Wednesday Morning Livestock Market Update - Cattle Continue to Struggle

GENERAL COMMENTS:

Traders did not know which way to go with live cattle. No cash business was done with no bids or offers placed. There was little expectation for any business Tuesday, but there should be some cash activity Wednesday. Feedlots may have a tough time holding out much longer due to increasing grain prices. They may be happy with steady bids given the current market situation. If packers see there is a desire to move cattle, they may pull back on bids. Boxed beef continues to erode with choice down $0.83 and select down $1.89. Boxed beef has been declining over the past few weeks nearly on a daily basis as consumers may be shifting to lesser cuts of beef. Slaughter pace is holding well and in line with a year ago.

Hog futures finally finished the liquidation phase with buyers willing to step back in. Fundamentals have not changed over the past week with tightening supplies in the country. That prompted cash to jump $5.11 on the National Direct Afternoon report. Packers are looking for hogs and need to pay higher to obtain them. The problem is that cutouts fell $4.08 offsetting some of the support from strong cash. However, traders did not seem to care and pushed futures as much as $3.35 higher in the June contract. In fact, May through October closed over $3.00 higher. Higher cash is expected again Wednesday.

	BULL SIDE		BEAR SIDE
1)	Cattle futures liquidation may have run its course with the market poised to move higher if cash is traded no worse than steady this week.	1)	Boxed beef prices remain unable to find a bottom. This may result in packers pulling back on bids for cattle.
2)	Supplies of cattle are expected to tighten as the year progresses. With high feed prices, replacements might decline while eventually tightening the supply further over time.	2)	Increasing feed prices may cause feedlots to move cattle even at lower prices rather than holding out for higher cash, resulting in the loss of profitability.
3)	Hog futures did an about face once the liquidation subsided. Trader were eager to get back into the market for the long term.	3)	Hog futures may have a difficult time resuming the uptrend after the large price correction. Futures may have moved too far, too fast with prices now near where they should be.
4)	Strong cash indicates packers may be having some difficulty finding market ready hogs. This may be the reason slaughter pace is not back up to where it should be compared to a year ago.	4)	Futures need to follow through Wednesday or the market could retest the low of Tuesday, which might indicated the rally was mainly due to short covering.

Tuesday Closing Livestock Market Update - Live Cattle, Lean Hogs Look to Recover Some Losses

GENERAL COMMENTS:

Tuesday served as a reminder for both the live cattle and lean hog contracts that life will indeed go on. While we mourn for the people of Ukraine and cannot stomach the greed that Putin possesses, we must regain focus on the livestock contracts. I understand there are contracts (grain especially) that need to be up in turmoil as they're directly affected by the war in Ukraine; but the live cattle and lean hog contracts should be able to trade on. With the feeder cattle market dependent on corn, it's understandable why that market has yet to show any positive recovery. Hog prices closed higher on the National Direct Afternoon Hog Report, up $5.11 with a weighted average of $94.51 on 6,686 head. May corn is up 35 cents per bushel and May soybean meal is up $8.00. The Dow Jones Industrial Average is down 597.65 points and NASDAQ is down 218.94 points.

LIVE CATTLE:

Tuesday's live cattle trade came as a double-edged sword. It was nice to see the deferred contracts back to trade somewhat higher; but it's beyond aggravating to see the nearby contracts selling away as the market should be getting ready for its spring rally. April live cattle closed $0.90 lower at $140.52, June live cattle closed $0.65 lower at $137.05 and August live cattle closed $0.07 lower at $137.07. The April live cattle contract is now trading the lowest it has since the last week in January and will soon have to make a decision. The market could either rally at the support plane of $140.00, or it could continue to trend lower, feeling the geopolitical pressures of the world. Nevertheless, this volatility comes at a horrible time for the market as feedlots need to be pressing prices toward a spring rally. The cash cattle market didn't see any interest in its market today, but it's likely bids are lightly tossed at the market come Wednesday. 

Tuesday's slaughter is estimated at 124,000 head -- 1,000 head more than a week and year ago.

