Friday, January 15, 2021

Friday Closing Livestock Market Update - Contracts Defend Their Positions

GENERAL COMMENTS:

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.

LIVE CATTLE:

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!

FEEDER CATTLE:

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.

LEAN HOGS:

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.

LIVE CATTLE

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).

FEEDER CATTLE

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.

LEAN HOGS

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.

BULL SIDE BEAR SIDE
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

GENERAL COMMENTS:

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.

LIVE CATTLE:

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.

FEEDER CATTLE:

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.

LEAN HOGS:

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.




Thursday Midday Livestock Market Summary - Null Support Leaves Contracts to Trade Lower

General Comments

The full resume of higher prices in the corn contracts has drawn the attention of the livestock contracts and left the contracts to trade fully lower into Thursday's afternoon. Even after posting moderate gains throughout Wednesday's trade, the feeder cattle contracts find themselves taking the biggest losses that the day has thus far offered with Wednesday's support nowhere to be found. The cash cattle market is still quiet without bids having been renewed. March corn is up 8 cents per bushel and March soybean meal is up $6.70. The Dow Jones Industrial Average is up 117.36 points and NASDAQ is up 58.37 points.

LIVE CATTLE

As time ticks closer and closer to the noon hour, there's been some mild support develop in the deferred live cattle contracts while the rest of the complex continues to trade lower. February live cattle are down $0.45 at $111.80, April live cattle are down $0.62 at $116.85 and June live cattle are down $0.32 at $114.75. The from feed prices and lack of interested traders has caught the livestock contracts in a position to have a less than desirable day. Even with boxed beef prices being higher the cash market sits idly as packers are reluctant to spark too much interest in the cash market. With the trade that's developed over the last two days its appearing that the week's cash trade could be essentially over other than a little clean up business here and there. Southern live cattle traded for $108 to $112, mostly $110 which is $1.00 to $2.00 lower than a week ago. Norther dressed cattle traded from $171 to $173 which is $4.00 softer than a week 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).

Boxed beef prices are higher: choice up $2.49 ($213.49) and select up $2.10 ($201.16) with a movement of 73 loads (35.46 loads of choice, 12.09 loads of select, 5.10 loads of trim and 20.67 loads of ground beef).

FEEDER CATTLE

After having a successful day, trading fully higher throughout Wednesday's hours, the feeder cattle contracts have sunk back to trading lower and are again pressured by the rising cost of corn. January feeders are down $1.17 at $132.40, March feeders are down $1.37 at $132.90 and April feeders are down $1.32 at $135.35. With pressure being ample the complex comes up against the support plane of $132.50 once again and could pressure enough to close beneath its threshold. Feeders continue to count their blessings and are thankful that the demand in the countryside has been as strong as it has, but with buyers having restocked a lot of their empty pens many are worried about the weeks to come with corn prices showing no intensions of retracting.

LEAN HOGS

Falling lower like the cattle contracts, the lean hog contracts waltz into Thursday's afternoon without support appearing to be likely before the day's end. February lean hogs are down $0.20 at $66.62, April lean hogs are down $0.55 at $72.35 and June lean hogs are down $0.65 at $84.52. The one positive thing to see Thursday morning was that even though cash prices are lower, the bottom end of the cash scale jumped $2.00 from $44.00 to $46.00 -- every little bit helps.

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).

The projected lean hog index for 1/13/2021 is up $0.39 at $65.87 and the actual index for 1/12/2021 is up $0.99 at$65.48. Hog prices are lower on the National Direct Morning Hog Report, down $0.50 with a weighted average $53.70, ranging from $46.00 to $56.00 on 5,820 head and a five-day rolling average of $54.81. Pork cutouts total 150.27 loads with 131.35 loads of pork cuts and 18.92 loads of trim. Pork cutouts are higher: choice up $5.54, $83.67.




Thursday Morning Livestock Market Update - Cattle Futures Slowly Regaining Composure

General Comments:

Cash cattle trade became more evident Wednesday, likely setting the tone for the week given the early week pressure and concern of follow-through weakness in the complex. It has become evident that packers are intent on reducing spending on cattle purchases through the week, leaving feeders feeling pressured to try to step into the market and sell cattle in the event prices will be lower the next day. Light-to-moderate trade developed in the South with live cattle trading in a wide, but lower range of $108 to $111 per cwt. Most trade took place at $110 to $111 per cwt, which is $1 to $2 per cwt lower than last week, and swiftly ends hopes of renewing the positive moves in late December. Dressed business in the North remained generally light, but developed mostly $172 to $173 per cwt. This is $4 per cwt below last week's levels, but generally steady to $1 per cwt below the limited Tuesday trade reported. The amount of trade in the market is expected to have generally set the tone for the market, but at least some additional trade volume is expected in the next couple of days. Both feeders and packers appear more focused on long-term market direction with the intent of bringing stability to the market next week, helping to limit the January pressure to losses already seen.

Market stability slowly but firmly developed in feeder cattle and deferred live cattle futures through the second half of trade Wednesday. Although traders continue to focus on recent gains in feed prices from higher corn and soybean meal price levels, feeder cattle futures especially appear to have hit support levels, creating renewed underlying buyer support at these price levels. The trigger point that traders aggressively defended through the midweek session was $133 per cwt in January futures and $134 per cwt in March contracts. At this point, buyers are willing to move into the complex, sparking renewed support in nearby and deferred contracts, also helping to lend price support to the live cattle futures. Although light pressure may continue to develop in nearby live cattle futures as the increased production costs continue to add uncertainty to short-term market production, summer contracts have found moderate support near the $115 per cwt price points, sparking renewed interest likely through the end of the week.

Boxed beef prices posted moderate-to-firm support Wednesday with increased values in choice and select cuts. The $1.86 per cwt gain in choice cuts not only sparked renewed momentum through the market but also helped to widen the choice to select price spread. Traditionally, the first quarter is challenging as it tries to maintain strong premium levels in choice beef values. This leaves seasonal lows in the market spread typical between early January and March. But the ability to sustain moderate-to-strong buyer interest in these higher end cuts could minimize the pressure over the next few weeks.

Strong hog market pressure continues to be rooted in spot-month February contracts with traders focusing on the lack of support in nearby contracts given the previous weakness in other contracts across the livestock market. Despite the pressure in nearby lean hog futures, the focus on light but consistent buying interest moving back into deferred contracts is helping to take the pressure off the weakness in February and April futures. Traders continue to focus on the direction in wholesale pork values, and the lack of follow-through buyer support over the last couple of days is adding to market weakness. Given the inability to hold recent gains, spot-month contracts are nearing initial support levels of $66.50 per cwt, Thursday morning will be a good test to these support levels, and could help set the market direction and trade interest for the next couple of weeks.

