GENERAL COMMENTS:
The livestock contracts saw some contracts close lower here and there, but largely it was another day of supported business throughout the livestock sector. The lean hog market saw exceptional support with a robust cash trade. If Thursday's export data can share favorable data, then the market will once again get the fundamental backing it needs to continue its technical surge. Hog prices closed sharply higher, up $3.50 on the National Direct Afternoon Hog Report equating to a weighted average of $61.94 on 8,204 head.
LIVE CATTLE:
It's another week of delayed cash trade and feedlots know that they could easily add another $1.00 to $2.00 to the marketplace -- if, and only if, the entire market is willing to hold out for those prices. Taking a lesson out of last week's book, there's prosperity to be gained if one is willing to be patient and market their cattle to their fullest ability. Packers are going to fight tooth and nail and work every possible angle to avoid not paying more this week for the inventory they need. This week sale reports are noting slaughter cows and bulls anywhere from $2.00 to $5.00 higher as packers are working the sale barns in efforts to curb their cash cattle needs. Wednesday's cash cattle trade was at a mere standstill with packers not wanting to pay up and feedlots sticking to their asking prices. Trade is expected to develop sometime Thursday or even potentially Friday.
February live cattle closed $0.50 lower at $115.47, April live cattle closed $0.07 lower at $122.45 and June live cattle closed $0.67 higher at $119.47. With the slight pull back in boxed beef prices, and the unknown fate of this week's cash market, traders pulled back from the nearby contracts but still feel confident in trading the deferred months where the cattle market is fully expected to be supported. Wednesday's slaughter is estimated at 119,000 head, steady with a week ago and 5,000 head less than a year ago.
The Fed Cattle Exchange Auction listed a total of 1,362 head, of which 699 actually sold, 663 head went unsold, as they did not meet the reserve prices that ranged from $113.50 to $115. Opening prices ranged from $111 to $112.50, high bids ranged from $113.25 to $113.75. The state by state breakdown looks like this: Texas 1,186 total head, with 604 head sold at $113.75, 582 head were not sold; Oklahoma 95 total head, with all 95 head sold at $113.50; Kansas 81 total head, all of which went unsold.
Boxed beef prices closed lower: choice down $1.48 ($235.28) and select down $1.65 ($223.39) with a movement of 153 loads (89.01 loads of choice, 24.72 loads of select, 19.69 loads of trim and 19.72 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Higher. Securing $1.00 or $2.00 more to this week's market shouldn't be a challenge so long as feedlots are willing to wait until the week's end to get their cattle moved.
FEEDER CATTLE:
Corn prices continued to scale higher the longer the day traded, but even with nearby contract gains of $0.05 to $0.09 higher, the feeder cattle contracts were able to muster up support in the deferred contracts before the day's end. Nearby contracts closed modestly lower, but the long-term trajectory of the cattle market is where the comfort lies, so expectedly traders feel more comfortable trading in the deferred months. March feeders closed $0.60 lower at $138.52, April feeders closed $0.42 lower at $141.82 and May feeders closed $0.05 lower at $144.32. At Winter Livestock Auction in La Junta, Colorado, compared to last week, feeder steers under 400 pounds sold steady, steers weighing 400 to 500 pounds sold $3.00 to $4.00 higher, steers weighing 550 to 700 pounds sold steady to $2.00 higher and steers over 700 pounds sold $2.00 to $3.00 lower. Feeder heifers under 500 pounds sold steady, heifers weighing 500 to 600 pounds sold steady to $3.00 higher, heifers over 600 pounds sold $1.00 to $2.00 lower. Slaughter cows sold $3.00 to $4.00 higher and slaughter bulls sold $2.00 higher. The CME Feeder Cattle Index for Feb. 2: up $0.04, $136.44.
LEAN HOGS:
The lean hog contracts continue to rally higher and run stronger, making the complex interesting to watch. As many of the contracts meet new contract highs, the market's support is multi-faceted and continues to encourage this type of robust trade. February lean hogs closed $0.82 higher at $72.37, April lean hogs closed $1.12 higher at $79.20 and June lean hogs closed $0.62 higher at $88.72. Wednesday's close was especially interesting as the cash market grew to see an advancement of $3.50, which packers don't mind paying when domestic demand is growing, coolers are empty and Thursday's export report is anticipated to show great export demand again. Pork cutouts total 321.57 loads with 286.16 loads of pork cuts and 35.41 loads of trim. Pork cutout values: down $0.87, $80.23. Wednesday's slaughter is estimated at 495,000 head, 3,000 head more than a week ago and 5,000 head more than a year ago. Tuesday's slaughter was revised to 489,000 head. The CME Lean Log Index for Feb. 1: up $0.55, $68.87.
THURSDAY'S CASH HOG CALL: Steady. The market is flourishing with exceptional demand, but with packers adding $3.50 to Wednesday's market, they are going to want to safeguard their own margins before giving too much more. The question of, "will cash prices be higher?" really relies on the number of hogs that packers need. If they are now sitting flush on their inventory necessities, the cash market will trade steady. But if packers are lower on inventory, the market bows enough upside potential for them to be able to pay more in the cash market.
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