Boxed beef prices closed lower: choice down $0.83 ($256.68) and select down $1.89 ($251.52) with a choice/select spread of $5.16 and a movement of 144 loads (82.11 loads of choice, 13.88 loads of select, 17.44 loads of trim and 30.37 loads of ground beef).

WEDNESDAY'S CASH CATTLE CALL: Steady to $1.00 higher. While the futures complex continues to be absorbed with Russia/Ukraine, the cash cattle market could demand higher prices as supplies favor their position.

FEEDER CATTLE:

Another day passed and another couple dollars lost in the feeder cattle complex. As the market continues to watch the grain complex rally to unfathomable highs, the feeder cattle market has no other option but to morn its sorrows and trade lower. March feeders are down $1.45 at $156.27, April feeders are down $2.20 at $159.80 and May feeders are down $2.55 at $165.25. If the live cattle market could lend some support, it would help the feeder cattle market's morale. But, overall, the pressures from the grain market are simply too great to bear right now. Until the situation with Ukraine and Russia simmers down, it's unlikely the nature of the feeder cattle market gets much better. The CME Feeder Cattle Index 2/28/2022: down $0.24, $159.67.

LEAN HOGS:

The lean hog complex served as a reminder that life will indeed go on for the markets -- as it always has. The lean hog complex found support in Monday's close and leaped higher throughout all of Tuesday's trade. April lean hogs closed $2.70 higher at $106.20, June lean hogs closed $3.35 higher at $116.77 and July lean hogs closed $3.05 higher at $116.02. Pork cutouts closed noticeably lower, but I doubt it worries the contracts in Wednesday's trade. Pork cutout prices could dip lower as Lent begins Wednesday. Pork cutouts total 291.31 loads with 264.76 loads of pork cuts and 26.55 loads of trim. Pork cutout values: down $4.08, $108.19. Tuesday's slaughter is estimated at 482,000 head -- 10,000 head more than a week ago and 12,000 head less than a year ago. Monday's slaughter was revised to 451,000 head -- 19,000 head less than what was originally stated. The CME Lean Hog Index 2/25/2022: up $0.69, $99.09.

WEDNESDAY'S CASH HOG CALL: Steady to somewhat higher. Packers have been aggressive for about two days in the cash market in weeks past. It's likely they are aggressive again in Wednesday's market.

Tuesday Midday Livestock Market Update - Rallying Grain Prices Keep Feeders Bleeding

GENERAL COMMENTS:

The feeder cattle complex continues to drown in agony as grain futures soar higher; but the live cattle and lean hog markets are beginning to rebuild. The cash cattle market hasn't seen any interest develop as of yet and it is likely trade won't develop until Wednesday or later. May corn is up 35 cents per bushel and May soybean meal is up $7.50. The Dow Jones Industrial Average is down 638.13 points and NASDAQ is down 175.52 points.

LIVE CATTLE:

The nearby live cattle contracts are lagging behind modestly as the deferred contracts set out to regain some of what the market recently lost. April live cattle are down $0.50 at $140.97, June live cattle are down $0.17 at $137.52 and August live cattle are up $0.40 at $137.55. Any day now boxed beef prices are expected to bottom, which will lend the live cattle market some positive morale. It's not like packers have been scraping their last pennies together to make things work; but stronger box prices will give them more money to play with and hopefully some of those dollars will trickle into the cash market. The cash cattle market hasn't seen any interest yet and it's likely the week's business doesn't get underway until Wednesday or later. Asking prices are noted at $144-plus in the South; the North has yet to disclose what they'd like to get. Showlists are lighter throughout the main feeding regions, which bodes well for feedlots. I know the world sits anxiously amid the uncertainy with Russia/Ukraine, but cattle still have to trade.

Boxed beef prices are lower: choice down $0.37 ($257.14) and select down $1.39 ($252.02) with a choice/select spread of $5.12 and a movement of 66 loads (42.96 loads of choice, 8.06 loads of select, 4.15 loads of trim and 10.37 loads of ground beef).

