Thursday Closing Livestock Market Update - Feeder Trade Leads Cattle Lower

GENERAL COMMENTS: Firm pressure in nearby feeder cattle trade set the tone Thursday. Weakness in the cattle trade was due to traders adjusting end-of-the-month positions and taking protection in the event that long-term resistance at $130 per cwt holds. Hog futures posted strong early gains, but the gains eroded though the session on a lack of new market information and limited volume. Cash cattle markets were undeveloped with the same wide gap between asking prices and bids as seen through the first half of the week. Asking prices remain at $130 and higher live basis and $205 to $206 dressed, while bids are limited to $125 live and $202 dressed. Both sides seem ready to push activity to late in the day Friday. The National Daily Direct afternoon hog report was $0.56 lower ($42-$45.75, weighted average $44.72) on 7,451 head sold. Corn futures were lower in light activity with March falling 1 cent per bushel. The Dow Jones Index was 69 points lower with the Nasdaq down 21 points.

LIVE CATTLE: Live cattle futures saw narrow losses late Thursday as traders adjusted positions. Futures closed mixed, $0.32 lower to $0.55 higher. The February futures contract posted firm gains as traders tried to get out of positions before the contract expires. This took the emphasis off of light pressure in the rest of the complex as traders closely focused on sharp feeder cattle losses and limited market news in beef or cash trade. April futures settled 7 cents lower, as the inability of the contract to move above resistance midweek seems to have pulled buyers out of the market temporarily. End-of-the-month position adjustments were also likely a factor Thursday, which is putting more attention on early Friday trade. Beef cut-outs: higher, up $2.48 (select, $215.27) to up $0.49 (choice, $219.95) with good demand and light-to-moderate offerings, 136 loads (64 loads of choice cuts, 24 loads of select cuts, 8 load of trimmings, 40 loads of coarse grinds).

FRIDAY'S CASH CATTLE CALL: Steady. Cash cattle interest remains at a standstill going into Friday morning. Trade may not develop until late in the day Friday, as there remains a stalemate between asking prices and bids that has held over the last couple of days.

FEEDER CATTLE: Most feeder cattle futures saw sharp losses Thursday, adding renewed weakness to the cattle complex. Futures settled $1.07 lower to $0.12 higher. Month-end trade quickly sparked weakness through nearby feeder cattle futures, leading to triple-digit losses across spring and summer contracts. The intensity of the losses slowed significantly through the morning, but traders seemed content to back away from recent support due to the potential for higher production costs through the spring and summer months. CME cash feeder index for 2/27 is $139.94, down $0.52.

LEAN HOGS: Trade volume slowed significantly through the last half of Thursday's trading session, allowing lean hog futures to close with narrow gains of $0.05 to $0.55. Trade opened with sharp gains early Thursday, but market depth was challenged through the morning as prices steadily eroded. Nearby contracts managed to hold on to narrow gains at closing bell. The ability to sustain recent support levels was the key focus as traders closed out the month of February. Pork cutouts bounced higher as back-and-forth market shifts continued through late February. Pork cutout values added $0.92 per cwt, moving to $60.49 per cwt on 345 loads. CME cash lean index for 2/26 is $52.82, down $0.03. DTN Projected lean index for 2/27 $52.64, down $0.18.

FRIDAY'S CASH HOG CALL: Steady to $1 lower. Late-week price pressure is expected to continue through the cash hog complex with most bids expected to remain steady to 50 cents lower early Friday. Friday slaughter is expected at 477,000 head. Saturday runs are expected at 196,000 head.

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Livestock & Poultry Outlook - Another Record Year for Meat Production Forecast for 2019

ARLINGTON, Va. (DTN) -- U.S. meat production continued to climb to record levels in 2018 and that trend will continue in 2019.

Total red meat and poultry production grew 2% to a record 102.4 billion pounds last year, and USDA expects these categories to increase by 2% again in 2019, to reach a new record of 104.7 billion pounds. These projections were released early Friday in USDA's outlook for livestock and poultry, at the agency's annual Agricultural Outlook Forum in Arlington, Virginia.

This steady rise in production kept cattle, hog and turkey prices lower last year, as well as broiler prices, which rose briefly in the first half of the year before dropping in the second half. USDA expects prices for cattle and turkey to rise in 2019, but hog and broiler prices are forecast to drop lower. Exports for 2019 are expected to increase for all the major commodities, but pork growth may be held back by ongoing trade disputes.

CATTLE & BEEF

The government shutdown in January has delayed USDA's January Cattle report, which forced the agency to rely on inventory estimates from July 2018, and current herd estimates are not available at this time.

