Friday, January 15, 2021

Friday Closing Livestock Market Update - Contracts Defend Their Positions


After a tough week, the livestock contracts were granted renewed support and largely were able to close higher before the long weekend. Hog prices closed lower on the National Direct Afternoon Hog Report, down $1.26 with a weighted average of $52.72 on 4,923 head. March corn is down 2 3/4 cents per bushel and March soybean meal is down $1.70. The Dow Jones Industrial Average is down 177.26 points and NASDAQ is down 114.14 points.

From Friday to Friday livestock futures scored the following changes: February live cattle down $1.70, April live cattle down $1.10; January feeder cattle down $1.25, March feeder cattle down $1.00; February lean hogs down $0.78, April lean hogs down $0.17.

**DTN will not be sharing market commentary Monday, Jan. 18, as the futures complex is closed for Martin Luther King Jr. Day.


Friday came as a breath of fresh air, allowing both the feeder cattle and live cattle contracts to close fully higher after a week of immense pressure. February live cattle closed $0.70 higher at $112.77, April live cattle closed $0.97 higher at $118.20 and June live cattle closed $1.32 higher at $116.27. With an uptick in boxed beef prices and a shortened week, seeing that Monday is Martin Luther King Day and markets will be closed, the cash cattle market may be able to make packers pay steady, if not a little higher next week. Looking toward next week's trade, it's also encouraging to remember that Friday unveils another Cattle on Feed report, which is anticipated to report bullish placements once again. Friday's cash cattle trade was as exciting as watching grass grow in the dead of winter as the market had finished its trade earlier in the week. This past week Northern cattle sold dressed for $173 to $174 and Southern live cattle sold from $110 to $111. Friday's slaughter is estimated at 115,000 head, 2,000 head less than a week ago and steady with a year ago. Saturday's slaughter is projected to be around 67,000 head.

With the higher closes late in the week, boxed beef prices saw an uptick from last week's weighted average. Choice cuts averaged $210.82 (up $4.09) and select cuts averaged $199.41 (up $2.93) from last week. The week's movement of cuts, grinds and trim was sizeable again totaling 714 loads.

Boxed beef prices closed mixed: choice down $0.45 ($212.92) and select up $2.01 ($203.08) with a movement of 140 loads (87.71 loads of choice, 15.73 loads of select, 15.68 loads of trim and 20.64 loads of ground beef).

TUESDAY'S CASH CATTLE CALL: Steady to $1.00 higher. Packers aren't going to want to support next week's cash market, but if feedlots align themselves together and make packers wait until later in the week for cattle, packers very well may have to pay more in next week's trade!


The slightly weaker close in the nearby corn contracts allowed the feeder cattle contracts to trade higher throughout Friday's trade. January feeders closed $1.97 higher at $134.57, March feeders closed $2.45 higher at $135.82 and April feeders closed $2.30 higher at $138.30. It was another hurdle to jump through this week with the gusty winds that blew across the Northern and central Plains; the feeder cattle market had to play a tough game of defense. The corn market's surge obviously had a toll on the feeder cattle contract's morale as buyers worry about their cost of gains and pray that the fat cattle will soon see a spike in their end prices. But nonetheless, buyers were aggressive this past week, which helped tremendously. Later-in-the-week buying aggression was less as the windstorm deterred some cattle from coming to town and made travel difficult for buyers. At Mitchell Livestock Auction in Mitchell, South Dakota, compared to last week, feeder steers weighing 500 to 800 pounds sold steady to $5.00 lower, while steers weighing 800 pounds or more sold $8.00 to $11.00 lower. Heifers weighing 600 to 900 pounds sold $2.00 to $5.00 lower and heifers weighing 900 to 950 pounds sold $11.00 cheaper than a week ago. It's very noticeable that given the mild winter that the countryside's seen, that feeders are coming in a little heavier than usual. Demand was good and there were sizeable load lots available. The CME feeder cattle index Jan. 14: down $1.04, $134.45.


