Tuesday, January 12, 2021

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


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 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.


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.


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.

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