Wide price variability has developed in pork cutout values over the last few days, creating instability in the entire market and causing a pendulum effect in carcass values. Pork belly prices tumbled lower, falling $15.24 per cwt in afternoon reports Wednesday. Ham and picnic values, which tumbled lower Tuesday, posted aggressive market rebounds on Wednesday, further adding to pork price volatility. Part of this is seasonal buying patterns still shifting, but there could be some additional uneasiness growing based on whether current demand levels can be sustained over the next couple of months. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents lower. Thursday slaughter numbers are expected near 495,000 head. Saturday runs are expected at 256,000 head.

BULL SIDE BEAR SIDE
1)

Firm buyer support is slowly moving back into feeder cattle futures as traders appear to have reached support levels despite continued uncertainty in feed prices and production costs. This could rekindle commercial buyer support through the end of the week.

1)

Active pressure in cash cattle trade over the last two days has quickly taken the wind out of the sails. The hope that feeders could demand steady-to-higher price levels despite the pullback in futures trade is being dashed and causing concerns of further pressure in the weeks to come.

2) Firm support in boxed beef values continues to develop through the week. The ability to move large amounts of beef through the system is putting the focus on tighter supplies as 2021 progresses. 2)

Elevated feed prices will continue to be a major concern for the cattle market industry through most of the year. Not only are grain prices at the highest levels in nearly seven years, but high-priced hay and forage products impacts all areas of cattle production.

3)

Active price gains moved back into ham and picnic cuts, helping to bring renewed stability to the pork cutout values. This focus may continue to spark increased, but slow pork buyer support in the coming days.

3)

Pork belly prices tumbled lower Wednesday, falling $15.24 per cwt as prices are readjusting in the complex. A portion of the market shift may be associated with potential long-term impacts on bacon demand from the struggling food service industry during the next several months.

4)

Deferred lean hog futures trade continues to make strides on higher and more supportive price levels as traders factor in the increased cost of production into the market and focus on maintaining strong demand through the remainder of the year.

4)

Cash hog prices continue to erode lower during early January. This has moved prices below $55 per cwt, creating concerns that further winter market pressure will further weaken the entire market.




Wednesday, January 13, 2021

Wednesday Closing Livestock Market Update - Day Treats Contracts Better Than Anticipated

GENERAL COMMENTS:

It ended up being a better day for the cattle contracts than anticipated as the feeder cattle contracts closed fully higher and the live cattle market was only met with some resistance in nearby contracts. Largely the lean hog contracts traded a lot like the live cattle market as the industry faces heavy front-end supplies and continues to look for support to drive the market higher. Hog prices closed lower on the National Direct Afternoon Hog Report, down $0.52 with a weighted average of $54.48 on 7,266 head. March corn is up 7 1/4 cents per bushel and March soybean meal is down $8.30. The Dow Jones Industrial Average is down 8.22 points and NASDAQ is up 56.52 points.

LIVE CATTLE:

The live cattle contracts mustered up all the support that the industry could afford to lend and were able to let most of the contracts close higher before the day clocked out. Both the February and April contracts closed lower, but with corn prices at the levels that they are and with packers showing weak acquisition in the cash cattle market and running slower slaughter speeds, the pressure is evident. February live cattle closed $0.22 lower at $112.25, April live cattle closed $0.17 lower at $117.47 and June live cattle closed $0.17 higher at $115.10. The South saw more interest develop throughout the afternoon and ended up trading cattle for mostly $110, but a few $111 pens were sold, which equates to being $1.00 to $2.00 softer than last week's business. The North caught some business as well with dressed deals ranging from $171 to $173, which is roughly $4.00 less than a week ago.

Wednesday's slaughter is estimated at 118,000 head -- 1,000 head more than a week ago and 6,000 head less than a year ago. Tuesday's slaughter was revised to 115,000 head. With both Monday's and Tuesday's cattle slaughter being reduced, it's likely that this week's total slaughter will come in shy of 650,000 head. There's also been some chatter that a couple of plants in Kansas will be limiting their speeds late this week and potentially extending into early next week to perform regular maintenance. One of the most impressive things about 2020's chaotic marketplace was that, even with the COVID-19 disruptions, the year's end slaughter was only 3.5% fewer head in 2020 than in 2019 (roughly 1,135,000 head less). But looking at how 2021 slaughter speeds compare to 2020's vigorous pace is a little disappointing seeing that, as of last Friday, packers have processed 254,000 fewer head of cattle thus far this year.

Boxed beef prices closed higher: choice up $1.86 ($211.00) and select up $0.97 ($199.06) with a movement of 143 loads (78.95 loads of choice, 18.37 loads of select, 18.64 loads of trim and 27.10 loads of ground beef).

THURSDAY'S CASH CATTLE CALL: Steady with the week's trend. Seeing that there's been a moderate movement in the both the North and the South, it's likely that packers try to keep the week's trend at these lower ranges.

FEEDER CATTLE:

Nearby corn contracts still closed higher, but the feeder cattle contracts were eager to trade higher after a long run of depressing, lower trade. January feeders closed $0.35 higher at $133.57, March feeders closed $0.35 higher at $134.32 and April feeders closed $0.50 higher at $136.75. The hard pill to swallow for the feeder cattle market is that, in time, higher corn prices could have a positive affect on the feeder cattle contracts, but right now the pressure remains lofty. If corn prices remain elevated (which it's looking like they are going to) feedlots will be interested in selling their fats at lower weights and replacing their pens with new feeders as the compensatory gain on feeders is far better than that on fat cattle that are topped out. Unfortunately, it will take some time to get the heavier cattle worked out of the system, but thankfully time keeps ticking on. At Miles City Livestock Commission Auction in Miles City, Montana, compared to a week ago, steer calves under 500 pounds sold mostly $10.00 lower, steers weighing 500 to 599 pounds sold steady to $3.00 higher and steers weighing over 600 pounds sold fully steady. Light weight calves were hard to sell this week as buyers were reluctant look buy calves that were going to take longer to feed. Heifers weighing 450 to 550 pounds sold $5.00 to $8.00 higher and heifers weighing over 550 pounds sold steady. Slaughter cows sold $1.00 lower and slaughter bulls sold $1.00 to $2.00 lower. The CME feeder cattle index for Jan. 12: up $0.06, $136.22.

LEAN HOGS:

The lean hog contracts faced some pressure in the nearby contracts while the deferred contracts were able to safeguard their levels. Not helping matters, and realistically adding to the market's pressure, was the day's weaker cutout close and softer trading cash hog market. Like we've discussed before, the market needs to work through these front-end supplies and hopefully at that point supply pressure won't be as big of an issue and allow for the market to regain some upward mobility. February lean hogs closed $1.65 lower at $66.85, April lean hogs closed $0.57 lower at $72.95 and June lean hogs closed $0.20 higher at $85.17. Pork cutouts total 383.42 loads with 347.76 loads of pork cuts and 35.66 loads of trim. Pork cutout values: down $1.06, $78.13. Wednesday's slaughter is estimated at 498,000 head, 3,000 head more than a week ago and 1,000 head more than a year ago. The CME lean hog index for Jan. 11: up $0.58, $64.49.

