Tuesday Morning Livestock Market Update - Cash Weakness May Impact Hogs

GENERAL COMMENTS:

There is optimism that cash cattle will trade higher this week but there was no indication of what feedlots are looking for. There were no offers posted and no initial bids from packers. That really was not expected as feedlots will wait to see how aggressive packers will be with their bids. Strong grain prices Monday may have increased the anxiety over holding cattle too long, which could make some more anxious to sell. The World Agricultural Supply and Demand will be released on Wednesday, providing direction for grain prices, which could have an influence on cash cattle sales. Feeder cattle pressure due to higher grain prices was an anchor on live cattle. Boxed beef prices continued to weaken with choice down $0.85 and select down 1.01%. The Commitment of Traders report showed funds as net buyers of 19,951 contracts bringing their net long positions to 69,272 contracts.

Hog futures closed in positive territory Monday with April and May posting double-digit gains. The emphasis is on closer months with some spread trading continuing to take place. February hogs have five trading days remaining before April takes over as front month. New highs were again posted in all contracts with the exception of February. The strength was surprising given the fact that cash plummeted Monday with the National Direct Afternoon report showing price falling $9.35. This decline may have a delayed impact possibly putting pressure on futures Tuesday. Cutouts were able to close higher with a gain of $0.78. The Commitment of Traders report showed funds as net buyers of 3,061 contracts moving their net long positions to 69,968.

	BULL SIDE		BEAR SIDE
1)	Feedlots are expected to hold out for higher cash this week. They intend to capitalize on the aggressiveness of packers last week and higher futures.	1)	Cattle futures may trickle lower until direction is seen from cash. It is uncertain how aggressive packers will be.
2)	Slaughter seems to be back on track, which may have packers aggressively looking for cattle to keep plants running efficiently.	2)	Boxed beef prices continue to show weakness, which may have an impact on what packers will pay for cattle.
3)	The optimism in the hog market continues to push futures higher despite the large decline of cash Monday. New highs keep buyers active and aggressive.	3)	Hog futures may have too much optimism dialed into them due to the substantial weakness of cash Monday.
4)	Hog supplies are expected to continue to tighten as the year progresses.	4)	Futures are overbought and in need of a correction. Cash weakness could trigger that selling.

Monday Closing Livestock Market Update - Live Cattle Seeking Fundamental Support

GENERAL COMMENTS:

The markets closed mixed with the lean hog contracts rallying higher yet again. But the cattle contracts lost some of their muster through Monday's market. Heading into Tuesday, feedlots should post their asking prices for the week, and most are assuming that they will try to push the market higher again this week while the opportunity lasts. Hog prices closed lower on the National Direct Afternoon Hog Report, down $9.35 with a weighted average of $74.52 on 7,209 head. March corn is up 14 3/4 cents per bushel, and March soybean meal is up $8.90. The Dow Jones Industrial Average is up 1.39 points, and the NASDAQ is down 82.34 points.

LIVE CATTLE:

The live cattle complex closed lower Monday afternoon as traders look for direction from the cash cattle market and grew weary over grain prices. February live cattle closed $0.22 lower at $141.82, April live cattle closed $0.47 lower at $146.40 and June live cattle closed $0.27 lower at $141.10. Feedlots are encouraged to see that Monday's slaughter posted an aggressive 121,000 head -- which gives them assurance that they could potentially push the cash market higher again this week. The cash cattle market hasn't seen any interest yet, and it's likely this week's trade doesn't get underway until Wednesday or later. Asking prices haven't been established in either the North or South but could be shared sometime Tuesday. Monday's slaughter is estimated at 121,000 head -- 1,000 head more than a week ago and 8,000 head more than a year ago.

Last week's negotiated cash cattle trade totaled 98,188 head. Of that, 76% (75,030 head) were committed for nearby delivery, while the remaining 24% ($23,158 head) were committed for deferred delivery. Last week's volume of 98,188 head is 18,432 head more than a week ago, but still 4,320 head less than a year ago.

Boxed beef prices closed lower: choice down $0.85 ($278.96) and select down $1.01 ($275.04) with a movement of 80 loads (52.29 loads of choice, 12.86 loads of select, 4.68 loads of trim and 9.75 loads of ground beef).

TUESDAY'S CASH CATTLE CALL: $1 to $2 higher. The cash cattle market knows that the pressure is on. The charts need to see strong fundamental support to keep trading higher, and feedlots know that packers are going to be hard to deal with given that boxes are tipping lower. But if the feedlot sector is going to regain any leverage, they are going to have to take it for themselves.

