Thursday Morning Livestock Market Update - Cattle Strength May Be Short-Lived

GENERAL COMMENTS:

Live cattle uncovered sufficient buying interest to close the chart gap in some futures contracts but not in all. Feeder cattle showed similar technical buying with nearby contracts unable to close the gaps while later contracts did. Much of what took place Wednesday was technical in nature and not fundamental. After cash business taking place at steady money on Tuesday, some trading took place $1.00 lower Wednesday. We cannot expect anything much different to develop the rest of the week. Not only did cash not support the rally, but boxed beef declined. Choice was down $2.92 with select down $3.60. This does make one feel warm and fuzzy for the rest of the week. Futures may follow through Thursday but likely only to close the chart gaps that remain. Pressure could then resume unless there is support from weekly exports.

It was a little disappointing to see some weakness in hog futures, even though there was a strong possibility of a price correction. Some spread unwinding took place putting pressure on closer months. Cash fell back on the National Direct Afternoon report with a loss of $3.84. Cutouts increased $2.14 helping to offset cash weakness. Traders will see what weekly export sales show before making further decisions for Thursday's trading. The market seems solidly supported even though slaughter pace is not yet back up to par. Saturday slaughter is projected at 205,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle futures were able to move higher despite steady to weaker cash and cutouts. Further technical buying may develop.	1)	The strength of cattle futures was not supported by cash or boxed beef.
2)	Some contracts have yet to fill chart gaps above the market. This may result in higher futures to begin Thursday.	2)	Mediocre export sales could keep the trend lower as it could affect overall demand.
3)	Selling pressure took place in nearby hog futures, but not until April was able to establish a new contract high.	3)	Hog futures may see a significant correction if weekly export sales are low. More pork would be available to the domestic market.
4)	Prop 12 is on the back burner again, leaving business as usual with strong demand absorbing a lot of pork.	4)	Hog futures are overbought and ripe for a price correction. Lower cash for a few days might trigger heavier selling.

Wednesday Closing Livestock Market Update - Cattle Trade With Confidence, While Hogs Chop Sideways

GENERAL COMMENTS:

It was a technically supportive day for the cattle contracts, but the cash side of the market dipped lower as packers pushed cash prices down $1.00 from Tuesday's trade. After an aggressive week, the lean hog complex is looking for follow-through support, which could come from Thursday's export numbers. Hog prices closed lower on the National Direct Afternoon Hog Report, down $3.84 with a weighted average of $68.29 on 4,631 head. March corn is up 7 cents per bushel and March soybean meal is up $8.50. The Dow Jones Industrial Average is down 129.64 points and NASDAQ is up 2.82 points.

LIVE CATTLE:

While it was refreshing to see stronger trade in the futures, cash trade through the countryside did not improve. February live cattle closed $0.95 higher at $138.05, April live cattle closed $1.80 higher at $141.90 and June live cattle closed $1.62 higher at $137.05. After dancing around the 100-day moving average in both the February and April live cattle contracts, Wednesday's support helped create some distance from the market's moving average and pushed prices higher. The problem with Wednesday's trade is that, with boxed beef prices seasonally topping, cash prices are seeing pushback. Southern live deals were marked at $136 to $138, mostly at $136 to $137, which is steady to $1.00 lower than Tuesday. Northern dressed trade was marked at $218, which is fully steady. Trade volumes for the week remain light, so some more clean-up trade could develop. But with packers having cattle committed with time and running slower chain speeds, they may not need that many. 

Wednesday's slaughter is estimated at 118,000 head -- 3,000 head more than a week ago and 2,000 head less than a year ago.

Boxed beef prices closed lower: choice down $2.92 ($289.46) and select down $3.60 ($279.72) with a movement of 132 loads (88.67 loads of choice, 15.03 loads of select, 5.03 loads of trim and 22.87 loads of ground beef).

THURSDAY'S CASH CATTLE CALL: Steady with the week's trend. Seeing that packers bought cattle and worked the market $1.00 lower Wednesday, it's likely any more buying will be simply steady with the week's trend.