THURSDAY'S CASH HOG CALL: Lower. Packers have been a little less aggressive in the cash hog market and, with a mixed futures complex faced with resistance in the nearby contracts, it's likely that packers continue to let the cash market slide lower.




Wednesday Midday Livestock Market Summary - Feeder Cattle Contracts Finally Catch a Mild Break

General Comments

The livestock contracts continue to trade mixed heading into Wednesday's afternoon trade though the feeder cattle contracts have finally caught a break and are finally seeing some support develop after trading sharply lower all throughout this week and the later part of last week. There's some interest developing in the cash cattle market, though bids are $2.00 to $3.00 lower than last week's trade. March corn is up 6 3/4 cents per bushel and March soybean meal is down $8.00. The Dow Jones Industrial Average is down 29.79 points and NASDAQ is up 50.42 points.

LIVE CATTLE

While the feeder cattle contracts catch a break, the live cattle contracts have slumped to lower levels despite trying to trade higher earlier Wednesday morning. February live cattle are down $0.22 at $112.25, April live cattle are down $0.25 at $117.42 and June live cattle are up $0.02 at $114.95. It would help the cash cattle market if the futures market couple find some support and close modestly higher. It's positive to again see boxed beef prices higher but packers know that the first quarter can be a hard time for them to earn the lofty profits they're used to and they've taken a hard stance on this week's cash cattle trade. Bids are on the table in Kansas and Texas at $109 (which is $2.00 to $3.00 lower than last week's trade) and sharply lower than the South's asking prices of $113 to $114. The South has yet to really test their market this week and thankfully feedlots aren't panicking and selling out. The North is quiet following Wednesday's trade in eastern Nebraska where dressed cattle sold $2.00 to $3.00 lower at $173 to $174. Packer interest is expected to increase as the day goes on.

The Fed Cattle Exchange Auction listed a total of 1,532 head, of which 580 actually sold, 952 head were listed as unsold as they did not meet the reserve prices that ranged from $109 to $111. Opening prices started at $109, high bids ranged from $109.50 to $111. The state by state breakdown looks like this: Kansas 120 total head, all of which went unsold; Nebraska 110 total head, all went unsold; Texas 1,302 total head, with 722 head sold at $110.50 to $111, 580 head went unsold.

Boxed beef prices are higher: choice up $0.94 ($210.08) and select up $1.16 ($199.25) with a movement of 72 loads (45.55 loads of choice, 10.48 loads of select, 5.93 loads of trim and 9.61 loads of ground beef).

FEEDER CATTLE

The feeder cattle contracts have finally found some support after sinking lower all throughout the earlier part of the week. The contracts are finding some support at the $132.50 level and the mixed trade in the corn contracts is helping ease the pressure to keep trading lower. January feeders are up $0.32 at $133.55, March feeders are up $0.10 at $134.02 and April live cattle are up $0.07 at $136.25. The modest support rising in the futures market should help add some confidence to the feeder cattle sales developing Wednesday morning and afternoon.

LEAN HOGS

Nearby lean hog contracts are fighting some modest pressure, which is also unfortunately coupled with a weaker cash market. February lean hogs are down $1.35 at $67.15, April lean hogs are down $0.72 at $72.80 and June lean hogs are steady at $82.97. The market ran to resistance levels a week ago and has since not been able to muster enough substantial support in the spot February contract to keep the market trading higher. And even though midday cutout values are only up slightly, another day of higher cutout prices will always be welcomed.

The projected two-day lean hog index for 1/11/2020 is up $0.58 at $64.49, and the actual index for 1/8/2020 is up $0.57 at $63.91. Hog prices are lower on the National Direct Morning Hog Report, down $1.29 with a weighted average of $54.20, ranging from $44.00 to $57.00 on 4,768 head and a five-day rolling average of $55.49. Pork cutouts total 219.48 loads wit 197.35 loads of pork cuts and 22.13 loads of trim. Pork cutout values: up $0.37, $79.56.






Wednesday Morning Livestock Market Update - Trade Anticipates Further Grain Market Swings

General Comments:

Limited activity is seen in cattle country midweek with most feeders still not pulling the trigger as they wait and hope that the volatility brought about by surging grain trade Tuesday will subside as the week continues. A few deals were inked in the North with dressed trade at $173 to $174 per cwt. This is generally $2 to $3 per cwt below last week's average price. There is too many moving pieces in the market and trade volume remains too small to indicate if these price level will set the tone for the week and bring about lower money in most other areas. But given the focus on outside grain market gains and the subsequent pressure on feeder cattle and nearby live cattle futures, it is likely that cash markets may remain steady at best for the week. Feeder cattle futures led the complex lower Tuesday with aggressive triple-digit gains in all contract months. Even though nearby contracts closed with the most aggressive losses between $2.50 and $3 per cwt lower, the focus on corn market moves will continue to be a major driver in the feeder cattle complex. Given the underlying expectation that cattle numbers will tighten significantly through the rest of the year, and elevated feed prices will most likely limit heavy weight cattle, the downward pressure in feeder cattle futures may be limited by the expectation of firming long-term beef demand. Live cattle futures continue to hover within a wide sideways trading range, with Tuesday's market pullback testing last week's market low at $112.30 per cwt. But the ability to keep prices above the $110 per cwt in February futures is likely to limit widespread market liquidation. Boxed beef values bounced higher Tuesday with triple-digit gains seen in choice and select markets. The firming support in beef values is good news given the continued strong movement of product and ability to clear current processing levels in a timely and aggressive manner. This is likely to add to further, but choppy support through the boxed beef trade in the days and weeks to come.

Lean hog futures appear to be taking the surging grain market and feed prices in stride, with moderate-to-strong gains seen through the entire complex. Given the shorter time period of feeding cycles in the hog market compared to cattle, the elevated feed markets are quickly moved through the lean hog and pork systems with much less dramatic volatility compared to the cattle complex. This is helping to post moderate support in nearby contracts while summer and fall contract months have fully embraced the higher production costs and are working these higher corn and soybean meal prices into lean hog contracts. This is further widening the price premium in these deferred contracts with July contracts now trading at an $18 per cwt premium to spot February futures. The pressure in pork cutout values Tuesday may create moderate price retractions Wednesday morning, but the underlying tone of the market is still expected to remain firm. Sharp gains in ham cuts on Monday were wiped out Tuesday afternoon as ham prices quickly adjusted lower, falling over $14 per cwt. This created wide pressure in the entire cutout equation, allowing carcass values to fall $4.19 per cwt. Further wide market swings in any of the primal cuts will be closely watched over the next few days as traders look for the potential to establish market stability during early January. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents higher. Wednesday slaughter numbers are expected near 496,000 head. Saturday runs are expected at 256,000 head.

