Friday Closing Livestock Market Update - Live Cattle, Lean Hogs Push Aggressively Into Weekend

GENERAL COMMENTS:

It was an exceptional week for the live cattle market as the cash trade jumped higher and the futures supported that move. Meanwhile, the lean hog market rallied on limited supplies and robust demand, which is likely to continue in the months ahead. Hog prices closed lower on the National Direct Afternoon Hog Report, down $3.62 with a weighted average of $83.87 on 2,267 head. March corn is up 3 3/4 cents per bushel and March soybean meal is up $6.80. The Dow Jones Industrial Average is down 21.42 points and NASDAQ is up 219.19 points.

From Friday to Friday livestock futures scored the following changes:

February live cattle up $3.35, April live cattle up $3.78; March feeder cattle up $6.47, April feeder cattle up $6.13; February lean hogs down $0.90, April lean hogs up $5.15.

LIVE CATTLE:

Live cattle futures rounded out the day fully higher, championing the week with significant gains both technically and fundamentally. February live cattle closed $0.45 higher at $142.05, April live cattle closed $0.12 higher at $146.87 and June live cattle closed $0.15 lower at $141.37. The market rallied into the week's end as feedlots regained some market positioning as the cash cattle market traded higher. This week's production bobbled a little with the snowstorm hindering efficiency, but next week feedlots hope processing speeds run at full capacity as the market now needs front-end supplies to regain currentness. This week Southern live trade was at mostly $140, $3 to $4 higher than last week's weighted averages. Northern dressed trade was at mostly $222, $4 higher than last week's weighted averages basis Nebraska.

Friday's slaughter is estimated at 114,000 head -- 3,000 head less than a week ago and steady with a year ago. Saturday's slaughter is projected to be around 46,000 head -- 11,000 head less than a week ago and 23,000 head less than a year ago. This week's slaughter is estimated at 639,000 head -- 4,000 head less than a week ago and 13,000 head less than a year ago.

Boxed beef prices closed lower: choice down $1.65 ($279.81) and select down $0.42 ($276.05) with a movement of 87 loads (65.58 loads of choice, 5.41 loads of select, zero loads of trim and 16.12 loads of ground beef). Throughout the week choice cuts averaged 284.05 (down $6.92 from last week) and select cuts averaged $279.11 (down $2.95 from las week) and the week's total movement of cuts, grinds and trim totaled 565 loads.

MONDAY'S CASH CATTLE CALL: $1.00 to $2.00 higher. Feedlots know that packers have some cattle committed with time, but by and large they know supplies favor their position and packers will need to pull on the cash market to keep production elevated.

FEEDER CATTLE:

The snowstorm that moved across the Midwest and parts of the south hindered feeder cattle sales late this week. From a technical sense, the feeder cattle futures fought some pressure as corn traded higher throughout Friday's close. Overall, it was a strong week for the feeder cattle market and buyers are still hopeful for the opportunity that lays ahead, but monitoring input prices will continue to be the gamble. March feeders closed $0.62 lower at $166.10, April feeders closed $0.37 lower at $171.42 and May feeders closed $0.27 lower at $175.35. At Lexington Livestock Market in Lexington, Nebraska, compared to last week, on a run of 2,247 head, steers weighing 600 to 750 pounds sold steady to $2.00 higher and steers over 750 pounds traded steady to $7.00 higher. Heifers weighing 600 to 800 pounds traded $2.00 to $5.00 higher. The CME Feeder Cattle Index for 2/3/2022: up $0.92, $160.17.

LEAN HOGS:

It took some guts, but the April lean hog contract stuck its neck out and closed slightly above $100.00. Sure, the cash market may be lower, and slaughter lagged a little this week, but with the snowstorm affecting production, one can only expect those type of market reactions. Excellent demand both domestically and internationally continues to spur bullish morale throughout the lean hog market. The February contract is set to expire in a short 10 days, at which point the nearby contracts of April 2022 through August 2022 all are trading above $100.00 as supplies of market-ready hogs are expected to be hard to come by. February lean hogs closed $0.57 higher at $87.02, April lean hogs closed $1.70 higher at $100.07 and June lean hogs closed $1.22 higher at $109.42. Pork cutouts totaled 200.95 loads with 170.46 loads of pork cuts and 30.49 loads of trim. Pork cutout values: up $0.20, $97.41. The CME Lean Hog Index 2/2/2022: up $0.04, $83.33.

MONDAY'S CASH HOG CALL: Higher. With the lull in production this week because of weather, I'd suspect that packers are eager to get back to full capacity next week.

Friday Midday Livestock Market Update - Hogs Keep Pushing Higher as Cattle Hold Back

GENERAL COMMENTS:

Friday's commodities were mixed and so were livestock with live cattle and feeders trading modestly lower at midday, while lean hog futures were higher, staying near contract highs. March corn is up 2 cents and March soybean meal is up $5.10, on track for a new closing high for the contract. The Dow Jones Industrial Average is trading down 220 points after the Labor Department reported a much higher than expected increase in January nonfarm payrolls.