The lean hog contracts endured some choppy trade, but nearby contracts were thankful to close on a stronger note come Friday's close. February lean hogs closed $1.62 higher at $67.92, April lean hogs closed $0.57 higher at $72.65 and June lean hogs closed $0.05 higher at $84.37. Helping the market this past week was the pork cutout value and its support. Even though the cutout value didn't close higher Friday afternoon, it showed ample support earlier in the week. Pork cutouts total 362.86 loads with 336.42 loads of pork cuts and 26.43 loads of trim. Pork cutout values: down $0.48, $80.07. Friday's slaughter is estimated at 386,000 head, 101,000 head less than a week ago and 52,000 head less than a year ago. Thursday's slaughter was revised to 484,000 head. The CME lean hog index for Jan. 13: up $0.39, $65.87

TUESDAY's CASH HOG CALL: Steady. Packers were willing to pay a little more for hogs earlier this week but as the week dragged on, their interest grew slim. Friday's considerably smaller slaughter most evidently had something to do with their buying aggression and we have to remember that Monday is a holiday, which means reduced slaughter speeds. Heading into next week's trade, packers may be a little more aggressive seeing that they are coming out of a long weekend, but then again supplies are ample and their needs to compete with one another to secure hogs is slim.

Friday Midday Livestock Market Summary - Renewed Support Sparks Higher Trade in Contracts

General Comments

Luckily traders have opted to ease back into the livestock contracts with most willing to invest in the feeder cattle contracts upon slightly weaker nearby corn prices. There's still a lot of time to pass before the day closes, but if the market can hold is support and head into next week with some modest gains from Friday -- hopefully the week will be given an opportunity at least to trade mildly higher amid bearish pressures. March corn is down 2 1/4 cents per bushel and March soybean meal is down $0.40. The Dow Jones Industrial Average is down 125.46 points and NASDAQ is down 79.60 points. Nothing feels better than a little redemption before the week's close.


The live cattle contracts are soaking up all the market's interest as the complex trades fully higher into the afternoon. It's encouraging to see the market's higher trade, which is complemented by another day of higher boxed beef prices and gaining open interest levels. Meanwhile the cash market was disappointing this week as live cattle in the South gave up $1.00 to $2.00 and dressed cattle in the North traded roughly $4.00 lower. Friday's cash cattle market has been extremely quiet without any new bids hitting the table and no rush on feedlots to sell more cattle before the day's close. February live cattle are $0.50 higher at $112.57, April live cattle are $0.97 higher at $118.20 and June live cattle are $1.17 higher at $116.12.

Boxed beef prices are higher: choice up $0.25 ($213.62) and select up $2.08 ($203.15) with a movement of 81 loads (45.75 loads of choice, 10.34 loads of select, 10.72 loads of trim and 14.32 loads of ground beef).


As the market's attention rolls from the January feeder cattle contract to the March feeder cattle contract, thankfully in both markets a support plan around $132.50 to $133.25 has developed and the contracts aren't seeming so pressured that they need to trade below such levels. Renewed support has invigorated the feeder cattle contracts and offered as much as $2.00 gains throughout the entire sector. January feeders are up $2.25 at $134.85, March feeders are up $2.60 at $135.97 and April feeders are up $2.40 at $138.40.


The nearby lean hog contracts are enjoying a modest rally like the cattle contracts while the deferred contracts trade just mildly lower. Still the market's fundamentals remain split as the cash market continues to trade lower as supplies are ample and packers don't have to work to find readily available hogs. It's helpful though that the day's cutout values are seeing renewed support again and hopefully the day will be able to keep its support through closing. February lean hogs are up $1.37 at $67.70, April lean hogs are up $0.52 at $72.60 and June lean hogs are up $0.15 at $84.47.

The projected lean hog index for 1/14/2021 is down $0.34 at $65.53 and the actual index for 1/13/2021 is up $0.39 at $65.87. Hog prices are lower on the National Direct Morning Hog Report, down $0.95 with a weighted average of $52.75, ranging from $46.00 to $55.00 on 4,650 head and a five-day rolling average of $54.20. Pork cutouts total 240.64 loads with 222.63 loads of pork cuts and 18.01 loads of trim. Pork cutout values: up $2.24, $82.79.

