Monday Midday Livestock Market Update - Hogs Look for Continued Support While Cattle Veer Lower

GENERAL COMMENTS:

The livestock complex is a mixed bag heading into Monday afternoon. Lean hog futures are partly keeping with last week's rally, but the cattle futures are trending lower as the market frets over last week's Cattle on Feed report. March corn is down 1 1/4 cents per bushel and March soybean meal is down $2.10. The Dow Jones Industrial Average is down 975.42 points and NASDAQ is down 593.98 points.

LIVE CATTLE:

Live cattle futures are taking a jolting ride to lower prices as the market reacts emotionally to Friday's Cattle on Feed report. February live cattle are down $2.10 at $135.82, April live cattle are down $2.80 at $139.30 and June live cattle are down $2.40 at $134.90. If feedlots get anxious and sell early this week, packers are undoubtedly going to push for lower prices. But if feedlots can stand united and push trade to the latter half of the week, the market stands a better chance at trading steady to potentially higher. The Cattle on Feed report may have your spirits weakened as a 6% jump in placements seems unmanageable -- but remember that given the year producers have face, where else were the cattle supposed to go? Thankfully, the market saw the lighter weight feeders more heavily placed than heavier cattle, which means those cattle won't be marketed until summer, so the spring rally won't be oversupplied. New showlists appear to be mixed: higher in Kansas, but lower in Texas, Nebraska and Colorado.

The majority of business took place on Tuesday and Wednesday last week, with just a little scattered trade on both Thursday and Friday. Northern dressed deals had a range of $217 to $218, mostly $218, generally steady with the prior week's weighted averages, a good many of these cattle are set for delivery in the weeks of Jan. 31 and Feb. 7. Southern live trade had a full range of $135.50 to $137, mostly $137, $1 to $1.50 higher than the previous week's weighted averages.

Last week's negotiated cash cattle trade totaled 74,145 head. Of that 72% (53,164 head) were committed for nearby delivery, while the remaining 28% (20,981 head) sold for deferred delivery.

Boxed beef prices are higher: choice up $0.35 ($292.76) and select up $1.69 ($284.02) with a movement of 26 loads (17.93 loads of choice, 4.39 loads of select, 0.02 loads of trim and 3.80 loads of ground beef).

FEEDER CATTLE:

With the live cattle complex trending lower and placements already taking up a large majority of feed bunk space, the feeder cattle complex is trending in a worried fashion. January feeders are down $2.00 at $158.27, March feeders are down $4.47 at $158.82 and April feeders are down $3.77 at $164.40. Adding to the market's disgruntled attitude is the fact that nearby corn prices are still trading well above $6.00 a bushel. So it wouldn't be surprising to see feeder cattle buyers hesitant in sale barns early this week.

LEAN HOGS:

After a long period of hem-hawing around and wondering whether the market should keep with last week's robust rally, lean hog futures have begun to trade mildly higher in the nearby contracts. February lean hogs are up $0.35 at $86.55, April lean hogs are down $0.07 at $94.92 and June lean hogs are up $0.45 at $105.25. With the cash market seeing support, and with pork cutout values seeing interest at midday, traders are hopeful the market will continue to see demand and keep with its quest of higher prices.

The projected CME Lean Hog Index for 1/20/2022 is up $0.72 at $77.51 and the actual index for 1/19/2022 is down $0.06 at $76.79. Hog prices are higher on the National Direct Morning Hog Report, up $1.36 with a weighted average of $61.81, ranging from $60.00 to $75.00 on 2,405 head and a five-day rolling average of $65.44. Pork cutouts total 210.15 loads with 182.67 loads of pork cuts and 27.48 loads of trim. Pork cutout values: up $8.89, $102.18

Monday Morning Livestock Market Update - Cattle Expected Lower

GENERAL COMMENTS:

The Cattle on Feed report was bearish all the way around. On feed numbers were 1% higher than a year ago and above expectation for slightly lower numbers. Placements were significantly bearish as 6% more cattle were placed in feedlots in December than a year ago. This was over 4% more than the average trade estimate. Marketings were even with last year but about 1% below the trade estimate. This has been the subject of much discussion over the weekend with some disbelief as to the numbers but also some ideas as to why placements were large. Either way you look at it, there are more cattle on feed and placed in feedlots than expected. These cattle will need to be worked through the system. This may be a tall order in the near term as slaughter pace remains lower than desired. This has not likely already been factored in the market leaving it vulnerable to further liquidation. Beef exports sales were an improvement at 12,800 mt but may not be enough to offset the implications of the report. Boxed beef took a breather Friday with choice down $0.57 while select gained $0.15. Futures are expected to struggle to begin the week.

