Tuesday Morning Livestock Market Update - Futures May be Under Pressure

GENERAL COMMENTS:

The focus of trade to begin Tuesday will be the Cattle on Feed report. The report was bearish in all categories with the largest estimate being the placement number. This resulted in the fourth consecutive month with higher-than-expected placements. Placements were 98.1% with the trade estimating 92.2%. The on-feed number was 102.7%, slightly higher than expected. Marketings were 92.6%, a bit lower than expected. Futures are expected to open lower but may be offset to some extent by the development of stronger cash at the end of last week. Live cattle in the South traded $1.00 higher with dressed cattle around $3.00 higher. The previous three Cattle on Feed reports put pressure on the market with futures trending lower since the September report. Whether this will be the case again is difficult to say. The market may have already factored this in and may be supported by higher cash. Boxed beef was mixed with choice up $1.80 and select down $0.12. The Commitment of Traders report showed funds reducing their long position by 5,196 contracts, reducing their net-long position to 17,037 contracts. Feeder cattle showed a reduction of 595 contracts, increasing their net-short position to 2,258 futures contracts.

The Hogs & Pigs report was considered neutral to slightly bearish. All hogs and pigs were slightly higher than expected at 100%, along with kept for marketing at 100%. The kept for breeding category was more friendly at 97%, lower than the trade estimate of 98.7%. Futures may see greater support for the deferred contracts. The market will be influenced by cash that may struggle due to the holiday week. Packers may not be aggressive as they need to purchase less. Cash trade Friday was down $0.20, according to the National Direct Afternoon Hog report. Cutouts fared well with a gain of $0.86. The Commitment of Traders report showed funds buying 10,192 futures contracts, reducing their net-short position to 8,238 contracts.

	BULL SIDE		BEAR SIDE
1)	Higher cash cattle last week may provide support to the market with feedlots looking for more this week.	1)	Cattle placements were higher than expected and above expectations for the fourth consecutive month.
2)	The market may have the negative numbers of the Cattle on Feed report already factored in.	2)	Packers may not be aggressive this holiday-shortened week as they will not be running a full slaughter schedule.
3)	Funds reducing their net-short positions as reported in the Commitments of Traders report may provide some support to the hog market.	3)	All categories in the Hogs & Pigs report were higher than the trade estimate, except the kept for breeding category. This may put overall pressure on the market.
4)	The number of hogs kept for breeding, being lower than the trade estimate, may provide support for deferred contracts.	4)	Pigs per litter were at a record high for the third consecutive month. Pigs per litter in September-November increased 3.9% over the previous year.

Friday Closing Livestock Market Update - Cattle On-Feed Numbers Increase 3%

GENERAL COMMENTS:

From Friday to Friday, livestock futures scored the following changes: December Live cattle up $1.83, February Live cattle off $0.82; January Feeder cattle up $1.85, March Feeder cattle up $2.22; February Lean hogs off $0.55, February Lean hogs off $0.55; February Pork cutout up $0.00, April Pork cutout up $0.05.

Pre-holiday and pre-report market shifts developed Friday, allowing for mixed to mostly higher price moves during the Friday session. Nearby live cattle futures posted limited losses, while deferred contracts moved slightly higher. The main support was seen in feeder cattle trade as traders focused on the Friday afternoon report release.

With cattle on feed numbers and placement numbers coming in slightly higher than traders expected in pre-report estimates, it is expected that some uncertainty may continue to develop early next week once markets reopen.

Hog futures bounced higher as traders covered short positions seen earlier in the week, but volume in the hog market also remained extremely light heading into Christmas weekend.

Hog prices closed lower on the Daily Direct Afternoon hog report, down $0.20 with a weighted average of $47.76 on 2,036 hogs. March corn closed up 1/2 at $4.73 and March soybean meal closed up $4.70 at $391.1. The Dow Jones Industrial Average is down 18.38 at 37,385.97.

LIVE CATTLE:

Live cattle futures ended mixed in a narrow trading range Friday afternoon as traders focus on the impact of the cattle on feed report and limited expected trade volume once markets reopen Tuesday.

The cattle on feed report posted larger-than-expected cattle in nations feedlots, creating a generally weaker tone to the market following the report. It is still uncertain just how much of this increase has been factored into prices, as a large portion of the higher supply level has been impacting live cattle prices over the past few weeks. Total cattle numbers in feedlots moved above 12 million head for the first time since April 2022. The fact that cattle on feed numbers continue to grow may be the biggest concern to traders in the coming days.