FEEDER CATTLE:

With grain prices rallying relentlessly, the feeder cattle contracts had a bit of a tough Monday, as input costs worried traders. March feeders closed $1.07 lower at $165.02, April feeders closed $1.15 lower at $170.27 and May feeders closed $0.62 lower at $174.72. Still, demand in the countryside held strong as the market sees potential in the months ahead, especially if the cash cattle market can regain leverage. At Joplin Regional Stockyards in Carthage, Missouri, compared to last week on a run of 2,239 head, feeder steers traded $4 to $7 higher, but most of the market's gains were on those weighing less than 550 pounds. Feeder heifers under 600 pounds traded $6 to $12 higher. The CME feeder cattle index 2/4/2022: down $0.03, $160.14.

LEAN HOGS:

The lean hog market kept with its upward surge throughout Monday's trade. April lean hogs closed $1.20 higher at $101.27, June lean hogs closed $0.95 higher at $110.37, and July lean hogs closed $0.55 higher at $109.70. Pork cutout values closed slightly higher, but the cash hog market took a strenuous fall. There were 7,209 head of hogs traded in the cash hog market, but Monday's weighted average fell $9.35 to $74.52. The stark, drastic changes in the cash hog market continue to be startling, and with supplies of market-ready hogs unlikely to increase anytime soon, these type of volatile price jumps could continue. Pork cutouts total 336.82 loads with 299.23 loads of pork cuts and 37.59 loads of trim. Pork cutout values: up $0.78, $98.19. Monday's slaughter is estimated at 481,000 head -- 6,000 head more than a week ago and 7,000 head less than a year ago. The CME lean hog index 2/3/2022: up $0.97, $84.30.

TUESDAY'S CASH HOG CALL: Steady. After falling abruptly on Monday, one would think that the cash market would stabilize with throughput seeming sufficient and demand remaining strong.

Monday Midday Livestock Market Update - Live Cattle, Lean Hogs Jump Aggressively Into Trade

GENERAL COMMENTS:

Live cattle and lean hog futures are rallying into Monday's trade with a full head of steam. The feeder cattle contracts aren't as confident as feed prices continue to spike. March corn is up 13 3/4 cents per bushel and March soybean meal is up $7.20. The Dow Jones Industrial Average is down 51.14 points and NASDAQ is down 47.12 points.

LIVE CATTLE:

Live cattle futures are leaning into Monday's trade, exhilarated to take on the week and hopefully push cash cattle prices higher again. February live cattle are up $0.10 at $142.15, April live cattle are up $0.07 at $146.95 and June live cattle are up $0.05 at $141.42. You can tell the futures complex is holding its breath, seeming to teeter, and will look to the cash cattle market to dictate whether the market has more upward potential in its near future. The exciting piece about the cash cattle market is throughput has mostly recovered and everyone in the business knows supplies of market-ready cattle are thin -- T.H.I.N.! Monitoring how cattle are committed (for the nearby delivery or deferred delivery) will be incredibly important throughout the spring rally as packers will try to cut the cash cattle market's upward trend by buying cattle with time. Watching boxed beef prices has been and will continue to be very telling. While packers continue to say they want the bigger cattle that will yield choice cuts, it's interesting to note the choice/select spread has narrowed to a thin $2.22 -- which tells us there's more demand for the select carcasses than what's being portrayed. The cash cattle market hasn't seen any interest as of yet and it's likely this week's trade doesn't get underway until Wednesday or later.

Last week's negotiated cash cattle trade totaled 98,188 head. Of that 76% (75,030 head) were committed for nearby delivery, while the remaining 24% ($23,158 head) were committed for deferred delivery. Last week's volume of 98,188 head is 18,432 head more than a week ago, but still 4,320 head less than a year ago.

The bulk of business took place Wednesday and Thursday last week with just a little clean-up trade on Friday. Southern live deals had a full range of $136 to $140, mostly $140, $3 to $4 higher than the prior week's weighted averages. Northern dressed transactions had a full range of $220 to $224, mostly $222, $4 higher than the previous week's weighted average basis Nebraska.

Boxed beef prices are mixed: choice down $0.66 ($279.15) and select up $0.88 ($276.93) with a movement of 44 loads (31.18 loads of choice, 5.00 loads of select, zero loads of trim and 7.36 loads of ground beef).