As of July, the 2018 calf crop was estimated at 36.5 million head, 2% up from 2017, and the largest calf crop since 2007. Although herd expansion continued in 2018, there are indications that is slowing. Producers indicated that they were retaining fewer heifers, and higher levels of beef cow slaughter were reported through much of the year.

Commercial beef production for 2019 is forecast to increase by 3% to 27.61 billion pounds, which broke the previous record for production set in 2002. Total commercial cattle slaughter is expected to rise in 2019 by nearly 1%.

Beef exports are forecast to have increased by 11% for 2018, with competitive U.S. beef prices and global demand holding steady. For 2019, exports are expected to rise 2% to reach 3.26 billion pounds. USDA predicts U.S. exports will face higher prices in 2019, but drought and flooding in Australia may limit competing supplies.

Beef imports are expected to reach 3.01 billion pounds, just barely up from 2018 levels. The 5-Area steer price for 2018 is expected to average $115 to $122 per cwt, up slightly from 2018. Cow-calf operators and backgrounders will likely see lower prices in 2019, given higher projected feed prices and large supplies of cattle in feedlots. Feeder steer prices are forecast to average $141 to $148 per cwt, compared to $147 in 2018.

PORK

Hog producers continue to expand herds, despite lower returns. Several new plants opened up in the last two years, which has added capacity and allowed producers to take advantage of expectations of strong demand.

Hog inventory for 2018 was pegged at 74.6 million head, up 2% from 2017, and the largest inventory since 1943. The breeding herd was 2% higher as well, topping out at 6.3 million head. The large pig crops from second half 2018 and the first half of 2019 are expected to result in a record numbers of hogs marketed for slaughter in 2019. U.S. hog imports are forecast at 4.2 million head for 2019, just barely down from 2018.

Commercial pork production is forecast to reach a record level of 27.34 billion pounds in 2019, up 4% from 2019. Despite these expected record-high slaughter numbers, the recent expansion of slaughter capacity should absorb this growth, USDA said.

Pork exports increased in 2018, with low prices and increased global economic growth overriding the effect of tariffs and trade disputes. Exports are forecast to increase 6% again in 2019, to 6.3 billion pounds. Pork imports declined 5% in 2018, thanks to rising pork production and low domestic pork prices, which made the U.S. market less competitive abroad. This trend is expected to continue in 2019, with pork imports forecast to drop slightly to 1.06 billion pounds.

U.S. hog prices are forecast to average $41 to $44 per cwt for 2019, down from $46 on average last year.

POULTRY & EGGS

Broiler meat production is expected to rise 1% to a record 43.1 billion pounds. Due to the government shutdown, current flock size estimates are not available, but at the beginning of December 2018, flocks were 1% larger than 2017. Given weak profit margins expected in 2019, flock expansion is unlikely, USDA said.

Broiler meat exports are forecast to increase 1% to 7.15 billion pounds, and USDA expects prices to average $0.94 to $1 per pound, compared to an average of $0.98 per pound in 2018.

Turkey production for 2019 is forecast to reach 5.92 billion pounds, after a decline in 2018. The national turkey hen price is expected to average $0.83 to $0.88 per pound, up from an average of $0.80 in 2018.

The total U.S. egg production is set to reach record heights in 2019, with 9.13 billion dozen eggs expected, up 2% from 2018. As of Dec. 1, 2018, the table layer flock was 33.1 million birds, up 3% from 2017. Although weaker egg prices and higher feed costs may hamper profits in 2019, USDA expected producers to continue flock expansion.

Egg prices are forecast to average $1.22 to $1.29 per dozen, down from $1.38 average for 2018.

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Thursday Midday Livestock Market Summary - Cattle Losses Pressure Feeder Trade

General Comments

Firm pressure is building in cattle trade following triple-digit losses moving through nearby feeder cattle trade. The concern that April contracts will move through initial support levels of $145.30 through the end of the week has caused active liquidation. This has sparked underlying pressure in live cattle markets with April futures firmly lower. Hog futures have held onto early gains, but initial market surges have slowly eroded through the morning. Corn futures are lower in sluggish trade. March corn futures are 1 cent lower. Stock markets are mixed in light trade. Dow Jones is 8 points lower with Nasdaq up 5 points.