FEEDER CATTLE:

Despite the corn market closing higher, the feeder cattle contracts rallied through Wednesday's close. March feeders closed $0.95 higher at $160.80, April feeders closed $0.92 higher at $166.20 and May feeders closed $0.92 higher at $170.12. Even though the feeder cattle market doesn't like how high corn prices have gotten, the market was encouraged to see the live cattle contracts trading higher and throughput picking up speed. The latter half of the 2022 live cattle market offers a nice premium when compared to today's live cattle market and feeders are looking at this market and continue to be bullish as they believe the market's fundamentals of fewer cattle amid excellent demand will lead prices to higher planes. At Bassett Livestock Auction in Bassett, Nebraska, compared to last week on a run of 4,500 head, steers weighing 550 pounds traded $10.00 higher and steers weighing 650 to 700 pounds traded $2.00 to $4.00 stronger. Heifer offerings weighing 450 to 500 pounds traded $8.00 to $9.00 higher and heifers weighing 550 to 650 pounds traded steady. The CME Feeder Cattle Index 1/25/2022: down $0.27, 159.50.

LEAN HOGS:

If you're one who struggles with restless nights, unable to shut your mind down, DON'T begin to look at the current lean hog market. The market rallied aggressively Tuesday as technical pushed prices higher and upon hearing that Prop 12 won't be enforced until six months after the rules are finalized. But come Wednesday, the complex seemed to cool down and merely catch its breath. The futures market closed mixed, pork cutouts closed higher, and the cash market closed lower -- so all-in-all the market chopped sideways. What's extremely odd is the spread in cash hog prices. Did you see the $21 spread from the highest offer to the lowest offer? Pork cutouts totaled 313.72 loads with 283.10 loads of pork cuts and 30.62 loads of trim. Pork cutout values: up $2.14, $94.60. Wednesday's slaughter is estimated at 475,000 head -- 18,000 head more than a week ago and 18,000 head less than a year ago. Tuesday's hog slaughter was revised to 471,000 head -- 5,000 head less than what was originally stated. The CME Lean Hog Index 1/24/2022: up $0.13, $78.45.

THURSDAY'S CASH HOG CALL: Steady. With that wide $21 spread in the cash market, it's likely one of the ends tightens up and narrows the price spread. But with processing speeds lagging, it is unlikely prices see much more upward potential until throughput improves.

Wednesday Midday Livestock Market Summary - Contracts Find Technical Support

GENERAL COMMENTS:

Cattle futures are finally seeing some support from traders after a tough start to the week. Meanwhile, after an exhilarating day of trade , Tuesday, the lean hog complex is chopping sideways. March corn is up 3/4 cent per bushel and March soybean meal is up $7.70. The Dow Jones Industrial Average is up 363.84 points and NASDAQ is up 329.68 points.

LIVE CATTLE:

Boxed beef prices are pulling back for the second day in a row, which points to the conclusion that boxes are topping. As packers take note of the boxed beef market, they've also cut into the cash market and been able to buy cattle in Kansas for $136, which is $1.00 lower than Tuesday's trade and $1.00 lower than last week's average. Throughout the week Southern live cattle have traded at mostly $137 and Northern dressed trade has taken place at $218. While it's frustrating to see the lower trend in the cash market, hopefully the support that's building in Wednesday's futures complex keeps the market from dipping much lower. February live cattle are up $0.90 at $138.00, April live cattle are up $1.70 at $141.80 and June live cattle are up $1.47 at $136.90. It's likely boxes will indeed close lower by the afternoon, which will be important to monitor. But equally as important is noting how the day's slaughter performs. The pullback in boxes is normal for this time of year.

The Fed Cattle Exchange Auction listed a total of 2,904 head (Texas 1,438 head, Kansas 987 head, Iowa 203 head, Nebraska 120 head, Oklahoma 121 head, California 35 head), all of which went unsold, as they did not meet the reserve prices, which ranged from $130 to $138.50. Opening prices ranged from $125 to $136.50, high bids ranged from $130 to $138.50. Another auction is scheduled for Thursday.

