Thursday Midday Livestock Market Update - Cash Cattle Market Heats Up

GENERAL COMMENTS:

Bullish momentum in the livestock markets has carried futures contracts higher for a fifth straight day, although the gains are generally less than a dollar and may be vulnerable to profit-taking before the session is over. Cash cattle traders have taken advantage of the mood to receive prices $3 to $4 higher than last week. March corn is down 8 1/2 cents per bushel and March soybean meal is down $2.10 per ton. The Dow Jones Industrial Average is down 339 points and NASDAQ is down 483 points.

LIVE CATTLE:

It's unusual and difficult for a commodity market to move consistently upward for five days in a row, but cattle contracts are making it happen so far Thursday, with another round of fresh contract highs, like $147.275 on the April chart. Generally, the gains are less than a dollar: the February contract is up $0.75 at $141.875, and the June contract is up $0.075 at $141.70. This bullish momentum, along with evidence of packers' eagerness to keep chain speeds rolling on pace (Thursday's slaughter is projected at 119,000) has given the cash market confidence to push triumphantly higher this week. Light trade is seen in the South at $140, or $3 to $4 higher than last week's weighted averages. More trade is still expected in the North after Wednesday's dressed deals at $222 in Nebraska.

The special Fed Cattle Exchange Auction held Thursday listed a total of 1,759 head (Texas 1,007 head; Kansas 596 head; Oklahoma 121 head; California 35 head), of which 465 actually sold at $140.00 (all in Texas), none were scratched from the auction and 1,294 head were listed as unsold, as they did not meet the reserve prices, that ranged from $139 to $140.50. Opening prices were all at $137, high bids ranged from $137 to $140.

Meanwhile, the beef market shows signs of stalling. Choice prices are down $1.09 Thursday morning ($282.06) and select down $2.43 ($277.14) with a movement of 76 total loads (55.21 loads of choice, 10.32 loads of select, 0 loads of trim, and 10.43 loads of ground beef).

FEEDER CATTLE:

Although outside markets are skittish Thursday morning, traders in the feeder cattle futures market have so far been able to ignore any risk-off inclinations and instead focus on another day cheaper corn, with most corn contracts falling and dipping below $6.20. In reaction, the March feeder cattle contract is up $0.525 at $167.40; the April feeder cattle contract is up $0.675 at $172.525; and the May feeder cattle contract is up $0.30 at $176.05. Producers in the countryside are experiencing the cold weather typical for the early February timeframe, but most feeder cattle movement in the West is presently uninterrupted by the kind of weather that's causing problems for other livestock industries in the East.

LEAN HOGS:

On Thursday, all the lean hog futures contracts between April and October 2022 are trading above $100 per cwt, with triple-digit gains that confirm the unbounded bullish optimism permeating this market. The February contract is $0.15 lower at $87.20, likely with an eye on the lackluster CME Lean Hog Index ($83.33 on 2/2) with which it will eventually have to converge. But the rest of the contracts are on a roll: April is up $1.75 at $100.875, and May is up $1.45 at $104.50. Trading volume hasn't been heavy so far but may pick up during the second half of the trading session. The logistical problems faced on icy truck routes from Indiana to North Carolina may have an influence on today's actual hog values, but they can't outweigh the long-term bullishness of traders who note another dip in the U.S. Dollar Index supporting export price tags.

The CME Lean Hog Index from 2/1 was 83.29 (up $0.15) and the projected index for 2/2 is $83.33 (up $0.04). Pork cutouts Wednesday morning total 146.22 loads with 138.13 loads of pork cuts and 8.08 loads of trim. Pork cutout values: down $1.04, $95.40. Thursday's hog slaughter is projected at a storm-challenged 428,000 head.

Thursday Morning Livestock Market Update - Futures Strength May Be Difficult to Maintain

GENERAL COMMENTS:

Cattle continued to increase for the fourth consecutive trading day with contracts setting new highs as trader optimism runs high. The bullish cattle inventory report, weather impacting movement, packers bidding up for cattle and chain speed returning to where it should be is supporting futures. Just how far this will carry futures higher is unclear, but a strong move of this magnitude may be met with a price correction. Cash activity has been limited so far this week but what has taken place indicates feedlots should receive higher prices. Light trade in Nebraska took place as much as $4.00 higher. However, overall trade is not expected to be that strong. Increasing cattle futures have given feedlots the confidence needed to hold out longer this week in the hopes that packers will increase bids. There is concern over continued weakness of boxed beef with choice down $2.29 and select down $0.65. Inflation seems to be having an impact on beef demand.

