Thursday, January 20, 2022

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.




Wednesday, January 19, 2022

Wednesday Closing Livestock Market Update - Technical Support, Higher Meat Prices Boost Futures

GENERAL COMMENTS:

It was a strong day throughout the livestock contracts as the entire marketplace closed higher. It was especially surprising to see the feeder cattle contracts close higher amid the corn market's jump in prices well above $6.00 a bushel. Hog prices closed higher on the National Direct Afternoon Hog Report, up $4.09 with a weighted average of $70.28 on 9,911 head. March corn is up 11 cents per bushel and March soybean meal is up $8.20. The Dow Jones Industrial Average is down 339.82 points and NASDAQ is down 166.64 points.

LIVE CATTLE:

Seeing how strong the market traded Wednesday leaves one bitter that cash cattle opted to trade early in the week as they could have likely gotten steady money with last week's market if feedlots would have waited just a little longer to trade. The futures market traded mostly $1.00 stronger, finding ample technical support and feeling extremely confident in the demand stemming from higher boxed beef prices. Wednesday was a big day for boxed beef prices as both choice and select cuts closed over $2.00 stronger. February live cattle closed $0.87 higher at $138.55, April live cattle closed $1.50 higher at $143.35 and June live cattle closed $1.40 higher at $138.47. There was another light round of cash cattle market trade, but all trade was steady with the week's earlier business -- which means lower prices than a week ago or cattle trading with time. Throughout the week, Northern dressed deals have been marked at mostly $218, fully steady with last week's weighted averages. The majority 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. 

Wednesday's slaughter is estimated at 115,000 head -- 1,000 head more than a week ago and 6,000 head less than a year ago.

Boxed beef prices closed higher: choice up $2.11 ($291.60) and select up $2.04 ($280.43) with a movement of 115 loads (64.28 loads of choice, 17.30 loads of select, 10.96 loads of trim and 22.88 loads of ground beef).

THURSDAY'S CASH CATTLE CALL: Steady with the week's trend. Given that cattle have traded in both regions, it's likely prices stay steady throughout the remainder of the week.

FEEDER CATTLE:

Even with the corn market blowing past $6.00 a bushel to round out the day at $6.07 to $6.11 per bushel, the feeder cattle contracts pushed higher amid the technical strength stemming from the live cattle complex. January feeders closed $0.05 lower at $161.40, March feeders closed $0.20 higher at $165.62 and April feeders closed $0.47 higher at $170.05. Demand throughout the country's sale barns was a little more reserved than the futures market rally as buyers were aggressive the past two weeks in filling their orders and foresee some hiccups on the fundamental side that still need worked through in the short term. At Miles City Livestock Commission in Miles City, Montana, compared to last week on a run on 3,371 head feeder steers sold $5.00 to $15.00 lower, and heifer calves traded $5.00 to $10.00 lower on all offerings. There were very few takers this week compared to last week's abundant attendance. It's still evident that cattle suitable to run on grass are selling with the best demand. Cattle feeders in the Corn Belt were not as aggressive in this week's offering as many of them show hesitancy about jumping into more cattle as processing speeds are still not completely back up to par, and the corn market is back up to $6.10 a bushel in its nearby contracts. The CME Feeder Cattle Index 1/18/2022: down $0.12, $161.24.

LEAN HOGS:

Lean hog futures bolted higher as demand was seen from nearly every side of the market -- cash hogs traded higher, pork cutouts closed higher and the futures market saw gains mostly above $1.00 stronger. February lean hogs closed $0.70 higher at $82.30, April lean hogs closed $2.07 higher at $91.35 and June lean hogs closed $1.52 higher at $101.87. The sporadic jumps in the pork cutout value are again noted Wednesday afternoon as cutouts jumped over $8.00 higher with an astonishing $30.61 jump in ham prices alone. As retailers restock their coolers, the market has seen prices jump higher as the lag in production the last two weeks has hindered available supplies. Pork cutouts total 387.33 loads with 353.66 loads of pork cuts and 33.67 loads of trim. Pork cutout values: up $8.26, $95.47. As processing speeds show signs of trying to get back to normal, packers have been more aggressive in the cash market as they are reaping profits from the meat and want to ensure they have product to sell. Wednesday's slaughter is estimated at 457,000 head -- 24,000 head more than a week ago and 43,000 head less than a year ago. The CME Lean Hog Index 1/17/2022: up $0.88, $76.78.

THURSDAY'S CASH HOG CALL: Steady to somewhat lower. The market will likely see interest from packers again, but it's likely prices trade steady to somewhat lower after they upped the market over $4.00 on Wednesday.




Wednesday Midday Livestock Market Summary - Contracts Jump Higher

GENERAL COMMENTS:

It's a strong day for the livestock contracts as the markets are rallying in an aggressive manner. The only market trading mixed is the feeder cattle contracts; with corn prices shooting higher it makes sense that the market is teetering in its position. March corn is up 13 cents per bushel and March soybean meal is up $8.70. The Dow Jones Industrial Average is up 96.17 points and NASDAQ is up 78.18 points.