Hog futures are on a tear with traders very aggressive. Stronger cash indicates packers are willing to pay more for available hogs. Even though slaughter pace has been less than desired, hogs have not backed up in the market. Cutouts were up $1.05 on Friday indicating strong demand. Weekly export sales were very good at 38,700 mt. April through August futures contracts made new highs again with June and July nearing $105. Hog slaughter is showing signs of increasing, which should also provide support to the market as packers will need to increase their purchases. Traders may begin the week with some caution waiting for indication of packer aggressiveness.

	BULL SIDE		BEAR SIDE
1)	Cattle supplies are expected to tighten over time. The slight backup of cattle and higher weights will need to be worked through.	1)	The Cattle of Feed report was not supportive to the market over the near term. There will be a lot of cattle to work through over the next months.
2)	Improving slaughter pace could keep packers more aggressive bidding no less than steady cash.	2)	Packers may bid lower cash this week, especially since they see plentiful cattle supplies.
3)	The trend is up in hog futures keeping traders actively purchasing.	3)	Hog futures cannot go up forever. With futures overbought, it is ripe for a price retracement.
4)	Large export sales even without China buying indicates strong demand for pork internationally. This is coming at a time when pork supply is tightening.	4)	April hog futures have a chart gap remaining $9.00 below the market. These gaps generally are filled before the end of the contract.

Friday Closing Livestock Market Update - Lean Hogs Push to New Highs

GENERAL COMMENTS:

Lower U.S. hog inventories in 2021 plus Friday's report of 38,700 metric tons (mt) of pork export sales for last week were enough to send hog futures to new high ground Friday, even to new contract highs for April and June contracts. Meanwhile, live cattle futures did well to finish the day with modest losses, staying mostly neutral in a week that had a lot of bearish headwinds for cattle. March feeder cattle did not hold up as well, closing down $1.65 Friday and ending down $3.07 on the week.

From Friday to Friday livestock futures scored the following changes: February live cattle up $0.05, April live cattle down $0.02; January feeder cattle down $2.42, March feeder cattle down $3.07; February lean hogs up $5.30, April lean hogs up $6.50.

LIVE CATTLE:

For anyone looking at the news this week, there were plenty of reasons for cattle to trade lower. U.S. stocks fell lower with ongoing concerns about higher interest rates in 2022, along with some disappointing earnings reports. U.S. cases of coronavirus remain far above levels seen previous to this winter and are limiting cattle slaughter. Crops in southern Brazil and Argentina finally received some rain this week, but corn prices jumped higher anyway with traders concerned about Russian troops on Ukraine's border. In spite of all the bearish news, February live cattle closed down 40 cents at $137.92 Friday and was up a nickel on the week. It is also impressive that February cattle prices continue to hold above support at $136, the site of their 100-day average. The April and June contracts were down $1.07 each on Friday but remain above their recent levels of support.

The best we can say on cattle prices' behalf is that it appears the market was encouraged by this week's slight increases in the daily slaughter pace and remains optimistic about returning to higher levels soon. Unless there is some unexpected surprise late Friday, this week's cash trade took place at mostly $137 in the South and $218 in the North. Northern trades were roughly steady with a week ago, but also included trades for early February, when slaughter may be even higher. Friday morning's report from USDA showing 12,800 mt of beef export sales last week was not especially impressive, but it was interesting China was the top buyer, taking 3,900 mt. USDA estimated Friday's slaughter at 114,000, up from 113,000 a week ago. Saturday's slaughter was estimated at 61,000, up from 50,000 last week. For the week, cattle slaughter was estimated at 636,000, up from 618,000 last week. 

Boxed beef prices have been gradually increasing since mid-December and posted another higher week. Choice boxed beef finished at $292.41, up $8.10 from a week ago. Selects ended at $282.33, up $8.36 from a week ago.

After Friday's close, USDA said 12.037 million head of cattle were on feed as of Jan. 1, 2022, more than expected and up 1% from a year ago. It was also the second highest Jan. 1 inventory on record. December placements were up 6% from a year ago, more than expected and the most since the series began in 1996. Marketings were only slightly higher than a year ago and the second highest for December on record. While the report is bearish for Monday's prices, it is worth noting the placement weights fell in categories that were generally lower than a year ago, so deferred contracts may absorb more of the bearish pressure.

MONDAY'S CASH CATTLE CALL: $1.00 to $2.00 lower. An early bearish response to Friday's on-feed report could moderate by the end of the session.

FEEDER CATTLE:

It is fair to say the bearish news mentioned above did have more of a price impact on feeder cattle this week. This week's 20-cent gain in March corn and ongoing concerns that cattle are gaining weight, while the slaughter pace has slowed, are two of this week's stronger bearish concerns. March feeder cattle closed down $1.65 at $163.30 but did manage to hold above its 100-day average at $162.70. The January feeder contract expires Thursday, Jan. 27 and closed down $0.90 at $160.27, below the CME Feeder Cattle Index, posted at $161.20 on Wednesday. The more forward looking May feeder contract was down 80 cents on the week, but continues to project a more bullish future, ending at $171.92.

