GENERAL COMMENTS:
On the day after Thanksgiving, cattle prices are responding to lower cash trade, while lean hog prices struggle to find enough demand for the country's hogs.
LIVE CATTLE:
February live cattle futures are trading down $3.87 at $171.40, a new seven-month low encouraged by lower cash trade late Wednesday and with sellers taking advantage of low market attention the day after Thanksgiving. DTN reported southern live trade near $177, while northern dressed trade was near $280, both roughly a dollar or more lower than last week. The recent increase in available cattle on feed has pressured prices lower, but there is no sign of herd expansion taking place. February cattle are now down 13% from their September high, the largest correction since the upward move began in 2020.
U.S. cattle and hog futures close early, at 12:05 p.m. Friday, so these midday comments are earlier than usual and don't yet have the boxed beef and pork cutout prices normally reported. Those stats will be included in Friday's closing comments. On Wednesday afternoon, choice boxed beef was at $297.00, a few dollars higher on the week, while selects were at $267.62, a few dollars lower with a total load count of 170 for Wednesday. Dow Jones estimated cattle slaughter at 119,000 for Friday, up from 116,000 a week ago and a good sign of continued demand. Overall, the U.S. economy remains supportive for continued demand at the retail counter and the outlook for interest rates is finally showing signs of softening.
Earlier Friday, USDA said 10,000 metric tons of beef were sold for export last week, with China and Hong Kong named top buyers. So far in 2023, U.S. beef exports are down 15% from a year ago. Colder temperatures have pushed into the northwestern Plains and Friday's radar shows snow in western Nebraska and western Kansas. Kansas is expecting more precipitation on Saturday, but overall, the forecast remains favorable for moving being able to move cattle the next two weeks.
FEEDER CATTLE:
January feeder cattle are trading down $5.82 at $221.30, their lowest price in over seven months, taking cues from this week's lower cash trade in live cattle and likely taking advantage of a lack of eyeballs the day after Thanksgiving. Corn prices are steady Friday and are staying near their lowest levels in 2023. Drought remains a concern in the southwestern Plains, but pasture conditions are much better in the northwestern Plains, heading into winter. Back in the July inventory report, USDA estimated the number of calves under 500 pounds at 26.3 million, 3% less than the previous year. It will be interesting to see what that number looks like at the end of January, but expansion doesn't seem likely yet with more beef cows on feed in the October report.
The latest CME Feeder Cattle Index was at $226.94 for Tuesday, Nov. 21, a few dollars above the January futures price. Wednesday morning's U.S. Drought Monitor showed moisture improvement in Texas, but drought remains a concern in the southwestern Plains and in the western Midwest with a mostly dry forecast ahead.
LEAN HOGS:
February lean hogs are trading down $2.80 at $69.02, extending the low in November and challenging the October low of $69.17, which is also the lowest price for the February contract since February 2021. The hog market continues to have the look of a well-supplied market with no sign of packers having any trouble securing their weekly needs. On Wednesday, USDA's Daily Direct afternoon report showed national formula hog prices holding at $72.98 per hundredweight, while negotiated trade fell to $59.19, suffering a painful lack of attention from packers. Dow Jones estimated Friday's hog slaughter at 469,000 down from 482,000 a week ago, but still an active pace for this holiday week. CME's most recent lean hog index was projected at $74.18 for Monday, Nov. 20.
Earlier Friday, USDA said 26,300 metric tons of pork were sold for export last week with Mexico accounting for just over half the sales. With a month and a half left in 2023, U.S. pork exports are up nearly 6% from a year ago. This year continues to be one of the most unprofitable years for hog producers on record, and a reduction in hog numbers remains likely at some point. One sign of possible support in the market is coming from commercials that CFTC said were net-long 14,461 contracts as of Nov. 14. Commercials have shown more interest when February hog prices dip into the low $70s, but there is no sign yet of the downtrend being over. The next update of CFTC data will take place Monday afternoon, due to this week's Thanksgiving holiday.
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