Wednesday Morning Livestock Market Update - Winter Storm May Provide Further Support to Markets

GENERAL COMMENTS:

The cattle complex traded higher Tuesday in response to a friendly cattle inventory showing the lowest inventory in seven years. The report was seen as having a greater impact during the second half of the year, but it did support the whole complex. Another supportive factor is the winter storm moving across a large section of the country again. This will hinder cattle performance and reduce the movement of cattle to slaughter. Although restricted movement in temporary, the market always reacts to it in the same way consumers react to a storm as they stock up on food supply. The market did not receive any direction from cash Tuesday with reports of only a few sales. It was not sufficient to establish any solid indication of potential. Boxed beef did not perform well with choice down $4.96 and select down $3.05.

Hog futures certainly showed some spread trading between the front-month February and later contracts of October through the beginning of 2023 against spring and summer contracts. Traders were at a disadvantage Tuesday as cash and cutout prices were not released due to packer submission problems. These left traders flying blind likely resulting in the spread trading. The winter storm is a factor in the market as movement may be hindered, which may result in a larger Saturday slaughter.

	BULL SIDE		BEAR SIDE
1)	New contract highs were established in live cattle Tuesday, effectively negating the possible head and shoulders top.	1)	The cattle inventory report is bullish in the longer term, may not have much impact in the near term. Cattle supplies remain readily available.
2)	Feedlots may want to sell and move cattle, but the winter storm may have them for focused on taking care of their cattle. This may result in packers having to bid up to purchase supply.	2)	Increasing grain prices keep cutting into profit margins, increasing the need for feedlots to move market-ready cattle as quickly as possible. This may keep a lid on higher cash potential.
3)	April and later hog futures made new highs, which will keep traders buying into the market as the trend is your friend.	3)	Traders began the month with a vengeance, but it may have been overdone to the upside in light of the fact traders had no indication of what cash and cutouts did.
4)	Packers have become more aggressive as demand is strong and slaughter pace is increasing. Even though there were no cash or cutout reports Tuesday, traders anticipated stronger cash.	4)	Technical traders still see some chart gaps that remain quite a bit lower that will likely be filled at some point.

Tuesday Closing Livestock Market Update - Cattle Close Higher; Lean Hogs Mixed

GENERAL COMMENTS:

Both the live cattle and feeder cattle futures championed another day with higher closes. Meanwhile the lean hog complex closed mixed and packers had a rough day as they lag behind in posting pork cutout values and cash prices. Hog prices are unavailable due to packer submission problems. March corn is up 8 3/4 cents per bushel and March soybean meal is up $17.10. The Dow Jones Industrial Average is up 273.38 points and NASDAQ is up 106.12 points.

LIVE CATTLE:

Live cattle futures closed fully higher, supported by Monday's inventory report and feeling anxious to push the cash market higher upon seeing throughput return to full capacity. February live cattle closed $0.72 higher at $140.30, April live cattle closed $0.85 higher at $145.37 and June live cattle closed $0.90 higher at $139.97. The market championed contract highs in some cases and came rather close to mustering a new high in other contracts. There's no denying that -- upon seeing the numbers of fewer cattle and achieving normal chain speeds once again -- the market is ready to rock 'n roll and pick up steam like it possessed in the last months of 2021. A small handful of cattle traded in parts of the North with dressed deals ranging from $218 to $220. But there wasn't enough business to really even say the market was tested. Southern feedlots are asking $140-plus and the North has yet to disclose their asking prices. Tuesday's slaughter is estimated at 121,000 head -- 3,000 head more than last week and last year.

Boxed beef prices closed lower: choice down $4.96 (285.44) and select down $3.05 ($280.22) with a movement of 127 loads (83.90 loads of choice, 16.94 loads of select, 9.85 loads of trim and 15.86 loads of ground beef).

WEDNESDAY'S CASH CATTLE CALL: Steady to $2.00 higher. With chain speeds back to full bore, the cash market should see excellent interest from packers. We know packers do have some cattle committed with time, but they should still need to dabble in the cash market in order to fill all of their needs.

FEEDER CATTLE:

The feeder cattle market rallied through Tuesday's close as the complex swelled upon analyzing the bullish data from Monday's Cattle Inventory report. The corn complex moved higher again, but the feeder cattle market didn't weaken upon the corn market's modest rally as the complex is hoping Monday's report sparked a new rally for the cattle complex. March feeders closed $0.67 higher at $163.70, April feeders closed $0.70 higher at $169.15 and May feeders closed $0.62 higher at $173.52. At Russell Livestock Auction in Russell, Iowa, compared to last week on a run of 2,943 head, feeder steers weighing 400 to 700 pounds traded $5.00 to $10.00 higher, and those over 700 pounds traded firm to $3.00 higher. Feeder heifers weighing 350 to 800 pounds sold $6.00 to $8.00 stronger. The CME Feeder Cattle Index 1/31/2022: up $0.33, $158.77.

LEAN HOGS:

With both pork cutouts and cash hog prices unavailable due to packer submission problems, the market has a hard time analyzing the fundamental side of the complex. February lean hogs closed $0.32 lower at $88.15, April lean hogs closed $1.97 higher at $97.67 and June lean hogs closed $1.90 higher at $107.42. It is encouraging to see throughput improving as the market desperately needed to get back to processing hogs at full capacity. Pork cutouts are unavailable due to packer submission problems. Tuesday's slaughter is estimated at 480,000 head -- 9,000 head more than a week ago and 7,000 head less than a year ago. The CME Lean Hog Index 1/28/2022: up $1.54, $82.15.

