27 lower at $85.45 and June lean hogs closed $0.17 lower at $102.35. Pork cutouts totaled 303.03 loads with 266.92 loads of pork cuts and 36.11 loads of trim. Pork cutout values: up $0.93, $80.92. Monday's slaughter is estimated at 489,000 head, 65,000 head more than a week ago and 37,000 head more than a year ago. The CME Lean Hog Index for Jan. 19: down $0.63, $72.65.

TUESDAY'S HOG CALL: Higher. Given that Monday's market saw a strong movement of cash hogs, it wouldn't be surprising to see Tuesday's and/or Wednesday's market trade slightly higher.