GENERAL COMMENTS:
Alongside surging pork and beef prices, average lean hog bids from the packers have been improving this week (before a pullback Thursday), and there is some momentum on the side of the cash cattle market too, but Thursday's livestock futures trade mostly ignored the bullish supply-and-demand arguments and instead pulled prices back to counteract gains made earlier in the week. In the cash cattle market, asking prices remain around $163 live basis, so far unmatched by packers' bids at $160. The National Direct Afternoon Hog Report showed purchased swine prices down $0.54 to a weighted average of $76.82 on 5,917 head. Prices ranged from $75 to $80, and the five-day rolling average is now $76.73. March corn closed down 1/4 cent to $6.76 per bushel and March soybean meal closed up $0.30 per ton to $491.40. The Dow Jones Industrial Average was down 431.66 points and the NASDAQ was down 245.41 points.
LIVE CATTLE:
The live cattle futures market can only be described with bullish supply-and-demand fundamentals and a bullish trend on the chart, but they can't go up every day, and they mostly didn't on Thursday. The February contract closed up $0.225 at $162.775; the April contract closed down $0.525 at $164.075, and the June contract closed down $0.475 at $159.725. Boxed beef prices have been moving higher by leaps and bounds this week, supported by resilient demand from U.S. grocery shoppers but also by eager foreign buyers, as seen in Thursday's friendly export sales report. In the cash cattle market, it's the usual standoff between feedlots who note these rip-roaring gains in beef prices and are asking for $163 in the South (a $2 gain over last week's trades), versus packers who have held off so far this week with nothing more than a few token bids several dollars below asking prices, specifically $160 in Iowa (live basis) or $256 in Nebraska (dressed basis).
Boxed beef prices significantly higher: choice up $3.88 ($279.55) and select up $1.45 ($262.64), with a movement of 106 loads (73.92 loads of choice, 9.6 loads of select, 5.24 loads of trim and 17.43 loads of ground beef).
FRIDAY'S CASH CATTLE CALL: $1 higher. Given that packers were able to build up their inventory last week, they'll likely be tougher to negotiate with this week. But improving beef values and packer margins may work in market bulls' favor.
FEEDER CATTLE:
Feeder cattle futures experienced a sell-off Thursday. The March feeder cattle contract was down $1.10 at $186.225, the April contract was down $0.55 at $190.60, and the May contract was down $0.50 at $194.475. Meanwhile, the November 2023 futures contract remains above $214. For historical reference, the all-time high for feeder cattle futures was $245.20 for the October 2014 contract, and that was at a time when live cattle weren't much higher ($171) than they are now, and the select beef cut-out was actually $20 per cwt lower than it is now. Thursday's newly updated March precipitation outlook from NOAA's Climate Prediction Center calls for above average precipitation pretty much everywhere it will add complications to cattle feeding or hauling logistics (the Midwest and Northern Plains) and pretty much nowhere it could help relieve the ongoing drought in the High Plains, where 83% of the region remains in some sort of abnormally dry or drought conditions.
LEAN HOGS:
Most of the nearby lean hog futures contracts posted losses Thursday amid fairly quiet spread trade. The April lean hog contract closed down $0.725 at $85.775; the April contract closed down $0.85 at $94.85; and the June contract closed down $1.15 at $103.15. Some traders may be feeling impatient for the charts to start making a seasonal move higher. Generally helpful bids from the packers this week support that shift, as does the positive weekly export sales report for pork. However, there was a relatively low volume of futures trade Thursday, and it just wasn't the day for a big move yet. The afternoon pork cut-out showed the overall carcass value up $2.12 to $83.06. There were 297.16 total loads (274.60 loads of cuts and 22.57 loads of trim). The CME Lean Hog Index for Feb. 14: up $0.44, $75.62, and the projected Index for 2/15: up $0.23, $75.85.
FRIDAY'S CASH HOG CALL: Higher. Packers have already shown some willingness to be aggressive this week, which may be what it takes to keep the nation's rollicking slaughter pace rolling.
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