WEDNESDAY'S CASH HOG CALL: Steady. Even though there hasn't been tremendous interest thus far in the week for cash hogs, to some degree it is likely packers will need to support the market as throughput is back to full capacity.

Tuesday Midday Livestock Market Summary - Contracts Rally

GENERAL COMMENTS:

It's a strong day for the livestock complex as the cattle contracts are anxious to rally after absorbing Monday's Cattle Inventory report. It's likely the cash cattle market trades higher this week as throughput is improving and feedlots saw the market's fundamentals favor their position in the inventory report. March corn is up 12 cents per bushel and March soybean meal is up $16.90. The Dow Jones Industrial Average is down 17.66 points and NASDAQ is down 7.87 points.

LIVE CATTLE:

Live cattle futures are rallying after seeing Monday's bullish Cattle Inventory report. The market saw somewhat of a perfect storm throughout Monday's trade as 120,000 head were processed, the futures complex traded higher and the Cattle Inventory report was completely bullish. With that being on the forefront of the market's mind, higher is the beat of Tuesday's drum. February live cattle are up $1.27 at $140.85, April live cattle are up $1.40 at $145.92 and June live cattle are up $1.37 at $140.42. The cash cattle market has yet to see any trade and trade could wait until Wednesday or later to develop. Early asking prices have been noted at $139 to $140 in the South, but the North has yet to disclose their asking prices. With the market back up to full capacity in packing plants, it is likely cash cattle trade higher this week.

Boxed beef prices closed lower: choice down $3.99 ($286.41) and select down $1.76 ($281.51) with a movement of 67 loads (43.97 loads of choice, 10.34 loads of select, 5.42 loads trim and 7.56 loads of ground beef).

FEEDER CATTLE:

Corn futures are back to trading fully higher and are coming close to trading at $6.40 per bushel in nearby contracts. But feeder cattle futures are fixated on fact that there will be fewer cattle to market this year and are continuing to trend upward. March feeders are up $0.62 at $163.65, April feeders are up $0.45 at $168.90 and May feeders are up $0.25 at $173.20. It wouldn't be unlikely to see excellent demand for calves in sale barns this week as the Cattle Inventory Report bodes in favor of feedlots and cow-calf producers. The heavier feeders (weighing 800 pounds or more) will likely continue to see steady to minimal interest as most of the market's opportunity lies in the later half of 2022 at this point.

LEAN HOGS:

The lean hog complex is trending higher despite the market's fundamentals still needing to iron out some specifics for the short term. The cash market is slightly higher at midday, but the week's volume of cash hogs sold is extremely thin and midday pork cutout values are lower. February is posting modest gains while the April 2022 contract through August of 2022 all trend significantly higher. The further the market makes its way into 2022, the thinner supplies are expected to get, which is helping boost prices in the marketplace. February lean hogs are up $0.35 at $88.82, April lean hogs are up $3.22 at $98.95 and June lean hogs are up $3.00 at $108.50.

The projected CME Lean Hog Index for 1/28/2022 is up $1.54 at $82.15, and the actual index for 1/27/2022 is up $0.86 at $80.61. Hog prices are higher on the National Direct Morning Hog Report, up $0.31 with a weighted average of $67.00 ranging from $65.00 to $88.00 on 2,020 head and a five-day rolling average of $66.04. Pork cutouts total 168.99 loads with 150.88 loads of pork cuts and 18.11 loads of trim. Pork cutout values: down $0.79, $93.72.

Tuesday Morning Livestock Market Update - Follow-Through Expected in Cattle Market

GENERAL COMMENTS:

Cattle are making a run for the highs with the strength Monday. Much of the strength seemed to be the result of the indication that slaughter pace might be near normal again soon and may cause packers to bid more aggressively to procure needed cattle. Cash did not trade Monday with no bids or offers floated. Showlists were mixed. The weakness of corn may not have been much of a factor as corn futures are still high and made new contract highs before falling back. The anticipation of a friendly cattle inventory report was likely more of a driving factor. Bullish traders were correct in their assessment as the inventory report showed all cattle and calves on Jan. 1 at 98% of a year ago. Boxed beef was slightly weaker with choice down $0.02 and select down $0.14. The Commitment of Traders report showed funds as net sellers of 12,856 contracts bringing their net long positions to 49,321.

Hogs did not receive spillover from cattle, as trading was as anticipated moving through the end of the month. Traders saw weaker cash and weakness in cutouts, which kept futures from triple-digit gains. Cash plummeted with a decline of $6.58 on the National Direct Afternoon report. Cutouts declined $1.88. Futures held well as traders remain friendly to the market as time moves forward. With a new month upon us, traders might be more apt to buy into the market for the long term. The Commitment of Traders report showed funds as net buyers of 18,112 contracts bringing their net long positions to 66,907.

	BULL SIDE		BEAR SIDE
1)	The Cattle Inventory report showed lower numbers in all categories. This solidifies the potential for tighter supplies as we move though the year.	1)	Live cattle are potentially forming a technical head and shoulders top which could trigger selling if futures cannot move to new highs and negate the technical setup.
2)	Live cattle futures are heading to challenge the highs, which might be achieved with potential tightening supplies and increasing slaughter pace.	2)	February and April feeder cattle closed the chart gaps which could trigger some liquidation. The market could also see a buy-the-rumor, sell-the-fact reaction to the inventory report.
3)	Hog futures held well despite a substantial decline in cash and lower cutouts. Traders are looking past that to good demand and tighter supplies.	3)	Hog futures need to renew the uptrend soon or traders could become bored and liquidate their long positions.
4)	A new month could bring a renewed interest in buying into the market for the longer term and higher prices.	4)	The sharp decline of cash yesterday might carry over into selling pressure Tuesday. There are sufficient hogs for the time being.