BULL SIDE BEAR SIDE
1)

Deferred live cattle futures have started to work higher as traders are starting to factor in the higher feed and production costs due to surging corn markets. This posted triple-digit gains in fourth quarter live cattle futures Tuesday, helping set the tone for further long-term market support through the end of the week.

1)

Sharp losses in feeder cattle futures once again have become the highlight of the livestock market. Following limit gains in corn prices Tuesday, the focus on higher feeding costs continues to limit feeder cattle buyer support in all regions.

2) Firm support in boxed beef values continues to develop through the week. The ability to continue to move large amounts of beef through the system continues to put the focus on tighter supplies as 2021 progresses. 2) Following Tuesday's USDA reports, corn futures surged higher, quickly breaking through the $5 per cwt threshold, quickly on the way toward $5.50 per bushel. These higher costs could bring further devastation to the cattle market system.
3)

Lean hog futures continue to adjust higher with active commercial and noncommercial support moving into all contracts. Triple-digit gains in summer contracts once again moves the focus on expected tighter supplies and strong demand.

3) Sharp losses in ham and picnic cuts Tuesday offset early week support and not only caused pork cutout values to tumble but put widespread volatility back into pork pricing. This may leave pork prices whipsawing higher and lower through the rest of the week.
4)

Strong export demand is expected to continue during early 2021, picking up where 2020 left off. This is expected to limit overall supply levels despite active pork production continuing through the next several months.

4)

Cash hog values have been unable to gain momentum during early January with packers running at full throttle but finding ample market-ready hogs available without having to dig deeper into their pockets to pay for them. The current available supply of hogs may continue to pressure cash values over the next couple of weeks.




Tuesday, January 12, 2021

Tuesday Closing Livestock Market Summary - Contracts Absorb Aftermath of Corn Rally

GENERAL COMMENTS:

The biggest hype of Tuesday's trade was solely wrapped around the corn market and how it would affect livestock contracts. Feeder cattle contracts continued to trade lower, feeling more and more pressure build on the complex as cost of gains get steeper and steeper. Meanwhile, the long-term, underlying support in live cattle contracts wasn't really shaken and lean hog contracts were able to close fully higher. Hog prices were lower on the National Direct Afternoon Hog Report, down $0.52 with a weighted average of $55.00 on 7,611 head. March corn closed up 25 cents per bushel and March soybean meal was up $18.60. The Dow Jones Industrial Average is up 60.00 points and NASDAQ is up 36.00 points.

LIVE CATTLE:

Live cattle futures sit in a split ship that's taking on water, but close enough to shore to see land. The underlying tone of the marketplace is still positive, especially for the second quarter and beyond. Boxed beef prices are a balancing act -- sometimes tipping higher and at other times scaling lower -- but seasonally that's expected. What's extremely encouraging is the speed in which boxed beef cuts are being sold. Last week's movement of cuts, grinds and trim totaled 825 loads, which is absolutely stellar and tells you just how eager consumers are to get their hands on beef products.

Meanwhile, this week's cash cattle market will most likely trade steady (at best); a few loads have already been bought this week in Nebraska for $173 to $174 ($2.00 softer than last week) with delayed delivery. Not only does the price point sting as it's only Tuesday and feedlots could have waited until later in the week to market those cattle and tried to milk at least steady prices out of packers, but it's also painful to see these cattle trade with time, which undermines the weeks to come.

Feedlot managers are doing their best to manage the constantly changing dynamics of the live cattle market, which isn't easy when packers are tightening their wallets and corn prices are escalating. Nearby live cattle contracts closed moderately lower, but the deferred contracts closed moderately higher from the August 2021 contract and beyond. February live cattle closed $0.92 lower at $112.47, April live cattle closed $0.70 lower at $117.65 and June live cattle closed $0.02 lower at $114.92. Tuesday's slaughter is estimated at 119,000 head -- 1,000 head more than a week ago and 5,000 head less than a year ago. Monday's slaughter was revised to 116,000 head.

Boxed beef prices closed higher: choice up $1.45 ($209.14) and select up $2.35 ($198.09) with movement of 172 loads (98.84 loads of choice, 33.25 loads of select, 10.10 loads of trim and 29.42 loads of ground beef).

WEDNESDAY'S CASH CATTLE CALL: Steady. There's much more painful than seeing cattle sell early in the week for weaker prices and with time. Thankfully, the cattle that did sell Tuesday afternoon were only a light trade -- not enough to truly call the market's trend already this week. The South continues to price cattle at $114 and the North has yet to share their asking prices. More bids are expected to develop Wednesday.

FEEDER CATTLE:

Given that the nearby corn contracts closed limit higher (up $0.25 per bushel) the feeder cattle contracts could have suffered more than what they did by closing. There is no denying feeder cattle contracts are under pressure as cost of gains reach $1.00 per pound and breakeven levels continue to surge. Unfortunately, producers and buyers alike are in a tough position as both wonder what to do and are forced to go back to the drawing board. Producers were eyeing the January/February market with hopeful aspirations the market would be stronger. With calving season about to start for many producers, carrying calves over into the second quarter isn't really a viable option as feeding them longer adds more input costs and they need the room for calving. Meanwhile buyers look at this market and see the long-term positive outlook in the live cattle market, but in order to make money at the end of this deal feeders must not only buy the calves at reasonable levels but grow them at calculated measures. January feeders closed $2.77 lower at $133.22, March feeders closed $2.92 lower at $133.97 and April feeders closed $2.77 lower at $136.25. At Russell Livestock Auction in Russel, Iowa, steers under 650 pounds sold steady to $5.00 higher compared to a week ago, and those over 650 pounds sold easily $1.00 to $4.50 lower. Heifers under 600 pounds were $1.50 to $6.50 higher while heifers weighing 600 to 750 pounds sold $1.00 lower to $1.00 higher, depending on type and kind. The toughest type of cattle to sell were heifers weighing 750 to 800 pounds as they sold $8.00 lower. Demand was good for long strings of cattle and the market was actively traded. The CME feeder cattle index 1/11/2021: up $0.07, $136.23.

LEAN HOGS:

While Tuesday's chatter and attention focused on the corn market and its skyrocketing position, the lean hog contracts did an excellent job maintaining support and ultimately closed higher. February lean hogs closed $0.02 higher at $68.50, April lean hogs closed $0.57 higher at $73.52 and June lean hogs closed $0.97 higher at $84.97. Largely the market traded with more confidence in the deferred contracts as producers hope to get front-end supplies more manageable in the upcoming months. It was disappointing to see Tuesday's closing pork cutout values sharply lower given that last week was met with mixed demand and Monday's prices were strong. Pork cutouts total 434.05 loads with 411.13 loads of pork cuts and 22.92 loads of trim. Pork cutout values: down $4.19, $79.19. Tuesday's slaughter is estimated at 498,000 head -- 9,000 head more than a week ago and 2,000 head less than a year ago. The CME lean hog index 1/8/2021: up $0.57, $63.91.

