Friday, January 8, 2021

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


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.


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.


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.


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.

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