FEEDER CATTLE:

The feeder cattle market is feeling the heat as Monday posts a generous rally throughout the grains. The corn complex is seeing an 8- to 15-cent rally in nearby contracts; soybean contracts are rallying anywhere from 25 to 28 cents higher in nearby contracts. The feeder cattle contracts are trending lower, but still you must admire where the contracts sit as today they're significantly higher than a year ago. March feeders are down $0.75 at $165.32, April feeders are down $0.97 at $170.45 and May feeders are down $0.62 at $174.72. The feeder cattle market will likely see fewer cattle in auctions this week as the market has moved most of the long-yearlings that were left to sell and buyers will be cognizant of their buying abilities given the higher feed prices. But still, the market has much to offer and buyers are going to want to be able to play the game while the marketplace is hot.

LEAN HOGS:

The current hog market isn't for the faint of heart. As you analyze the futures complex, you see the strength and vigor the market possesses as April 2022 through August 2022 contracts are all trading well above $100.00. But then the tricky part is analyzing the cash hog market. Before you get weighed down in the data of today's current price, the cash spread, and the volume which have sold, I think it's incredibly important to remember just how few hogs trade in the cash market and to remember the cash hog market's fickle nature nowadays. Not only are packers trying to gauge how many hogs they need from the cash market to fill in the gaps here and there, but they also are wanting to protect themselves from shortages of hogs in the near future, all while not giving too much for them as that takes away from their bottom line. Nevertheless, the lean hog market is rallying into Monday's trade with a head full of steam and is ready to take on whatever opportunity to market gives. April lean hogs are up $2.67 at $102.75, June lean hogs are up $2.45 at $111.87 and July lean hogs are up $2.00 at $111.15.

The projected CME Lean Hog Index for 2/1/2022 is up $0.19 at $83.33 and the actual index for 2/3/2022 is up $0.97 at $84.30. Hog prices are lower, sharply lower, on the National Direct Afternoon Hog Report, down $12.61 with a weighted average of $71.83, ranging from $69.00 to $90.00 on 5,876 head and a five-day rolling average of $80.10. Pork cutouts total 194.59 loads with 162.72 loads of pork cuts and 31.87 loads of trim. Pork cutout values: up $4.06, $101.47.

Monday Morning Livestock Market Update - Higher Cash Expectations

GENERAL COMMENTS:

Cattle futures showed some impressive strength last week. Cattle movement was lighter due to the winter storm, which impacted slaughter pace. Cash was able to increase $4.00 as packers were aggressively looking for cattle. Feedlots will set higher offers in the hopes packers will need current supply as well as attempt to purchase ahead for the following week or two. It will be an interesting week that will test the resolve of both packers and feedlots. Cash business in not likely to take place early as feedlots have set their sights higher and will hold. Packers are in a quandary as they need cattle to process while at the same time boxed beef prices continue to weaken. Choice declined $1.65 on Friday while select declined $0.42. The choice/select spread continues to move closer together with last week showing choice cuts down $6.92 while select cuts declined $.92 bringing the spread to $3.76.

The movement of hogs was hindered by the winter storm last week, which showed up in the slow slaughter pace. Cash did decline Friday with the National Direct Afternoon report showing a loss of $3.62. However, cash had been strong earlier in the week as packers need hogs. Slaughter pace should increase this week, which may have them more aggressively looking for supplies early in the week. Cutouts were able to close higher on Friday. The trend is still up and traders will trade with the trend.

	BULL SIDE		BEAR SIDE
1)	Cattle futures showed strong gains last week as packers became more aggressive. Higher cash is anticipated again this week.	1)	Inflation seems to be driving more people to lesser cuts of beef which is impacting the demand for choice and select cuts resulting in weaker boxed beef prices.
2)	Slaughter is expected to get back on track, which should increase the demand for cattle. Higher futures and higher cash last week will provide confidence to feedlots to hold out for higher prices.	2)	Higher cattle on feed numbers will keep sufficient supply available for the next months, limiting the aggressiveness of packers.
3)	Hog futures were strong despite cash weakness Friday. Traders continue to trade with the trend in anticipation of continued higher prices.	3)	Hog futures are overbought, which could result in a price correction if traders feel the market has moved too high, too fast.
4)	The market is looking at tightening supplies as the year progresses and there is a desire to satisfy current demand as well as build inventory.	4)	Higher pork prices may impact export sales and slow domestic demand, allowing for pork to back up into the market.