LIVE CATTLE:

Cattle futures are on track for higher closes this week, but are mostly lower Friday. February live cattle are up $0.12 at $141.72, April live cattle are down $0.32 at $146.42 and June live cattle are down $0.30 at $141.22. To keep in perspective, Friday's April prices are still near the highest in six years as producers continue to climb out from under a painful multi-year glut of cattle. This week's cash cattle trade was mostly seen at $140 in the South, up $3 to $4 from last week. In the North, trades ranged from $220 to $224, mostly near $222, which is $4 higher on the week. Light trade is still possible later Friday.

Thursday's actual slaughter data for the week ended Jan. 22, 2022, showed steers averaged 925 pounds, up 3 pounds from the week before. Heifers averaged 853 pounds, up 2 pounds on the week. Slaughter had been running higher earlier this week but stumbled a bit Thursday as USDA estimated 117,000 head, down from 118,000 last week. Dow Jones estimated Friday's slaughter at 118,000. 

Friday morning's choice boxed beef prices were down $1.60 at $279.86 and selects were down $0.45 at $276.02 with 55 total loads. Choice prices are on track for losses of over $10 from last Friday, while selects are down over $7.00.

FEEDER CATTLE:

March feeder cattle are down $0.55 at $166.17, while March corn is trading a couple cents higher on the day. After so many bearish factors weighed on cattle prices last week, this week saw relief from bearish pressures with encouragement from lower corn prices, higher cash cattle trade, increased slaughter and a roughly steady stock market. The U.S. Labor Department reported nonfarm payrolls increased by 467,000 in January, much more than expected and good news for retail demand in general. This week's winter storm may also have been a factor helping prices as temperatures plunged below zero in the Northern Plains and snow and ice crossed the Southern Plains. Technically, March feeder cattle are trading in a sideways range, recovered from last week's sell-off and appear poised to trade higher, now holding above the 100-day average at $162.60. Wednesday's CME Feeder Index was listed at $159.25.

LEAN HOGS:

April lean hogs are up $1.42 at $99.80, knocking on the door again of $100.00, a price that producers saw briefly last year, but not since 2014 before that. June lean hogs are up $1.12 at $104.95, its highest price since last June with ongoing support from lower hog inventory in 2022 and active retail demand. Thursday's USDA report showing 30,400 metric tons (mt) of pork export sales last week was also not bad for business as Mexico accounted for two-thirds of sales. The estimated slaughter pace is lower this week with Thursday's estimate dropping to 424,000, a total that was likely impacted by this week's winter storm. Dow Jones estimates Friday's hog slaughter at 462,000, down from 474,000 last week. Overall, hog futures are on track for positive gains this week and continue to pull cash prices higher.

Friday's Swine/Pork Market Formula price from USDA's national morning report showed a weighted average price of $86.84 with a head count of 105,753, up $5.27 from last Friday afternoon. The negotiated weighted average was not available Friday morning. Overall, cash hog prices bottomed near Thanksgiving and have been gradually increasing since, following the lead of much higher futures prices, especially in the summer months. The projected CME Lean Hog Index for Wednesday, Feb. 2, is $83.33, up $3.58 from a week ago. February lean hogs are up $0.37 at $86.82 and are set to expire on Valentine's Day. USDA's also showed pork cutouts up $2.44 Friday morning at $99.65 on 102.98 loads. Bellies, picnics and butts were the popular cuts pushing the carcass value higher. If Friday morning's values hold, pork cutouts would be up roughly $3 on the week.

Friday Morning Livestock Market Update - Volatility May Be Limited

GENERAL COMMENTS:

Cattle futures traded in a tight range Thursday as higher cash this week had already been factored in. Even though they traded in a tight range, February, April and June live cattle futures made new contract highs before slipping slightly lower into the close. Cash activity took place yesterday as expected providing solid numbers for the week. Southern cattle traded $3.00 to $4.00 higher while Northern cattle traded $4.00 higher. Packers needed to be more aggressive in order to maintain an increasing slaughter pace. Boxed beef is a concern as choice closed $1.69 lower with select down $3.10. Feeder cattle futures traded in a wider range Thursday but still closed with minor losses. Markets may coast into the weekend.

Hogs did an about face Thursday after first making new contract highs again and closing with double-digit losses. This seemed to be tied more to the inability to process hogs this week due to the winter storm. This will create a temporary backlog that will need to be worked through. However, that did not impact cash as packers bid up to obtain what hog they could. The National Direct Afternoon report showed price up $1.80. Cutouts increased $0.77. This should limit pressure on futures and keep support under the market. Slaughter for the week is running significantly low than last week and last year. Saturday estimated slaughter was revised to 208,000 head.