Friday Morning Livestock Market Update - Markets Struggle to Find Buyer Support in Late Week Trade

General Comments:

Following light-to-moderate trade Tuesday and Wednesday, cash market activity appears to be essentially done for the week with a few clean-up deals reported Thursday, and the potential for a few additional trades trickling into the market Friday. Unless a major shakeup is seen in outside markets or live cattle futures, cash market trade is expected to coast into the long weekend with limited interest and hold the weaker tone, which has developed over the past few days. Asking prices on cattle that remain on showlists is at $110 to $111 live basis, and $175 per cwt dressed, but the tone of the market appears to be generally $2 to $4 per cwt lower than last week, although generally steady with early week trade. Active selling this week in live cattle and feeder cattle futures has started testing initial support levels in nearby contracts. This is leaving traders focused on long-term market direction and the potential that widespread liquidation in nearby contracts could start to develop through the next several trading sessions. February live cattle futures were unable to hold early January support levels at $112.30 per cwt, with spot-month contracts closing below this level at $112.07 per cwt. The moves early Friday morning may be telling as to whether cattle markets can defend current price levels, or what longer-term direction may be seen over the coming days. Feeder cattle futures are also showing further signs of market erosion as nearby contracts are testing lower market limits with January feeder cattle contracts trading at the lowest levels since October. There is a wide gap between current price levels at $132.60 per cwt and October lows of $125.22 per cwt, but each tick lower erodes market support through not only the feeder cattle market, but all cattle trade. Boxed beef prices Thursday became the one bright spot of the cattle market with firm triple-digit gains seen in choice and select cuts. The upward market shift in the complex continues to focus on the ability for packers to move beef product following the holiday season and sustained longer-term demand. But the continued separation between cash cattle trade and beef values is adding increased uncertainty about continued market support in the last half of January.

Active pressure once again developed in nearby lean hog futures trade. February lean hog futures posted limited pressure compared to the rest of the complex, but the sharp market weakness the past two weeks has caused traders to focus on further market liquidation. February futures have tumbled $5 per cwt since 2021 began, an indication that the new year will likely be no different from last year. The underlying support in deferred contracts is starting to fade despite firm gains in pork values at the end of the week. Although further pressure in summer and fall contracts is expected to remain limited, buyers need to be able to find confidence for short-term market support in order to actively step back into the complex in the next few days. Market volatility in pork cuts through the week has continued to be the story in overall pork prices, leaving markets generally uncertain as to where to move in the coming days. Pork belly prices, which tumbled lower Wednesday, rebounded aggressively, posting a one-day $16.12 per cwt gain in Thursday afternoon's report. The limited overall movement in select cuts each day is also adding to the market swings, creating limited uncertainty if these price gains can be trusted as a good indication of market health. Further market swings are likely through the end of the week, although it is uncertain how this will impact futures or cash trade in the coming days. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents lower. Friday slaughter numbers are expected near 494,000 head. Saturday runs are expected at 256,000 head. Next Monday's holiday schedules are expected to be near 441,000 head.

1) Active gains have developed in boxed beef markets, with triple-digit support Thursday afternoon expected to create some end-of-the-week fundamental market support in the cattle complex. 1) Live cattle futures broke through initial support levels of $112.30 per cwt in February futures Thursday. This is creating additional downward market gaps, which could cause further late week pressure in all cattle markets.
2) Limited grain market support during overnight trade is starting to bring questions if the corn market is at or near its market top. A strong pullback in corn prices over the next several days is expected to be viewed generally bullish for live cattle and feeder cattle markets during the last half of January. 2) Cash cattle prices continue to show market weakness as packers quickly backed away from the market this week. It is uncertain with the lack of futures market support and changes in available cattle numbers if feeders will be able to reverse the weaker trend next week.
3) Strong late year pork demand remains evident in futures trade with summer and early fall contracts commanding strong, double-digit premiums to spot market prices. The ability to sustain long-term buyer support is expected to sustain further market interest through the second half of 2021. 3) Cash hog prices continue to show additional market weakness in late week trade. This underlying pressure in the market is wearing on fundamental support, which was thought to be strengthening during early January due to expected strong product movement.
4) Pork cutout values surged higher following a $16 per cwt rally in pork belly prices. This wide-ranging and volatile market shift in pork cuts over the last week is helping to create expectations of further buyer support in the near future. 4) Active pressure in all lean hog futures trade has triggered limited but evident technical selling in nearby futures. The move to 2021 lows in February futures Thursday afternoon is creating uncertainty through the entire complex ahead of the long weekend.

Thursday, January 14, 2021

Thursday Closing Livestock Market Update - Nearby Pressure Looms Heavily Over Contracts


Thursday wasn't a favorable outcome to the livestock markets as most of the complex traded lower and the cash markets continued to trade in their lower manners. Some deferred live cattle contracts were able to sneak through the day's close with moderate support, but the nearby contracts weren't able to shake the market's lower woes. Hog prices closed lower on the National Direct Afternoon Hog Report, down $0.50 with a weighted average of $53.98 on 7,185 head. March corn is up 9 3/4 cents per bushel and March soybean meal is up $7.80. The Dow Jones Industrial Average is down 68.95 points and NASDAQ is down 16.31 points.