Boxed beef prices are lower: choice down $0.88 ($291.50) and select down $1.23 ($282.09) with a movement of 73 loads (44.99 loads of choice, 8.59 loads of select, 5.03 loads of trim and 14.35 loads of ground beef).

FEEDER CATTLE:

After dropping below the 100-day moving average in the March contract, the feeder cattle contract seems to be finding support. Even though the corn market is posting a mild rally, the entire feeder cattle complex is trading higher. March feeders are up $1.05 at $160.90, April feeders are up $0.80 at $166.00 and May feeders are up $0.62 at $169.82. It's helping that the live cattle market is also trading confidently into Wednesday afternoon. And even though the cash cattle market is only trading steady with last week, it does come as a sigh of relief to see processing speeds inching higher to 118,000 head.

LEAN HOGS:

After an exciting rally earlier in the week, the lean hog complex is chopping sideways through Wednesday's trade. February lean hogs are down $0.45 at $87.00, April lean hogs are down $0.92 at $96.30 and June lean hogs are down $0.15 at $106.42. After an exhilarating day of stronger trade and then hearing the news that Prop 12 rules won't be enforced until six months after the rules are finalized, the lean hog market seems to be coasting through Wednesday and catching its breath.

The projected CME Lean Hog Index for 1/25/2022 is up $0.75 at $79.20 and the actual index for 1/24/2022 is up $0.13 at $78.45. Hog prices are higher on the National Direct Morning Hog Report, up $1.56 with a weighted average of $62.81, ranging from $61.00 to $77.00 on 2,765 head and a five-day rolling average of $61.48. Pork cutouts total 177.85 loads with 164.18 loads of pork cuts and 13.67 loads of trim. Pork cutout values: up $3.42, $95.88.

Wednesday Morning Livestock Market Update - Slaughter Pace Impacts Prices

GENERAL COMMENTS:

As much as many hope cattle futures will find a bottom, it remains elusive. Prices did not suffer the losses that that feeder cattle did, but they failed to attract strong buyer interest. Boxed beef prices declined with choice down $1.12 and select down $1.47. As expected, feedlots wanted to sell cattle and when packers floated steady bids, they took them. Limited trade took place in the South at $137 and in the North at $218. Cash activity was not widespread, but it could have been. Steady cash may be as good as it gets now that packers see that steady prices may get the job done and then some as packers continue to purchase for immediate slaughter and future delivery.

There is nothing stopping the hog market. It was rising on its own demand and tightening supplies. Then, Prop 12 came back into the limelight with a court in California suspending the enforcement of the law, which moves the enforcement of it back at least six months. Depending on what the Supreme Court decides, it may never be fully enforced, leaving business as usual. Traders seems to have anticipated this as hogs have been in a strong uptrend since shortly after the beginning of the year. Cash was strong yesterday with the National Direct Afternoon report price up $6.44. It was not surprising to see cutouts down again posting a loss of $3.20. Cutout prices have been very choppy for some time making it difficult to predict. Slaughter pace seems to be picking up significantly.

	BULL SIDE		BEAR SIDE
1)	It appears cash cattle may be no worse than steady this week as increased slaughter has packers needing cattle.	1)	Cash cattle began trading already Tuesday, which is never a good sign for cash potential. It sets the stage for the rest of the week.
2)	Both live and feeder cattle have chart gaps above the market that will be filled at some point.	2)	Corn price keeps on trending higher, increasing the cost of feeding cattle. This leaves feedlots more willing to move cattle rather than hold onto them and lose more money.
3)	Strong cash indicates good demand and the need for packers to procure hogs for increasing slaughter pace to meet that demand.	3)	Hog future may have risen too high, too fast and could face a price correction soon. This could trigger heavy selling.
4)	The implementation of Prop 12 has been delayed, keeping pork moving to California without difficulty.	4)	The delay of Prop 12 may not result in increased demand. It may keep demand steady. A market pushed by emotion generally corrects to get in line with fundamentals.