	BULL SIDE		BEAR SIDE
1)	Cash trading $3.00 to $4.00 higher should keep support under the market.	1)	Cattle futures have stronger cash for the week factored in leaving traders with little incentive to push the market higher until there is more indication of cash potential for next week.
2)	The supply of cattle will tighten as the year progresses. Cattle numbers will not change over a short period of time. Packers may need to remain aggressive in order to compete for available supply.	2)	Weekly exports sales were not as good as hoped leaving traders a little disappointed.
3)	Hogs remain in a strong uptrend as cash moves higher. Hog supplies are expected to tighten as the first half of the year progresses.	3)	It may take a little while to get slaughter back on schedule with a large number of hogs needing to be processed. This could keep cash under pressure for a short period of time.
4)	Lower slaughter this week should only be temporary due to the winter storm. Any backlog of hogs should be worked through in a short period of time with chain speed returning to where it should be.	4)	Weekly export sales were not as good as hoped with China not a buyer again. This increased the caution of some traders triggering some profit taking before the weekend.

Thursday Closing Livestock Market Update - Markets Lower at the Close

GENERAL COMMENTS:

Cash cattle prices are $3 to $4 stronger this week and cattle futures have given an extended reaction to this week's Cattle Inventory data about the drought-diminished herd size, but even a fundamentally supported rally can't go on indefinitely. There was enough selling pressure to set futures contracts lightly lower at Thursday's close and this carried over to lean hogs as well. On the National Direct Afternoon Hog Report, prices were up $1.80 with a weighted average of $62.11 on 1,104 head. March corn is down 5 3/4 cents per bushel to $6.16 3/4 and March soybean meal is up $2.00 per ton to $437.10. The Dow Jones Industrial Average closed down 519 points and the NASDAQ closed down 639 points.

LIVE CATTLE:

Boosted by bullish confidence from this week's futures trade, as well as the knowledge that packers were aiming to keep a steady slaughter pace (117,000 head Thursday), cash cattle traders have manifested some big results. Light trade reported Thursday in the South showed live deals at mostly $140 per cwt, which is $3 to $4 higher than last week's weighted averages. Wednesday's moderate to good movement in the North was mostly $222, or $4 higher than last week's weighted averages. Asking prices for cattle remaining on showlists are around $140-plus in the South and $224-plus in the North. Futures prices have similarly added $3 or more since last week's close, but no rally can last forever, and traders apparently decided on Thursday afternoon to take a breather on this one. The February live cattle contract closed up $0.475 at $141.60, but the April contract closed down $0.15 at $146.75 after establishing a fresh contract high at $147.275. Live cattle futures haven't traded this high since early 2016.

Meanwhile, support from the beef market may be finding a plateau. Boxed beef prices closed lower again: choice down $1.69 ($281.46) and select down $3.10 ($276.47) with a movement of 134 loads (101.43 loads of choice, 14.62 loads of select, 4.80 loads of trim and 13.22 loads of ground beef).

FRIDAY'S CASH CATTLE CALL: $3.00 to $4.00 higher than last week. Cash cattle prices seem to have found firm footing after this big step up. Asking prices for cattle remaining on showlists are around $140-plus in the South and $224-plus in the North.

FEEDER CATTLE:

Light losses were noted in feeder cattle futures by the close of Thursday's session. March feeders were down $0.15 at $166.725; April feeders closed down $0.025 at $171.80; and May feeders closed down $0.125 at $175.625. The nearby chart is struggling to establish fresh highs in the way live cattle have been effortlessly sailing higher, and that may be due to the ongoing uncertainty about feed prices. Corn prices were lower Thursday and have dropped almost 20 cents since last week, but February is the classic "battle-for-acres season," and traders should be wary of volatility. Overall futures trading volume in feeder cattle has been strong throughout this week as traders have taken positions in response to the Cattle Inventory report, which showed a diminished beef herd and diminished prospects for calf numbers in 2022 and beyond. The CME Feeder Cattle Index for 2/1: up $0.16, $158.93, where it has been fairly steady through the past week.

LEAN HOGS:

Lean hog futures explored a lot of chart territory Thursday, first moving $2 higher and establishing fresh contract highs, then closing as much as $0.90 lower in the nearby February contract. The April contract closed $0.75 lower at $98.375, the May closed $0.85 lower at $102.20, and the June contract hit as high as $110.55 but ultimately closed $0.725 lower at $108.20. A fierce winter storm continues to snarl shipping operations for hog barns and packing plants anywhere from Arkansas to Ohio. As a result, daily hog slaughter Thursday at 424,000 is 51,000 below week-ago numbers and 34,000 below year-ago numbers. Meanwhile, the weekly export sales report showed only 30,400 metric tons (mt) of sales, mostly to Mexico and none to China (actually China reduced orders by 500 mt). But on the other hand, the futures market may look at the rapidly correctly U.S. Dollar Index and feel optimism for better export results in coming weeks. The afternoon pork cut-out report showed prices up $0.77 to $97.21, with 332.64 total loads (294.82 loads of cuts and 37.82 loads of trim). The CME Lean Hog Index for 2/1: up $0.15, $82.29, and the projected index for 2/2 is up $0.04, $83.33.

FRIDAY'S CASH HOG CALL: Steady to $1 higher. Packers may eventually start to shift into recovery mode and want to make up for the ground lost to this week's storm.