LEAN HOGS:

After a nearly six-month decline in cash hog prices that took the Swine Formula Base to a low of $68.83 at Thanksgiving, hog futures prices have turned sharply higher and are having some success in pulling cash prices higher as well. February hogs closed up $1.27 Friday, finishing the week up $5.30 at a new three-month high of $86.20. April and June contracts were even more impressive posting weekly gains of $6.50 and $4.87 as both closed at new contract highs of $94.95 in April and $104.77 in June.

USDA's Daily Direct Hog Report for Friday afternoon showed the Swine Formula base at $77.71 with a head count of 164,156, up $1.65 on the week. The negotiated weighted average ended at $62.69 with a head count of just 3,716. Helping to add to the bullish scenario for hogs, USDA said early Friday that 38,700 mt of pork were sold for export last week with Japan taking over half of the total. USDA also showed bullish influence from the retail sector. Pork cutouts were up $1.05 Friday at $93.29 on 242.78 loads. Butts and hams showed the largest gains of just over $8.00 each. For the week, pork cutouts were up $4.22, chopping higher since Thanksgiving. Similar to cattle, hog slaughter has also slowed lately, but was estimated at 445,000 for Friday, up from 422,000 a week ago. Saturday's slaughter is estimated at 218,000, up from 149,000 last week. For the entire week, USDA estimated 2.44 million head of hogs slaughtered, up from 2.366 million a week earlier. New U.S. cases of coronavirus are down from their recent peak in early January and may be subsiding, but it is too early to be confident.

MONDAY'S CASH HOG CALL: Steady. After Friday's upward surge in hog futures, the tone is clearly bullish, but a quieter Monday to start the week would not be a surprise.

Friday Midday Livestock Market Summary - Cattle Futures Sag Lower; Hogs Push New Highs

GENERAL COMMENTS:

Most of Friday's commodity board was painted red, including the active futures contracts of live cattle and feeder cattle. It has been a fairly quiet week for cattle on the futures board as markets are cautious about the lower slaughter pace and this week's higher corn prices. Hog prices are having a much more bullish week, supported by low inventories and a good week of pork export sales reported Friday morning. March corn is up 3 cents per bushel and March soybean meal is down $8.20. The Dow Jones Industrial Average is down 60 points and NASDAQ is down 92 points.

LIVE CATTLE:

Cattle contracts started lower Friday and have kept a low profile during the four-day week, following Martin Luther King Jr. Day. February live cattle are down $0.45 at $137.87, April live cattle are down $0.97 at $142.20 and June live cattle are down $0.85 at $137.52. This week's cash cattle trade was mostly seen at $137 in the South, up $1.00 to $1.50 from last week's weighted averages. In the North, trades have been mostly steady, near $218. If there is light trade remaining Friday, we haven't seen it yet.

Thursday's carcass weights were steady for steers at 928 pounds and four pounds lower for heifers at 851 pounds. Steer weights are up 16 pounds from a year ago and present some concern during this time of high coronavirus cases and lower slaughter rates. Thursday's slaughter did show some improvement however, estimated by USDA at 116,000 -- up from 114,000 the previous week. 

Friday morning's choice boxed beef prices were down $0.26 at $292.72 and selects were up $0.49 at $282.67 with 46 total loads. Boxed prices are on track for gains of roughly $8 to $9 from last Friday, continuing to climb higher since mid-December.

FEEDER CATTLE:

March feeders are down $1.35 at $163.60 and the January contract is down $0.60 at $160.57, set to expire Thursday, Jan. 27. Wednesday's CME Feeder Index was listed at $161.20. With dry weather concerns in South America and the conflict in Ukraine giving corn prices a boost this week, feeder cattle appear to be headed for a lower close, both for Friday and for the week. This week's lower stock market and ongoing concerns about the slower pace of cattle slaughter backing up cattle are also not helping feeder prices. With so many bearish headwinds this week, it says something about underlying demand to see March feeder cattle still holding above their 100-day average at $162.80.

LEAN HOGS:

February lean hogs are up $1.32 at $86.25, April lean hogs are up $1.20 at $95.20 and June lean hogs are up $1.12 at $104.95. Futures prices continue to look much more bullish than cash with the April and June contracts on track to finish the week with new contract highs. The projected CME Lean Hog Index for Thursday, Jan. 20 is $77.51, up from the actual index of $76.79 for Wednesday. Friday morning's Pork Market Formula price from USDA's morning hog report showed a weighted average price of $78.80 with a head count of 112,085, steady with Thursday morning's price. The negotiated weighted average was at $60.45 with a head count of 2,865, down from $61.14 Thursday. Overall, cash hog prices bottomed near Thanksgiving and have been slowly increasing since, following the bullish trail of much higher futures prices. USDA's morning report showed pork cutouts up $8.05 at $100.29 on 132.06 loads. Bellies, hams and butts were the popular cuts pushing the carcass value higher. If Friday morning's values hold, pork cutouts would be up roughly $11 on the week.