WENDESDAY'S CASH HOG CALL: Steady. Seeing that pork cutout values were lower Tuesday afternoon, packers may approach Wednesday's cash market with a little less aggression.




Tuesday Midday Livestock Market Summary - Contracts Battle Mixed Signals

General Comments

Corn prices are skyrocketing higher after the midmorning WASDE report shared less than expected corn stocks. The lean hog contracts are still keeping their rally, the live cattle contracts are split with nearby contracts trading mildly lower and deferred contracts trading somewhat higher and the feeder cattle market is enduring another considerably lower day feeling immensely pressured by their rising cost of gains. March corn is up 25 cents per bushel and March soybean meal is up $19.90. The Dow Jones Industrial Average is down 37.36 points and NASDAQ is down 34.12 points.

LIVE CATTLE

The live cattle contracts trade fully mixed with nearby contracts pressured to trade modestly lower while deferred contracts trade mildly higher. February live cattle are down $0.67 at $112.72, April live cattle are down $0.57 at $117.77 and June live cattle are down $0.17 at $114.77. Traders seem opposed to risking their positions in the nearby contracts and feel much safer investing in the contracts trading later this summer. Thankfully midday boxed beef prices printed higher, which comes as one of the limited supporting factors to this week's cash market. Still, the countryside sits idly without bids developing as of yet. Southern feedlots have noted their asking prices at $114, while the North still has yet to share their asking prices.

Boxed beef prices are higher: choice up $1.56 ($209.25) and select up $0.84 ($196.58) with a movement of 84 loads (47.82 loads of choice, 16.14 loads of select, 5.15 loads of trim and 14.54 loads of ground beef).

FEEDER CATTLE

The feeder cattle contracts have been on edge knowing that Tuesday's WASDE report would give better insight to where the corn market may be heading and upon the report's arrival where USDA estimated 2020-21 U.S. ending corn stocks at 1.552 bb, corn prices have shot as much as $0.25 higher in nearby contracts. Higher corn prices don't necessarily come as surprise as many assumed that the market's top wasn't in, but just how high the market will scale still remains the unanswered question. Meanwhile the feeder cattle contracts dip lower trading anywhere from $1.00 to $2.00 lower throughout the entire marketplace. January feeders are down $1.75 at $134.25, March feeders are down $1.97 at $134.92 and April feeders are down $1.95 at $137.07. Tuesday's stout surge in corn prices will most likely derail some of the strength that was found in the feeder cattle markets throughout the countryside. The problem is not only corn-based though, but really all inputs. With available wheat fields hard to come by, hay prices plenty high and now corn prices above what the industry's grown accustom to over the last six years producers and buyers alike will have to get creative in how they manage these calves and feeder cattle.

LEAN HOGS

The lean hog market was disappointed to see a slightly weaker trade Tuesday morning for the cash market, but thankfully the continued support from the pork cutout values has helped the market continue to trade higher. February lean hogs are up $0.45 at $68.92, April lean hogs are up $0.60 at $73.55 and June lean hogs are up $0.80 at $84.80.

The projected lean hog index for 1/11/2021 is up $0.58 at $64.49, and the actual index for 1/8/2020 is up $0.57 at $63.91. Hog prices are lower on the National Direct Morning Hog Report, down $0.38 with a weighted average of $55.49, ranging from $44.00 to $56.07 on 3,930 head and a five-day rolling average of $54.87. Pork cutouts total 271.79 loads with 257.20 loads of pork cuts and 14.59 loads of trim. Pork cutout values: up $1.58, $84.96.






Tuesday Morning Livestock Market Update - Cattle Futures Quietly Searching for Price Support

General Comments:

Cash cattle markets remain undeveloped with limited asking prices and bids likely to be seen during the morning Tuesday. Following the release Monday of last week's 5-state Weekly Average price at $111.27 per cwt, the underlying disappointment that average prices fell $0.24 per cwt from the previous week is starting to create the reality that the upward market shift during December may not be able to be carried into 2021. The challenge that is going to be seen over the coming weeks, is that wide trading ranges reported during the week of cash cattle trade may not indicate the true trend of the market once all of the numbers are in and tabulated. The expectation that cash cattle last week were reported steady to $1 per cwt higher did bring about some increased trade in certain areas, but the bulk of trade at steady to moderately lower than the previous week quickly overshadowed the higher prices that surfaced. That being said, feeders continue to focus on the expectations that packers will need to buy more cattle for the upcoming weeks, this is likely to increase asking prices over the next couple of days. Live cattle will likely be priced at $114, while dressed cattle may hold asking prices of $180 and higher, although active bids may not start to develop until midweek or later. Live cattle futures took the brunt of market pressure Monday with nearby contracts trading at or near $1 per cwt losses. Continued weakness in nearby cattle trade is likely to create additional underlying pressure, although with prices at current levels, prices have a long way to fall to indicate any downward technical pressure. With nearby contracts still hovering within striking range of recent December highs, the potential for renewed buyer support may move back into the market, especially if corn prices start to stabilize. Feeder cattle futures quickly bounced back from early week losses, potentially creating focus on buyers stepping back to the complex as feeder cattle prices move near the $136 per cwt in spot month contracts. This may continue to add further buyer interest over the near future, although prices may be unable to break away from the previous market range. Boxed beef values continue to show little direction, with mixed prices seen Monday, leading to what could be a sluggish market shift as seasonal weakness is typically seen during the first quarter of the year. This lack of underlying support in beef values could quickly curb optimism in the cash cattle complex over the coming weeks.

Firming market tone continues in lean hog futures during early January, although the focus is on deferred summer contracts, while nearby prices continue to struggle to keep up with the longer-term momentum in the market. Spring contracts bounced around in a narrowly mixed price direction Monday, although the strong upward shift in pork cutout values is starting to indicate that traders are coming out of the holidays with a much better expectation that pork movements will continue to gain momentum. The current price point in the pork complex is creating further domestic and export movement as pork continues to be priced as an economic protein source alternative. This is driven by firm support in primal cuts, as traders look for more normal post-holiday buying patterns to develop during the upcoming months. Ham cuts led the market rally higher in pork cutout values. Wholesale pork values surged $2.38 per cwt higher, although this was squarely placed on the $13 per cwt rally in ham cuts, and quickly offset firm market losses in both picnic and belly cuts during early week trade. The wide market shifts in individual primal cuts is likely to add increased volatility through the rest of the week and could cause weakness to overall pork cutout values in the coming days. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents higher. Tuesday slaughter numbers are expected near 496,000 head.