Hogs are very bullish with increasing cash and strong cutout prices. Traders continue to put significant premium in the market with April showing an unusually high premium to cash for this time of year. June hog futures nearly reached $110 as traders continue to buy into the market. Cash on the National Direct Afternoon report increased $6.46. Cutouts were strong with a gain of $3.47. Even though the movement of hogs is being impacted due to the winter storm, the estimate for Saturday slaughter is 186,000 head. This may change and may need to be updated as we move toward the weekend.

	BULL SIDE		BEAR SIDE
1)	New contract highs continue to be posted as traders are bullish the market.	1)	April live cattle left a chart gap at the open on Monday that needs to be filled. The gap is about $3.00 lower.
2)	The prospect of higher cash this week is keeping feedlots holding out for higher prices. Initial higher trade and strong futures prices is providing confidence that higher cash may be realized.	2)	Cash may not trade as high as anticipated, which could remove some premium out of the market. Trade should take place Thursday, which will provide direction.
3)	Hog futures have rebounded strongly after their slight dip at the end of January. New highs from strong buying interest put substantial premium in the market.	3)	Hog futures have substantial premium in relation to underlying cash. Some of this large premium may need to be removed from the market once the current exuberance runs its course.
4)	Packers are bidding aggressively for hogs as higher cutout prices drive them to fulfill demand.	4)	The impact of hog movement in those areas affected by the weather will be temporary with a normal slaughter pace resuming next week. Hogs are readily available.

Wednesday Closing Livestock Market Update - Groundhogs, Other Hogs Have a Big Day

GENERAL COMMENTS:

Only the nearby lean hog futures contract closed lower Wednesday; all other livestock contracts moved higher and, in some cases, established fresh contract highs. Livestock traders reacted to double-digit losses in corn prices and also anticipated the logistical effects of a major winter storm moving across the eastern United States. Hog prices closed higher on the National Direct Afternoon Hog Report, up $6.46 with a weighted average of $60.31 on 567 head. March corn is down 12 1/4 cents per bushel to $6.22 1/2 and March soybean meal is down $0.90 per ton to $435.10. The Dow Jones Industrial Average closed up 224 points and the NASDAQ closed up 120 points.

LIVE CATTLE:

On its fourth straight day of gains, the April live cattle contract established a fresh contract high at $146.95 and closed the day almost that high, up $1.525 at $146.90. Most deferred contracts posted similar gains. Eager trading activity lately may be both a medium-term reaction to this week's Cattle Inventory report that showed a diminished U.S. herd, and a short-term reaction to the healthy slaughter pace packers are maintaining. Wednesday's slaughter at 121,000 head was 3,000 higher than a week ago and 1,000 higher than a year ago. Feedlots must now position themselves to receive a fair share of this bullishness before beef prices lose any more of their luster. Some Nebraska dressed trade on Wednesday did just that: receiving $222 per cwt, or $4 higher than last week's level. Cash cattle asking prices remain mostly above $140 in the South and above $223 in the North.

Boxed beef prices closed lower: choice down $2.29 ($283.15) and select down $0.65 ($279.57) with a movement of 130 loads (89.44 loads of choice, 9.15 loads of select, 9.96 loads of trim and 21.05 loads of ground beef).

THURSDAY'S CASH CATTLE CALL: $1.00 to $4.00 higher. What we've seen so far this week suggests prices are strong: some limited online trade above $138 and dressed trade in Nebraska at $222, which will lend a tone to the rest of this week's business. With packers running vigorous processing speeds, their need for cattle remains reliable.

FEEDER CATTLE:

March feeders closed up $3.175 at $167.225; April feeders closed up $2.675 at $171.825; and May feeders closed up $2.225 at $175.85, which is a fresh contract-high close. The momentum in this market was already higher after Monday's Cattle Inventory report showed the beef cow herd down 2% year-over-year, with droughty western regions hit particularly hard, like Montana, which now has 10.2% fewer cattle and calves than it did a year ago. But on top of that, Wednesday delivered a sudden double-digit drop in corn prices, so feeder cattle traders kept up their enthusiasm. The CME Feeder Cattle Index for 1/31: up $0.33, $158.77, where it has been fairly steady through the past week.

