GENERAL COMMENTS
To start the week off, the livestock contracts couldn't have asked for a more supportive day. From a technical sense, traders showed up and traded the contracts respectively, and the fundamental support was mixed with cattle seeing ample support and hogs seeing merely no support. Hog prices closed lower on the Daily Direct Afternoon Hog Report, down $0.59 with a weighted average of $73.88 on 4,207 head. March corn is down 1 1/4 cents per bushel and March soybean meal is down $7.30. The Dow Jones Industrial Average is down 112.96 points.
LIVE CATTLE:
It was a positive day for the live cattle market as traders were able to rally the contracts given that boxed beef prices closed higher and that day's slaughter came in at an impressive speed of 129,000 head. As I've mentioned before, higher boxed beef prices incentivized packers to run faster chain speeds to ensure that they can sell beef at these boxed prices, which consequently also helps feedlots move cash cattle and keep their showlists current. With this type of cause-and-affect pattern happening in the market right now, feedlots are again planning to price cattle higher and will be willing to wait until the week's bitter end to trade if need be. In monitoring changes throughout the futures complex, it's interesting to see the deferred months of August 2023 through the year's end adding as much as 100 to 117 points to their contracts as all are realizing that supplies are going to be incredibly thin at that point and that feedlots are going be able to wildly push the cash market at that point. February live cattle closed $0.97 higher at $157.75, April live cattle closed $0.85 higher at $161.52 and June live cattle closed $0.90 higher at $157.45. New showlists appear to be lower in all three major feeding states.
Monday's slaughter is estimated at 129,000 head, incomparable to last week, but 16,000 head more than a year ago.
Last week Southern live deals were marked at $157, which is steady with last week's weighted average, and Northern dressed cattle traded for mostly $252, which is $0.50 higher than the previous week's weighted average. Last week's negotiated cash cattle trade totaled 73,664 head. Of that, 77% (56,636 head) were committed to the nearby delivery, while the remaining 23% (17,028 head) were committed to the deferred delivery.
Boxed beef prices closed higher: choice up $3.15 ($286.14) and select up $0.26 ($259.60) with a movement of 106 loads (73.24 loads of choice, 13.58 loads of select, 15.00 loads of trim and 3.85 loads of ground beef). The choice/select spread sits at $26.54.
TUESDAY'S CATTLE CALL: Higher. Cash cattle won't trade until later in the week, but prices will likely be higher. Seeing cattle jump $1.00 to $2.00 higher isn't out of the market's ability.
FEEDER CATTLE:
The feeder cattle complex rallied throughout Monday's market as traders appreciated the effects of steady to lower corn prices and the continued support of the live cattle market. January feeders closed $0.92 higher at $183.62, March feeders closed $0.65 higher at $186.30 and April feeders closed $0.80 higher at $190.62. It's likely that the countryside continues to see hot demand from feeder cattle buyers as corn prices trend downward and as the cash cattle market is expected to trade higher. So long as that relationship continues between corn and cash cattle prices, there is more profit to be made for feeders in the middle. At Oklahoma National Stockyards in Oklahoma City, Oklahoma, compared to their last sale mid-December, and at their midsession point, feeder steers were trading steady to $4.00 higher with the biggest advancements seen on the heavier weights. Feeder heifers were traded $1.00 to $3.00 stronger. Steer calves were selling mostly steady but thin fleshed calves continue to demand a big premium. Heifer calves were trading $3.00 to $6.00 higher. The effects of the drought continue to be evident with several loads of light weight cattle available and very few over 600 lbs. Also because of the drought, it appears that many mid-weight cattle are headed to the feed-yard instead of grass. Feeder cattle supply over 600 pounds was 41%. The CME Feeder Cattle Index for Jan. 6: down $0.09, $180.37.
LEAN HOGS:
After spiraling downward over the past seven trading days, the lean hog complex may have finally found technical support in the market amid Monday's trade. Pork cutout values and cash prices were still no help, but with the February contract closing around $80.27, Monday's market was able to build off that. Still, the market's biggest limiting factor continues to be demand: Will it improve? And if so, when will that be? This Thursday the market will see the newest WASDE report released, which will hopefully give some insight into that specially. February lean hogs closed $0.52 higher at $80.80, April lean hogs closed $1.15 higher at $90.80 and June lean hogs closed $1.75 higher at $106.45. Pork cutouts totaled 428.13 loads with 389.88 loads of pork cuts and 38.25 loads of trim. Pork cutout values: down $1.65, $82.34. Monday's slaughter is estimated at 491,000 head, incomparable to last week, but 44,000 head more than a year ago. The CME Lean Hog Index for Jan. 5: down $0.77, $77.49.
TUESDAY'S HOG CALL: Lower. Until packers see better margins in pork cutout values, they're not likely going to be aggressive in the cash market.
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