LIVE CATTLE:

Wednesday's cattle slaughter is anticipated to hit 117,000 head, which would be the second time this week the market has achieved that level. The live cattle complex is relieved to see progress being made on the packing front as feedlots desperately want to maintain the currentness the market sought in the latter part of 2021. February live cattle are up $1.32 at $139.00, April live cattle are up $1.70 at $143.55 and June live cattle are up $1.55 at $138.62. Thankfully this hiccup in the market has come at a time when boxed beef prices are very lucrative for packers, so while they don't like paying generously in the cash cattle market, they will likely support the market as they want to keep enough cattle in the pipe to chase the dividends that boxes are giving right now. The disappointing piece about this week's trade is that the cash trade puked cattle early in the week, so packers have gotten cattle bought at weaker prices. If feedlots would have waited until later in the week to trade, the market may have been able to hold prices steady with a week ago. Another round of light trade is being reported in the South at $137, which is $1.00 to $1.50 lower than last week. More trade has also been noted in the North for $218, which is steady with last week's trade, but a large percentage of the cattle trading dressed are also trading with time.

The Fed Cattle Exchange Auction listed a total of 3,580 head, of which none actually sold, 159 were scratched from the auction and 3,421 head were listed as unsold, as they did not meet the reserve prices, that ranged from $125 to $139.50 Opening prices ranged from $122 to $136, high bids ranged from $134 to $138. The state-by-state breakdown looks like this: Texas 1,008 total head, all of which went unsold; Kansas 1,301 total head, 1,142 head went unsold and 159 head were scratched from the auction; Nebraska 1,233 total head, all of which went unsold; California 38 total head, all of which went unsold.

Boxed beef prices are higher: choice up $1.56 ($291.05) and select up $1.32 ($279.71) with a movement of 78 loads (42.87 loads of choice, 11.50 loads of select, 10.66 loads of trim and 13.43 loads of ground beef).

FEEDER CATTLE:

Feeder cattle contracts are walking a tightrope Wednesday as the complex would love to trade higher along with the rest of the livestock sector, but with corn prices well above $6.00 a bushel (and trading closer to the $6.10 to $6.14 mark in the nearby contracts) feeders are again weighing the pros and cons of the market. January feeders are down $0.45 at $161.00, March feeders are up $0.02 at $165.45 and April feeders are up $0.05 at $169.62. It wouldn't be surprising to see order buyers take a removed position in sales this week as they look to see what further develops in the market before jumping into more cattle.

LEAN HOGS:

After rallying Wednesday, the lean hog contracts are really taking to moving bullishly as the market has seen strong interest in the cash market, midday pork cutout values are higher and it looks as though the day may be able to process more hogs as well. February lean hogs are up $0.85 at $82.45, April lean hogs are up $1.87 at $91.15 and June lean hogs are up $1.45 at $101.80. With the hog market eager to rally, any additional export support the market could get would only support the market further in its aspirations.

The projected CME Lean Hog Index for 1/18/2022 is up $0.07 at $76.85 and the actual index for 1/17/2022 is up $0.88 at $76.78. On the National Direct Morning Hog Report 7,403 head of hogs have traded for a weighted average of $70.07, ranging from $60.00 to $74.00 and the five-day rolling average has now moved to $66.95. Pork cutouts total 230.98 loads with 207.16 loads of pork cuts and 23.83 loads of trim. Pork cutout values: up $6.29, $93.50.




Wednesday Morning Livestock Market Update - Packers Need Hogs, Not Afraid to Bid Up for Them

GENERAL COMMENTS:

As anticipated, feedlots wanted to sell some cattle earlier rather than later. They had no desire to hold out for later due to the potential that buyers may finish earlier in the week and they will need to hold cattle another week. Cattle in the North were traded at steady money while the South traded cattle $1.00 to $1.50 lower. This sets that stage for the week as some of the cattle purchased were for deferred delivery, leaving packers with the upper hand. Boxed beef closed higher with choice up $1.63 and select up $1.34. Consumer demand is strong and with shortages showing up in grocery stores, consumers are purchasing more in order to stock up a little when it is available. This is giving the impression of stronger demand. The Commitment of Traders report showed funds as sellers of 10,405 futures bringing their net long to 61,941 contracts.

Packers wanted hogs Tuesday and they were not afraid to bid up for them. The National Direct Afternoon report showed cash up $4.08. Slaughter seems to be showing signs of improving but still has a way to go before the industry can feel confident slaughter is back on track. Packers seem to be looking ahead and might be seeing good demand but tighter hog supplies. Cutouts fell significantly again with a loss of $4.73. The Commitment of Traders report funds reducing their net long positions by 6,870 to a net long position of 48,804 contracts.

BULL SIDE BEAR SIDE
1)

Slaughter might begin to increase over the coming weeks, which could put a floor in cash.

1)

Packers are actively purchasing cattle for deferred delivery, which will leave cash vulnerable for further weakness.

2)

Consumers are purchasing beef at increased levels as there is a little fear over available supply again. Empty store shelves are causing some hoarding again.

2)

Cattle futures may be settling into a sideways trading pattern for a period of time until supplies become more current.

3)

New contract highs in June and later hog contracts renews the uptrend. This should keep trader interest strong.

3)

The volatility of cutouts leaves traders guessing as to the strength of cash hogs. The market could sell off at any time again.

4)

The jump of cash Tuesday indicates packers need hogs and are paying up for them. Slaughter seems to be increasing and the demand outlook is improved.

4)

Exports will need to increase, or the market could face disappointment over the inability to gain market share due to African swine fever problems in some other countries.