BULL SIDE BEAR SIDE
1) Total open interest in live cattle contracts has continued to increase through early January. At the end of last week, total live cattle open interest moved above 300,000 contracts, the highest levels since March, before the pandemic. 1)

Average cash cattle prices fell from the previous week, with a 5-state average price of $11.27 per cwt. This is $0.24 per cwt lower than the previous week and is likely to create concern of further cash market weakness through the rest of January.

2)

Increased asking prices are expected to quickly develop during the week with feeders focusing on the need for packers to get access to larger cattle runs as 2021 continues. This could push active trade to the end of the week as feeders are likely to hold tight to early asking prices.

2) Corn prices hovering near the $5 per bushel level will continue to add concerns of production cost gains and limit price support in feeder cattle trade.
3)

Sharp gains developed in pork cutout values, with ham cuts leading the complex higher with a $13.02 per gain Monday. This underlying support is helping to solidify firm buyer support developing during early 2021.

3)

Limited short-term buyer support in lean hog futures seems to be focusing more attention on the availability of ample market-ready hogs in the system. This could limit renewed buyer support during the week.

4)

Active gains in deferred lean hog futures have posted summer contracts near $85 per cwt. This is setting new contract highs in these late month contracts and helping to focus market attention on further growth potential in the complex.

4) High feed prices will continue to add pressure to hog markets, although the focus of elevated corn and soybean meal markets is not as evident as in feeder cattle prices.




Monday, January 11, 2021

Monday Closing Livestock Market Update - Cattle Dip Lower While Hogs Press Onward

GENERAL COMMENTS:

The pressures continue to weigh on the cattle contracts while the lean hog market was met with considerable support through Monday's trade. Tuesday will be a big day for the feeder cattle contracts as more insight into the long-term trend of corn is hoped to be obtained through the USDA reports released Tuesday. Hog prices were higher on the National Direct Afternoon Hog Report, up $0.58 with a weighted average of $55.52 on 3,040 head. March corn is down 4 cents per bushel and March soybean meal is up $7.20. The Dow Jones Industrial Average is down 89.28 points and NASDAQ is down 165.55 points.

LIVE CATTLE:

Monday's live cattle contracts didn't fare all too well and closed mostly lower. February live cattle closed $1.07 lower at $113.40, April live cattle closed $0.95 lower at $118.35 and June live cattle closed $0.32 lower at $114.95. The pressure that the future market's seen and the pressure that the cash cattle market is up against this week is going to be burdensome. As packers face a seasonally weaker boxed beef market, their ambition to support the cash cattle market will grow even more grim. Monday's cash cattle trade was anticipated with the countryside being at an utter standstill seeing that both bids and asking prices remain elusive. Feedlots would like to see the cash market higher but know that this week is going to be lucky to even obtain steady prices. Monday's slaughter is estimated at 119,000 head, 7,000 head more than a week ago and 3,000 head less than a year ago.

Last week's negotiated trade totaled 80,439 head. Of that, 53,524 head are committed for delivery in the next upcoming two weeks while the remaining 26,915 head are for delivery in the following 15 to 30 days.

Boxed beef prices closed mixed: choice up $0.89 ($207.69) and select down $0.95 ($195.74) with a movement of 123 loads (75.74 loads of choice, 22.07 loads of select, 5.83 loads of trim and 19.61 loads of ground beef).

TUESDAY'S CASH CATTLE CALL: Steady. Depending on how willing feedlots are to work this week's market, steady prices may be able to be obtained but it won't be easy.

FEEDER CATTLE:

Nearby corn prices closed $0.03 to $0.04 weaker ahead of Tuesday's USDA report of next round supply and demand estimates, which will affect the commodities trade in the weeks to come. The feeder cattle contracts are going to be watching the report closely as high corn prices affect feeding costs immensely. January feeders closed $0.17 higher at $136.00, March feeders closed $0.07 stronger at $136.90 and April feeders closed $0.05 lower at $139.02. The market will be on edge until Tuesday's report is shared and a clear direction is obtained for the corn market. Last Friday at St. Onge, South Dakota, compared to their last sale in December, feeder heifers were sharply higher selling $2.00 to $7.00 stronger. Feeder steers weighing in the high 400 weights and the high 600 weights were $2.00 to $5.00 higher, while the lower 400 and 500 weight calves sold $5.00 to $10.00 lower. Steers weighing in the low 600 weight and all the calves weighing in the 700-weight bracket sold steady. The buyer presence was light but those that were there were willing to pay for the calves they wanted. The CME feeder cattle index for Jan. 8: up $0.53, $136.16.

LEAN HOGS:

Monday ended up being a pretty strong day for the lean hog market as cash prices closed higher, pork cutout values closed higher and for the most part the futures complex closed with modest gains as well. February lean hogs closed $0.22 lower at $68.47, April lean hogs closed $0.12 higher at $72.95 and June lean hogs closed $0.25 higher at $84.00. Last week the lean hog contracts traded lower away from resistance levels as the market's support was shaky. If the market can continue to support a strong cash market and most importantly continue to see strong closed in the pork cutout sector, the market may try to break resistance levels, though they will be difficult to surpass. Pork cutouts totaled 377.17 loads with 335.72 loads of pork cuts and 41.45 loads of trim. Pork cutout values: up $2.38, $83.38. Monday's slaughter is estimated at 498,000 head, 8,000 head more than a week ago and 2,000 head more than a year ago. The CME lean hog index for Jan. 7: up $0.38, $63.34.

TUESDAY'S CASH HOG CALL: Higher. With slaughter speeds as aggressive as they are and if packers continue to see support in the cutout value, packers may decide that they want to purchase more hogs in order to meet demand.




Monday Midday Livestock Market Summary - Cattle Remain Under Pressure While Hogs Attempt to Break Higher

General Comments

Etching into the new week the entire livestock complex was sent to trade lower still feeling the immense pressure that stemmed from last week's trade, but as time rolls to the afternoon the cattle contracts are still trading lower but the lean hogs contracts are met with a more hopeful outlook. March corn is down 3 1/2 cents per bushel and March soybean meal is up $5.20. The Dow Jones Industrial Average is down 54.08 points and NASDAQ is down 74.49 points.

LIVE CATTLE

The feeder cattle contracts are trading lower, but the live cattle contracts are taking the biggest hit as the nearby contracts trade close to $1.00 lower. February live cattle are down $1.07 at $113.40, April live cattle are down $0.95 at $118.35 and June live cattle are down $0.52 at $114.80. Last week's cash cattle trade was disappointing in the sense that before the political hiatus broke out feedlots were hoping for a solid $1.00 to $2.00 stronger, but given the emotional turmoil that follows events such as the ones of last week, it's easy to see how the market's momentum was shaken. Packers are going to become harder and harder to work with as weakening boxed beef prices cut into their margins. Showlists this week are higher in all feeding regions.

