Friday Morning Livestock Market Summary - Bearish Hog Market Undertone Continues

GENERAL COMMENTS:

Cash cattle trade have once again made it to Friday morning with little interest or desire for packers and feedlot managers to meet in the middle. Even though packers remain short bought, it may be late in the day before deals are reached. Both sides seem entrenched in their position and unlikely to budge early in the day. Asking prices are likely to redevelop at recent levels of $121 live and $196 dressed. While asking prices are holding at $126 to $127 live and $200 to $203 dressed. A price gap of $5 to $7 per cwt at this point in the week remains wide and will likely take both sides willing to move significantly to get any sales put on paper. Cattle futures are expected to open mixed in limited activity. The narrow market shift Thursday focused on grain market weakness. The upcoming Friday morning USDA report is going to be watched closely as major implications in grain stocks could shift market prices in both grain and cattle trade.

Cash hog prices are expected to be steady to $1 per cwt lower. The recent shifts lower in futures markets and pork cutouts seem to have little impact in early cash-market activity as packers are able to gain access to market-ready hogs with prices generally steady to weak. Most bids Friday are expected to remain steady to 50 cents per cwt lower with packers gaining access to increased hogs in order to fuel the active Saturday run. Futures trade is expected to remain under pressure once again. With April contracts leading the complex lower and setting 2019 lows, the focus now has moved to $58.45 support levels set last August. The wide market swings this week have made it very clear that these price levels are within reach. Traders continue to struggle with growing uncertainty about demand growth through the rest of the year as rising amounts of market-ready hogs continue to enter the market. Slaughter runs are expected at 465,000 head Friday Saturday runs are expected near 214,000 head.

BULL SIDE	BEAR SIDE
1) Growing uncertainty is expected through the end of the week with the USDA crop production report being released late morning. The combination of market information available due to the past government shutdown may create a wild shift in markets. Any pressure in grain trade through the morning is expected to be viewed as bullish for feeder cattle.	1) Continued market weakness continues to develop in wholesale beef values with cutout values shifting lower once again Thursday. This is adding to additional market concerns that demand may be faltering through spring months.
2)Nearby live cattle futures continue to hold within striking distance of contract highs despite recent market volatility. This is expected to create additional fundamental momentum based on expected cash market support.	2)The inability of packers to aggressively move into the cash market before Friday is limiting the chance of strong cash market gains once again through the week. Limited firmness has been seen through the last month, allowing for packers to gain needed supplies while limiting overall spending.
3)Weekly export data released Thursday posted active 2019 pork sales with 15,200 metric tons reported for China. These numbers were as of Dec. 12, 2018, and gave markets no confidence Thursday. The focus on future sales is still positive to the market over the long term.	3) Sharp losses in nearby lean hog futures broke through crucial support levels Thursday. This created growing concerns that prices could easily reach April contract lows. This would likely spark additional aggressive technical selling.
4) Tyson president and CEO mentioned that the "impact of African swine fever is probably a little worse than what is reported." This continues to give some hope for long-term demand growth that business in China and Asia in general may need to rely on our pork supply to meet demand.	4) Pork cutout values have continued to erode through the week as supply levels have continued to outpace demand. This may continue to put pressure on cash and futures trade through most of February.

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Thursday Closing Livestock Market Summary - Hog Futures Struggle

GENERAL COMMENTS: Lean hog futures saw sharp losses Thursday on bearish market concerns. The prospect of plentiful supplies of hogs available to the market has continued to limit trader interest. Meanwhile, cattle trade stabilized Thursday following uncertainty in early activity. Light support developed in feeder cattle based on pressure in the grain complex. Cash cattle markets remain undeveloped with limited packer interest Thursday. A few bids have surfaced through the day in most areas with prices offered at $121 live and $196 dressed. Given the stability of cattle markets and futures prices, feeders are unwilling to give these bids much attention. Asking prices are holding at $126 to $127 per cwt live and $200 to $203 dressed. The National Daily Direct afternoon hog report was $0.23 lower ($45-$50.25, weighted average of $49.52) on 5,102 head sold. Corn futures were lower in light activity with the March contract down 3 1/2 cents. The Dow Jones Index was 220 points lower with the Nasdaq down 86 points.

LIVE CATTLE: Live cattle futures were mixed ($0.32 lower to $0.22 higher) due to limited support moving back into the market. Live cattle traders distanced themselves from the bearish shift lower in lean hog trade, allowing for limited market activity Thursday. There is growing uncertainty ahead of the USDA crop reports Friday, which will reveal a lot of data due to the government shutdown. This may create more volatility in the markets as traders try to sort out what they feel is relevant and what they toss into the heap of old information. Beef cut-outs: lower, down $0.84 (select, $211.53) to down $0.86 (choice, $216.71) with light demand and heavy offerings on 131 loads (67 loads of choice cuts, 15 loads of select cuts, 19 load of trimmings, 31 loads of coarse grinds).

FRIDAY'S CASH CATTLE CALL: Steady. Limited interest has developed before the end of the week. This is expected to allow for more packer interest Friday, although trade is likely to be delayed until the afternoon. Bids may firm through the day, but are expected to be sluggish early in the day. Cattle are priced at $126 to $127 live and $200 and higher dressed.