FEEDER CATTLE:

The theme continues to remain the same for the feeder cattle contracts -- as Russia continues to blast Ukraine the grain markets shoot higher as they're uncertain what will happen to the grain commodities in Ukraine if Russia takes over. As if grain prices weren't already hard enough to pencil, feeders are left speechless about what to do at this point. March feeders are down $0.97 at $156.75, April feeders are down $2.00 at $160.07 and May feeders are down $2.20 at $165.60. If the live cattle complex can lend any support, the feeder cattle complex will gladly take it. But it is going to be tough for the market to offset the blows from the surge in grain prices at this point.

LEAN HOGS:

The lean hog contracts are back to rallying as the market found support around $103.50. The complex continues to watch and monitor the events unraveling with Russia/Ukraine, but the facts remain that supplies of market-ready hogs continue to be thin and domestic demand is supporting the market still. As Lent goes into effect Wednesday, pork cutout values could stall out. But, all-in-all, with the limited availability of product and the limited supplies in cold storage, the market will likely continue to support pork prices. April lean hog are up $2.17 at $105.67, June lean hogs are up $3.52 at $116.92 and July lean hogs are up $3.17 at $116.15.

The projected CME Lean Hog Index for 2/28/2022 is up $0.57 at $99.66 and the actual index for 2/25/2022 is up $0.69 at $99.09. Hog prices are higher on the National Direct Morning Hog Report, up $0.22 with a weighted average of $88.59 ranging from $87.00 to $101.00 on 3,218 head and a five-day rolling average of $87.83. Pork cutouts total 178.08 loads with 163.38 loads of pork cuts and 14.70 loads of trim. Pork cutout values: down $0.97, $111.30.

Tuesday Morning Dairy Market Update - Complex Continues to Struggle

GENERAL COMMENTS:

Live cattle could not retain initial strength, as spillover pressure from feeder cattle impacted futures. Feeder cattle reacted to strong grain price and may likely do the same Monday. Traders had nothing else to provide much strength as boxed beef resumed weakness. Choice was down $0.76 with select down $2.00. There was no interest shown in the cash market Monday and likely will not be any Tuesday. However, feedlots may not be in the position to hold out for higher prices this week as grain prices are escalating. The conflict in the Ukraine is hindering exports and if it continues to drag on, it may be difficult for farmers to plant some of their crops this year, which will push grain prices higher. Holding out for higher cash may not be profitable. Packers continue to see dwindling profits which may leave them less aggressive. The Commitment of Traders showed funds trimming their net long positions by 628 contracts with their current net longs at 85,433 contracts.

Hog futures tried to regain some of last week's losses but failed to uncover sufficient buying interest racking up four consecutive days of losses. Cash increased on the National Direct Afternoon report with a gain of $1.62 but that was offset to some extent by cutouts declining $1.05. The market has corrected the overbought technical status, which might bring more aggressive buying back into the market. Hog slaughter is not yet back up to where it was a year ago with some of that possibly due to tighter market ready supplies. Tighter supply is expected to continue. The Commitment of Traders report showed funds reducing their net long futures positions by 2,281 contracts moving their net long position to 76,961 contracts.

	BULL SIDE		BEAR SIDE
1)	The slaughter pace of cattle is brisk and packers need to purchase supply to keep up with demand.	1)	Live cattle futures are anticipating weakness in cash cattle this week. This may reduce the interest of feedlots to hold out in the face of rising grain prices.
2)	Cattle futures are nearing technical support, which could cause short-covering and renewed buying interest from traders.	2)	Continued weakness of boxed beef will cause packers to be less aggressive. They may dig in their heels this week and not pay up for cattle.
3)	Hog futures slowed their decline Monday with later contracts closing higher. Liquidation may have run its course and traders may buy back into the market.	3)	April hogs still have a chart gap way down $91.40 or $12.00 lower than where they are. Gaps generally are filled and that is a long way down.
4)	Hog supplies are somewhat tight and expected to tighten as the year progresses. Price weakness may be limited.	4)	Hog futures may test support which is around $2.00 to $2.50 lower before the selling pressure subsides.