Last week's negotiated trade totaled 80,439 head. Of that 53,524 head are committed for delivery in the next upcoming two weeks while the remaining 26,915 head are for delivery in the following 15 to 30 days.

Boxed beef prices are mixed: choice up $0.61 ($207.41) and select down $0.11 ($196.58) with a movement of 73 loads (44.04 loads of choice, 10.90 loads of select, 4.81 loads of trim and 12.75 loads of ground beef).

FEEDER CATTLE

The feeder cattle contracts are at a standstill as the corn market traders lower in nearby contracts (down $0.02 to $0.03 per bushel) but higher in deferred contracts (up $0.02 to $0.05 per bushel). January feeders are up $0.02 at $135.85, March feeders are down $0.02 at $136.80 and April feeders are down $0.12 at $138.95. Following last week's trade throughout the countryside, feeder cattle prices and calf price were met with mixed support. Lighter weighing calves that will make excellent prospects for next spring's grass market were with excellent demand while feeders that were soft in their condition there sold with a discount as feeders don't have as many options with that type and kind of animal.

LEAN HOGS

Support is starting to creep into the lean hog market and though its only on a mild scale, any support is a good sign given the harsh climate that the market must fight against coming out of last week's trade. February lean hogs are up $0.17 at $68.87, April lean hogs are up $0.05 at $72.87 and June lean hogs are up $0.07 at $83.82. Last week's regression bought the lean hog market some trading opportunity this week as the market's pull back drifted the market away from heavy resistance levels. The long-term pressure at $72.00 is going to be tough to surpass and if the market would like to take a run at breaking past that resistance plane, fundamental support will have to be incredibly strong and consistent.

The projected lean hog index for 1/8/2021 is up $0.57 at $63.91, and the actual index for 1/7/2021 is up $0.38 at $63.34. Hog prices are higher on the National Direct Morning Hog Report, up $0.04 with a weighted average of $55.87, ranging from $44.00 to $56.07 on 2,770 head and a five-day rolling average of $54.86. Pork cutouts total 189.01 loads with 170.46 loads of choice and 18.55 loads of trim. Pork cutout values: up $3.84, $84.84.




Monday Morning Livestock Market Update - Traders Continue to Closely Follow Feed Market Prices

General Comments:

Limited cash cattle market interest is expected early in the week as the ability to sustain last week's steady-to-higher cash values is underpinning the steady-to-strong buyer interest in the market. Packers are aggressively moving into the heart of January production schedules. This is expected to keep asking prices elevated with feeders looking for the potential of another $1 to $2 per cwt gain in cash values before the end of the week. Asking prices and bids are likely to remain undeveloped until near midweek, with the focus Monday turning to inventory taking and showlist distribution. Cash cattle trade remained at $112 per cwt through much of the South late last week (steady with the previous week), while dressed trade in the North was mostly $176 to $177 per cwt, steady to $1 higher than the previous week. The underlying pressure in cattle futures late last week is from the aggressive price movement in feed prices, with strong upward support seen in both corn and soybean meal prices during the first week of January. Feeder cattle futures posted the most aggressive market weakness, as typically seen, the feeder cattle market price is the most vulnerable to higher feed prices. It is important to remember, even with the recent pullback in prices, that live cattle futures continue to hover around the top end of the recent trade range as February futures are holding near $115 per cwt, while April contracts have been able to sustain price levels above $119 per cwt. There is still underlying support in the live cattle futures complex despite continued challenges with higher production costs and pandemic demand concerns, and it appears the potential for further market support remains strong within the upcoming days. Boxed beef values have shown light-to-moderate price gains over the last couple of trading sessions, with choice cuts leading the market higher at $206.80 per cwt with a 99 cent gains. Select cuts were unable to keep up with the pace but etched out a 10-cent per cwt gain. The ability to regain buyer support, especially in choice cuts as we move out of the holiday season will become important in helping to support the entire beef complex during the remaining winter months.

Mixed price movement late last week in lean hog futures is helping to stabilize the market as traders continue to focus not only on recent market moves following holiday activity, but also gear up for what could be an exciting market shift as traders look forward to another year of strong export pork movement. Currently hog supplies remain heavy, but the expectation is that current demand from domestic and export movements will continue to limit overall supplies of pork from becoming burdensome as expected pork production is likely to slowly erode through the next several months. This is helping to instill renewed support in deferred summer contracts, although nearby futures may still have a hard time instilling sharp market support over the next several weeks. But the ability to keep nearby hog futures within the top end of the current trading range will help to limit further market pressure across the entire complex. Firm gains late last week in pork cutout values helped to renewed underlying buyer confidence through the entire pork and lean hog market despite rising feed prices and uncertainty as to where production costs will move in the coming weeks and months. The strong triple-digit gains in ham and picnic cuts Friday helped to offset weakness in loin cuts, pointing to underlying building support in the upcoming weeks. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids expected steady to 50 cents higher. Monday slaughter numbers are expected near 498,000 head.

BULL SIDE BEAR SIDE
1)

The focus on continued support in cash cattle trade through the upcoming week is helping to solidify renewed interest as feeders are expected to point to higher asking prices and the need for packers to become even more aggressive in order to fill procurement schedules.

1) The movement in feed prices, especially corn futures price, will continue to be the main focus in feeder cattle futures. With corn prices near or above $5 per bushel, pressure in feeder cattle trade is not expected to ease up.
2)

Firm gains in boxed beef values continue to focus on the ability to move beef product in retail channels following the holiday season. Despite continued concerns of lackluster food service activity, the ability to still provide beef to the dinner table, is sparking renewed price support.

2)

Prices seem unable to break through resistance levels, leaving concerns that noncommercial buyer support may become limited in live cattle and feeder cattle futures. This could limit short-term market support in all cattle trade in the coming days and weeks.

3) Active post-holiday support has continued to develop in pork cutout values. Late week price strength in ham and picnic cuts helped to sustain underlying support as buyers are returning to a more normal buying schedule for food items following the holidays. 3)

Although there is still limited credible information coming out of China about the status of their hog herd and pork production capacity, the expectation that rebuilding domestic pork production is a main priority will continue to limit long-term pork trade.

4) Firm underlying support in deferred lean hog futures continues to break away from the short-term market concerns in the complex and focus on expectations of market strength through the last half of 2021. 4)

Cash hog values have continued to show limited support with further pressure late last week. Despite the pork plants returning to full capacity at the end of last week, the current availability of market-ready hogs remains aggressive, limiting further cash price levels.