The livestock contracts were pressured to trade lower, but low and behold, before closing, the deferred live cattle contracts were able to scrape by with a moderately higher close. The nearby contracts continue to be faced with a lower trade as the pressure from the week's lighter slaughter and weakening cash cattle market take its toll on the contracts. February live cattle closed $0.17 lower at $112.07, April live cattle closed $0.25 lower at $117.22 and June live cattle closed $0.15 lower at $114.95. There's no shaking the depressed short-term mindset of the contracts, but the market's stronger boxed beef prices are nothing to overlook and by next Friday, the market could sense a little more optimism as the market expects another bullish Cattle on Feed report. Thursday's cash cattle trade was all merely clean-up with cattle trading steady with the week's trends. If there are any cattle to trade Friday, they will most likely trade for the week's set prices. Thursday's slaughter is estimated at 120,000 head, 1,000 head more than a week ago and 3,000 head less than a year ago.

Beef net sales of 16,800 mt reported for 2021, increases were primarily for South Korea (4,900 mt, including decreases of 300 mt), Japan (4,100 mt, including decreases of 300) and China (2,800 mt, including decreases of 200 mt).

Thursday's actual slaughter data shared depressing news for cattlemen as carcass weights are one the rise again. For the week ending Jan. 2, steers averaged 920 pounds (up 7 pounds) and heifers averaged 839 pounds (up 13 pounds from the last report).

Boxed beef prices closed higher: choice up $2.37 ($213.37) and select up $2.01 ($201.07) with a movement of 137 loads (82.49 loads of choice, 19.71 loads of select, 7.48 loads of trim and 26.82 loads of ground beef).

FRIDAY'S CASH CATTLE CALL: Steady. Seeing that the week's trade has all but been finished, if there are any more cattle to trade come Friday, they will most likely be for steady prices.


While the corn contracts enjoyed another $0.09 to $0.10 rally, the feeder cattle contracts scaled lower throughout Thursday. January feeders closed $0.97 lower at $132.60, March feeders closed $0.95 lower at $133.37 and April feeders closed $0.75 lower at $136.00. The nearby futures for feeder cattle contracts is grim knowing the realities of available pen space and rising feed costs. At Torrington Livestock Auction in Torrington, Wyoming, compared to a week ago, yearling steers and heifers traded unevenly steady, but demand was strong for the calves offered in the day's sale. Steer calves under 650 pounds sold $4.00 to $7.00 higher and steer calves over 650 pounds traded unevenly steady. Heifer calves under 500 pounds traded $3.00 to $8.00 higher but heifer calves over 500 pounds traded unevenly steady when compared to a week ago. This week's sale drew in a lot of buyers as the market had plenty of calves available for feedlots still looking to pens. The CME feeder cattle index for Jan. 13: down $0.66, $135.49.


The lean hog contracts traded moderately lower throughout Thursday's trade. February lean hogs closed $0.55 lower at $66.30, April lean hogs closed $0.87 lower at $72.07 and June lean hogs closed $0.85 lower at $84.32. At midday, cutout values were lower, but thankfully, even with the pressure mounting in the lean hog contracts, the day's closing cutout value was able to close substantially higher and will hopefully keep packers interested in running swift slaughter paces. Pork cutouts total 288.33 loads with 258.81 loads of pork cuts and 29.51 loads of trim. Pork cutout values: up 2.42, $80.55. Thursday's slaughter is estimated at 497,000 head, steady with a week ago and 1,000 head less than year ago. The CME lean hog index for Jan. 12: up $0.99, $65.48.

Pork net sales of 23,800 mt reported for 2021, increases primarily for Mexico (6,600 mt, including decreases of 700 mt), Japan (3,400 mt, including decreases of 200 mt) and South Korea (3,300 mt, including decreases of 500 mt).

Thursday's actual slaughter data shared the same fate to hog producers as what cattlemen faced, but thankfully not on as dramatic of a scale. For the week ending Jan. 2, live hogs averaged 294 pounds (up 2 pounds) and dressed weights averaged 220 pounds (up 3 pounds from the last report a week ago).

FRIDAY'S CASH HOG CALL: Lower. The weaker cash trend seems to be continuing late into the week and will most likely be the same outcome for Friday's trade.