LEAN HOGS:

The April lean hog contract tested the air above $100 amid Wednesday's active trading session, but ultimately ended up "only" $1.45 higher at $99.125. Other deferred contracts posted similar gains, but the nearby February contract was the lone red spot on the livestock board: down $0.80 at $87.35. The enthusiasm of the deferred futures market may be somewhat detached from the very near-term logistical reality on the ground, as a fierce winter storm sweeps across the eastern United States and snarls trucking from Illinois to North Carolina. As a result, daily hog slaughter Wednesday at 432,000 is 43,000 below week-ago numbers and 67,000 below year-ago numbers. If the packers resume their appetite for business after the storm has passed, and if the U.S. Dollar Index stays moderate to encourage a steady export pace, prices and reality will likely all match up again soon. Meanwhile, the wholesale market still wants its pork, and especially its hams: the afternoon pork cut-out report showed prices up $3.47 to $96.44, with 294.70 total loads (269.81 loads of cuts and 24.89 loads of trim). The CME Lean Hog Index for 1/31: up $0.99, $83.14, and the projected Index for 2/1 is up $0.15, $82.29.

THURSDAY'S CASH HOG CALL: Lower. Packers may be limited in what they can logistically manage late this week.

Wednesday Midday Livestock Market Summary - Triple-Digit Gains Across Sector

GENERAL COMMENTS:

Trading activity has been brisk throughout the livestock complex Wednesday morning as the markets peek out of their groundhog holes and see some fresh contract highs. April hogs, for instance, have pierced the psychologically significant $100 level, and nearby feeder cattle are up over $3.00 per cwt. March corn is down 11 cents per bushel and March soybean meal is down $1 per ton. The Dow Jones Industrial Average is up 60 points and NASDAQ is up 34 points.

LIVE CATTLE:

Midday gains of more than a dollar have pushed the April live cattle contract to another fresh contract high of $146.75 -- and the day's not over yet. The nearby February contract is up $1.025 at $141.325 and the deferred June contract is up $1.25 at $141.225, all amid active trade. 

Inflated consumer prices continue to support the overall beef sector, although boxed beef prices have been starting to plateau, as there is always going to be some price at which grocery shoppers will start to balk. Choice prices are down $1.68 Wednesday morning ($283.76) and select down $0.16 ($280.06) with a movement of 72 total loads (55.55 loads of choice, 5.28 loads of select, 0 loads of trim and 11.26 loads of ground beef). 

Cattle slaughter, estimated at 121,000 head Wednesday, shows packer chain speeds are on pace. 

The Fed Cattle Exchange Auction on Wednesday listed a total of 1,759 head (Texas 1,007 head, Kansas 596 head, California 35 head, Oklahoma 121 head), of which 197 actually sold in Texas at $138.25, none were scratched from the auction and 1,562 head were listed as unsold, as they did not meet the reserve prices, that ranged from $137 to $140.50. Opening prices ranged from $136 to $137, high bids ranged from $137 to $138.25. That's in line with last week's cash cattle trade at mostly $137 in the South, but most showlist asking prices this week have moved above $140.

FEEDER CATTLE:

Feeder cattle futures were trading higher Wednesday even before the corn market collapsed by double digits, and now the party is really rocking. The March contract is up $3.025 at $166.725. But it's the deferred contracts that bear watching, especially after this week's Cattle Inventory report confirmed the country's diminished calf numbers (especially lightweight calf numbers). The April contract's next goal may be to take another run at its $173.50 high that was seen at the start of the year, but so far it has only reached as high as $171.875 Wednesday. USDA's daily ethanol report shows countryside DDGS with a price tag around $210 per ton, and with soybean meal testing levels above $440 per ton Wednesday, all the other feed markets are likely to stay frisky, too.

LEAN HOGS:

February 2 is a big day for groundhogs and all other hogs, too. Nearby February futures traded both sides Wednesday morning and are presently headed lower on their own. With a reprieve in the U.S. Dollar Index (lower Wednesday morning), the export-sensitive deferred hog contracts are instead moving higher toward impressive-sounding numbers, with the April contract now $1.40 higher at $99.075, and the May contract up $0.675 at $102.60. More trading volume may follow throughout the afternoon, particularly as packers and traders evaluate the logistical challenges from the winter storm currently hitting the Midwest and on its way to the Carolinas.

The projected CME Lean Hog Index for 2/1/2022 isn't available because of Tuesday's packer submission issues, but the last look at the actual index was $83.14 from 1/31. Pork cutouts Wednesday morning total 116.59 loads with 103.18 loads of pork cuts and 13.41 loads of trim. Pork cutout values: up $3.70, $96.67. Wednesday's hog slaughter is projected at a storm-challenged 440,000 head.