Friday, January 8, 2021

Friday Closing Livestock Market Update - Feeder Cattle Futures Balk at Lofty Grain Prices

GENERAL COMMENTS:

The feeder cattle futures market fell as collateral damage this week, looking at the big gains in the feed markets: corn futures prices up 12 cents and soybean meal up $10.40 for the week. Actual demand for animals in the countryside remains strong, however, and this is true for fed cattle, as well. Cash cattle prices were either steady with last week ($112 traded Thursday for live trade in the South) or generally steady to $1 higher (mostly $176 to $177 for Northern dressed deals). Remaining business Friday is looking at firm asking prices around $114 in the South and $180 in the North. Lean hog futures calendar spreads widened with the nearby contracts trading lower and the late 2021 contracts seeing some higher prices. Hog prices closed lower on the National Direct Afternoon Hog Report, down $0.29 with a weighted average of $54.94 on 6,195 head. March corn closed up 2 1/4 cents per bushel at $4.96 1/4 and January soybean meal closed up $6.80 per ton at $444.80. The Dow Jones Industrial Average is up 56.84 points and NASDAQ is up 165.63 points.

From Thursday (12/31) to Friday (1/8), livestock futures scored the following changes: February live cattle off $0.55, April live cattle up $0.05, January feeder cattle off $3.13, March feeder cattle off $3.40, February lean hogs off $1.58, April lean hogs up $0.58.

LIVE CATTLE:

During a volatile news week, most of the outside markets remained remarkably unfazed and the stock market (S&P 500) even hit another fresh all-time high Friday. While this doesn't directly tie into grocery shoppers' willingness to buy beef, it certainly doesn't hurt, and although live cattle futures experienced some profit-taking this week and prices paused their recovery, the chart remains resilient. The February contract may be poised to test resistance at $116.30 again next week. At the end of the Friday session, the February live cattle contract was down $0.50 at $114.475, the April contract was down $0.20 at $119.30, and the June contract was down $0.10 at $115.275. Cash cattle prices were either steady with last week ($112 traded Thursday for live trade in the South) or generally steady to $1 higher (mostly $176 to $177 for Northern dressed deals).

Friday's slaughter was seen at 117,000 head -- not comparable to last week's holiday but 3,000 fewer than last year at this time. Add 68,000 head from the expected Saturday slaughter for a weekly figure of 651,000 head, which is 136,000 greater than the prior week's holiday slaughter, and 8,000 above 2020. Boxed beef prices were higher: choice up $0.99 ($206.80) and select up $0.10 ($196.69).

MONDAY'S CASH CATTLE CALL: Steady to $1 higher. Monday's own activity is likely to be limited to the collection of showlists, but in general, adequate packer margins and less onerous cattle weights are teaming up to keep a floor under this market.

FEEDER CATTLE:

The biggest rumble through the livestock sector this week came from the feed markets, where the nearby corn futures price crashed through the $5.00 level Wednesday and stayed lofty through the end of the week. This understandably spooked feeder cattle futures traders, who continued to pressure contracts Friday. The January feeder cattle futures contract closed down $0.875 at $135.825, the March contract closed down $0.75 at $136.825, and the April contract closed down $0.60 at $139.075. This is not to say that feeders can't still pencil out a profit margin or that actual demand for calves has been seriously dampened in the countryside. The CME Feeder Index dropped more than $3 per cwt at the start of the year, but has now stabilized, rising $0.28 to $135.63 for Jan. 7.

LEAN HOGS:

The record-setting pace of pork exports have supported a rally in lean hog futures prices since mid-December, but this means the market is vulnerable to external shocks that could ding export prices, and as the U.S. Dollar Index bounced above the 90 level Friday, nearby lean hog futures contracts adjusted themselves accordingly lower. The February lean hog futures contract closed Friday down $0.425 at $68.70, the April contract closed down $0.225 at $72.825 and the June contract closed down $0.10 at $77.825. Note, however, that the outlook for late 2021 was less affected, and the October contract, for instance, closed Friday up $0.45. Pork cutout values: up $1.18 at $81.00. Pork cutouts total 338.15 loads with 293.32 loads of pork cuts and 44.83 loads of trim. Friday's slaughter was seen at 487,000 head and Saturday's slaughter is expected to be 391,000 head, bringing the weekly figure to 2,849,000 -- 681,000 more than the prior holiday week and 154,000 more than at this time last year. The CME lean hog index for Jan. 6: up $0.54 at $62.96 and the DTN projected CME lean hog index for Jan. 7: up $0.38 at $63.34.

MONDAY'S CASH HOG CALL: Higher. With the support that's been evident throughout the cash hog market this week, the momentum may carry forward into next week.




Friday Midday Livestock Market Summary - Livestock Prices Wobble at Midday

GENERAL COMMENTS

Movements in outside markets continue to spark active trade in the livestock futures through the first half of Friday's trading session, although the direction of trade has generally pointed downward. Feeder cattle future contracts are leading the bearish movement in the sector, with losses of $0.40 to $0.60.

December corn is up 4 3/4 cents per bushel and December soybean meal is up $7.80 per ton. The Dow Jones Industrial Average is down 77 points and NASDAQ is up 10.29 points.

LIVE CATTLE

Although there continues to be strength in the cash cattle market and in the packing industry and at the retail counter, it's not enough to pull cattle futures higher this week. The February live cattle contract is down $0.425 at $114.50; the April contract is down $0.15 at $119.35; and the June contract is down $0.025 at $115.35. After a relatively active morning of futures trade, the contracts look headed for a lower weekly close, although this pullback so far leaves the February contract within $2 of its post-Christmas high at $116.30.

Boxed beef prices are higher: choice up $0.74 ($206.55) and select up $0.33 ($196.92) with a movement of 176 total loads (112 loads of choice, 21 loads of select, 14 loads of trim and 28 loads of ground beef).

FEEDER CATTLE

Once the feed markets turned back higher Friday, feeder cattle futures turned back lower, with the January feeder cattle contract down $0.525 at $136.175, the March contract down $0.45 at $137.125, and the April contract down $0.30 at $139.375 as of midday. The trading range has remained tight so far during this session, with no one appearing interested in testing more of a recovery while the rest of the livestock sector is stuck in mostly bearish trade, and consolidation looks to be the most likely path forward for feeder cattle futures.

LEAN HOGS

The February lean hog futures contract is down $0.425 at $68.00, the April contract is down $0.175 at $72.875, and the June contract is down $0.10 at $77.825. There have been some patches of fast trade through the session, perhaps triggered by outside market volatility, with the U.S. Dollar Index bouncing back upward above the 90 level. A bearish dollar is supportive to agricultural exports like U.S. pork, and although pork exports continue to be a bright spot of support for this market, with the February contract unable to break above $72 and now dipping as low as $68.325 Friday, this market may be relying on all the help it can get.

The projected lean hog index for 1/7/2021 is up $0.38 at $63.34, and the actual index for 1/6/2021 was up $0.54 at $62.96. Pork cutouts Friday morning total 213.56 loads with 180.57 loads of pork cuts and 32.99 loads of trim. Pork cutout values: up $7.48, $87.30.