LIVE CATTLE:

Narrow losses have held through live cattle futures with traders closely focusing on outside market shifts and the overall lack of support developing in feeder cattle trade Thursday. A strong triple-digit loss in the feeder cattle complex could quickly derail the recent support that has slowly but steadily developed in live cattle trade. After testing but not breaking long-term support levels of $130.10 per cwt Wednesday in April contracts, traders have been extremely cautious. This $130 per cwt barrier remains hard to penetrate, and could lead to a moderate to strong market retraction over the near future despite fundamental support. Cash cattle interest is quiet with bids holding at $124 to $125 live and $202 dressed. It appears that both sides will hold onto their position, with late Friday trade likely to be seen once again. Asking prices remain at $130 and higher live and $205 to $206 dressed. Boxed Beef cut-outs at midday are higher, $2.39 higher (select) and up $0.23 per cwt (choice) with moderate movement of 94 total loads reported (40 loads of choice cuts, 19 loads of select cuts, 6 loads of trimmings, 29 loads of ground beef).

FEEDER CATTLE:

Triple-digit losses have continued to hold across feeder cattle trade. Although prices have bounced off of session lows, the underlying weaker tone in the market on the last trading day of February is causing some concern that nearby contracts may be unable to hold support levels set last week. Despite the strong moves in live cattle trade over the last couple of weeks, the underlying concern surrounding future moves in grain trade has feeder cattle traders extremely cautious to actively step back into the complex.

LEAN HOGS:

Narrowly mixed trade is seen midday Thursday with all nearby contracts hovering in a mixed single-digit trading range. The lack of support seen through the morning in order to hang onto firm initial gains is evident of the limited trade volume in the market and traders focusing on end-of-month adjustments. Even though cash hog prices eroded slightly in the morning reports, the expectations that traders may continue to focus on increased underlying support through the rest of the week and maintain recent support levels, has the potential market losses limited through the day. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.41 at $44.87 per cwt with the range from $42.50 to $45.75 on 5,246 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $0.34 at $45.12 per cwt with the range from $42.50 to $45.75 on 1,365 head reported sold. Pork carcass values posted additional market pressure as wholesale pork markets continue to swing back and forth in a wide range. Pork cutouts inched higher, gaining $0.37 per cwt at $59.94 per cwt with 184 loads traded. Lean hog index for 2/26 is $52.82, down $0.03, with a projected two-day index is $52.64, down $0.18.

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Thursday Morning Livestock Market Update - Light Activity Expected at Month End

GENERAL COMMENTS:

Cash cattle trade remains elusive with limited interest midweek. Although a few bids have slowly developed at $125 live and $202 dressed, a $3 to $5 per cwt gap remains between asking prices and current bids. This is expected to narrow in the next couple of days, but at this point, both sides seem to be in no hurry. It is likely that packers may limit any aggressive moves until Friday,March 1, and the opening of a new month of financial spending. Futures trade should open mixed in a moderate range. The ability to hold prices generally stable through the end of the session has been impressive given the lack of firm direction in beef values and inactive cash trade. But traders continue to focus on this ceiling price of $130.10, which limited support Wednesday and the potential for another run at breaching this price point.

Packer activity has increased significantly through the week, although it has done little for market prices or the overall range of bids early Thursday morning. This may add even more volatility in early March since packers have negotiated more trade in the last two days than is typically seen in a week's time. The absence of active snowstorms in the next couple of days is a good sign for regaining balance not for only processors, but it will allow producers to move additional hogs and likely become more current in the next couple of weeks. Futures are expected mixed with limited end-of-the-month activity likely to develop. Even though prices seem to be well positioned above support levels, the last several weeks have shown that quick moves downward are never out of the question.

	BULL SIDE		BEAR SIDE
1)	April live cattle trade continues to hover just below long-term resistance levels. A 20-cent move higher would move be past 2018 highs, then the target would be summer 2017 prices of $131.25 per cwt.	1)	A large blanket of cold air continues to hold over much of the Midwest. This is not expected to change in the next couple of weeks, creating challenging feeding conditions and reduced overall gains.
2)	Strong demand expectations continue to add market support to the entire complex as traders not only focus on firm short-term beef demand growth, but stronger market interest through the entire year.	2)	Stagnant price levels midweek in all futures left prices hovering in a narrow range as traders seemed unable to break through resistance levels that has seemingly capped market support in the last year. The inability to break through $130.10 during the week could create active pressure across the market.
3)	Firm end-of-the-month buyer support is moving into nearby lean hog trade. This is helping to spark some additional expectations that continued buying will develop the next two days.	3)	Strong triple-digit losses developed once again in wholesale pork prices. The wide daily price swings higher and lower have created a pattern that that has held the market rangebound the past couple of weeks. This could limit market support through early March.
4)	Active cash buying has swept through the market, with over 35,000 hogs sold in the negotiated trade the last two days. This activity indicates that packers are aggressively buying hogs at the end of the month.	4)	Even though prices are holding above short-term support levels, market prices are still within the bottom end of the trading range. This is creating concerns of further growth as limited trade interest is willing to step into this market.

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