FEEDER CATTLE: Light support trickled into cattle futures on minimal volume. Futures closed steady to $0.50 higher. Early pressure shifted to a more stable pattern as pressure developed in grains. The firmness in live cattle trade is helping to bring some renewed support to nearby feeder cattle trade. CME cash feeder index for 2/6 is $141.81 up $0.28.

LEAN HOGS: Strong pressure swept through the lean hog trade, pushing futures $0.30 to $1.30 lower. The April lean hog futures contract turned sharply lower through the morning, breaking below $60 per cwt for the first time since August and moving through support levels seen last week. Traders remain focused on growing supply levels. Despite information on 2019 pork sales to China in the Export Sales report Thursday morning, the fact that report is from Dec. 27 seemed to minimize its market impact. With USDA releasing a mix of past and current data as the government returns from its shutdown, the focus on timely information becomes much more challenging. Pressure redeveloped in pork cutouts following increased market pressure in several primal cuts. Pork cutout values fell $0.50 per cwt, moving to $65.11 per cwt on 341 loads. CME cash lean index for 2/5 is $57.16, down $0.20. DTN Projected lean index for 2/6 $56.89, down $0.27.

FRIDAY'S CASH HOG CALL: Steady to $1 lower. Hampered by the latest round of adverse winter weather and aggressive pressure in futures trade, packers continue to adjust cash markets lower. Most bids are expected 50 cents lower Friday, although limited market direction is expected. Friday slaughter is expected to hit to 465,000 head. Saturday runs are at 214,000 head.

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Thursday Midday Livestock Market Summary - Hog Futures Tumble Lower

General Comments

Sharp losses have continued to flood through lean hog trade with April futures holding a $1 per cwt loss, moving below $60 per cwt through the morning. Cattle trade is steady to slightly higher midday as early losses have eroded due to sell orders evaporating through the morning. Corn markets are lower in light trade. March corn futures are 3 1/2 cents lower. Stock markets are lower in light trade. Dow Jones is 320 points lower with Nasdaq down 114 points.

LIVE CATTLE:

Early pressure in live cattle trade Thursday morning has eased with renewed buying slowly trickling into the complex midday. This is allowing contracts to trade steady to 15 cents per cwt higher. The spillover pressure seen in hog trade seems to have lost most of its bearish hold on cattle trade as traders look for steady to firm cash market moves at the end of the week while firming beef values are likely to bring additional underlying support over the next several trading sessions. Cash cattle markets remain inactive with live bids at $121 per cwt and $196 dressed. At this point, it appears that trade will be pushed off until Friday. Asking prices remain at $126 and higher live and $200 to $203 dressed. Boxed Beef cut-outs at midday are mixed, $0.35 higher (select) and down $0.45 per cwt (choice) with light movement of 76 total loads reported (30 loads of choice cuts, 8 loads of select cuts, 15 loads of trimmings, 23 loads of ground beef).

FEEDER CATTLE:

Limited buying has slowly moved into the complex midday as traders have backed away from the weakness in live cattle futures and are focusing on light to moderate pressure in grain trade. There is increased buyer activity developing through the last half of Thursday's trading session. This may help to bring additional underlying support back to the complex over the next couple of weeks.

LEAN HOGS:

Sharp losses have continued to hold following a swift move lower early Thursday morning. Currently April lean hog futures are holding just above session lows of $59.65 per cwt, but the break below $60 per cwt has created strong bearish undertones through the complex as traders are focusing on growing supplies through the spring and concerns surrounding future demand. Cash prices are lower on the National Direct morning cash hog report. The weighted average price is down $0.03 at $49.72 per cwt, with the range from $45.00 to $50.25 on 3,937 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price is down $1.65 at $47.82 per cwt, with the range from $45.00 to $49.00 on 426 head reported sold. Pork carcass values are higher on the morning report with prices adding $0.08 per cwt at $65.69 per cwt with 160 loads traded. Lean hog index for 2/5 is $57.16, down $0.20, with a projected two-day index is $56.89, down $0.27.

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Beef Production Likely to Grow in 2019

A Drovers report says the final beef production numbers for 2018 will soon be out as USDA data is moving again after the government shutdown. The current numbers for 2019 will also soon be released by USDA. The January Cattle on Feed Report will come out on February 22nd. With all but the last few days of slaughter and carcass data out, 2018 beef production totals are all but wrapped up. Commercial beef production in 2018 should total 26.9 billion pounds. That’s 2.6 percent higher than the previous year and just lower than the record U.S. beef production total of 27.1 billion pounds in 2002. Beef production in 2019 is expected to continue growing. The forecast for this year comes in at a record 27.4 billion pounds, 1.8 percent higher than last year. Drovers says the total beef production number is likely to grow through at least 2020. Steer carcass weights increased just two pounds year-over-year in 2018 to 880 pounds, a smaller increase than most expected. Heifer carcass weights increased five pounds over the same period to 816 pounds. The modest increase in steer and heifer carcass weights helped to alleviate industry concern that relatively inexpensive feed would lead to even higher carcass weights.

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