Cash cattle trade has started to develop through the day Friday. Trade in the south is reported at $171 per cwt live basis, which is $1 per cwt higher than last week's weighted average. Northern trade is seen at $171 to $172 live and $271 per cwt dressed. Dressed trade is $3 per cwt higher than last week. There may be some additional sales trickling in through the early evening, but most of the needed trade seems to have been accomplished.

December live cattle closed $0.50 lower at $170.05, February live cattle closed $0.15 lower at $168.525 and April live cattle closed $0.05 lower at $172.125. 

Friday's slaughter is estimated at 117,000 head, 4,000 head less than a week ago and 21,000 head more than a year ago. Saturday slaughter is estimated at 7,000 head. Week to date slaughter totals are expected at 621,000 head. 

Boxed beef prices closed mixed: choice up $1.80 ($292.93) and select down $0.12 ($261.15) with a movement of 89.97 loads (51.32 loads of choice, 15.27 loads of select, 11.67 loads of trim and 11.71 loads of ground beef).

TUESDAY'S CATTLE CALL: Steady. Limited activity is expected early next week following the Christmas break. Tuesday will likely be focused with show list distribution and inventory taking ahead of another sluggish week and holiday weekend.

FEEDER CATTLE:

Feeder cattle futures posted strong triple-digit gains through early afternoon with buyers focusing on covering short positions ahead of the long holiday weekend and upcoming report. Nearby gains closed $1 per cwt higher with limited volume seen through the entire complex.

The release of the cattle on feed report was only partially positive in the fact that for the first time in three months, placement levels were not above year ago levels. But cattle placements were larger than most expected, falling only 2% from year ago levels, while most expected the decrease to be closer to 4 to 5%. This is expected to have a weakening impact to the market early next week, although the uncertainty lies in the fact that it is still uncertain just how much of the weakness was already put into the market due to caution.

Limited trade is expected all next week between Christmas and New Year's. This could also add increased volatility to the market due to light trade volume.

January feeders closed $1.05 higher at $222.75, March feeders closed $1.03 higher at $224.4 and April feeders closed $1.08 higher at $229.525. The CME Feeder Cattle Index for Dec. 20: up $0.01, $219.81.

LEAN HOGS:

Lean hog futures bounced higher Friday as traders adjusted positions heading into the long holiday weekend and in front of the hogs and pigs report. Even though significant inventory levels were not expected, the fact that overall hog inventory increased slightly instead of decreasing is expected to create a weaker tone to the market once traders return Tuesday following Christmas celebrations.

A moderate reduction in hogs kept for breeding and the expectation that the industry will slowly but steadily work itself out of the heavy supply situation in the next two to three quarters, gives hope for long-term support. However, this may not help support short-term price levels in either the futures or pork markets, especially during the lightly traded holiday season.

February lean hogs closed $0.70 higher at $71.35, April lean hogs closed $0.63 higher at $77.575 and May lean hogs closed $0.40 higher at $83.95. Friday's hog slaughter is estimated at 434,000 head, 34,000 head less than a week ago and 324,000 head more than a year ago. Saturday slaughter is estimated at 61,000 head. Week to date slaughter is estimated at 2.42 million head. Pork Cutouts totaled 318.75 loads with 291.06 loads of pork cuts and 27.69 loads of trim. Pork cutout values are up $0.86 at $82.21. The CME Lean Hog Index for Dec. 20: up $0.15, $66.69.

TUESDAY'S HOG CALL: Steady to $1 lower. A combination of light holiday activity and two back-to-back long holiday weekends, packers are expected to be able to put even more pressure on cash hog values early next week.

Friday Midday Livestock Market Summary - Limited Trade Activity

GENERAL COMMENTS:

Moderate to firm price support is seen in feeder cattle and lean hog futures, each of which are partially focused on covering short positions following the firm pressure seen Thursday in cattle trade, and consistent hog market pressure during the week.

Light volume is the key factor of morning trade Friday, with a portion of traders already exiting the market ahead of the holiday weekend. There is expected to continue to be some limited position adjustments ahead of Friday afternoon's cattle on feed and hogs and pigs report. But for the most part, any needed position shifts have likely already been made.

Following the report, traders will not have access to trade the report information until Tuesday morning, which will give ample time to mull over and second guess potential market direction and main takeaways over Christmas dinner. But for the most part, the rest of the trading day is expected to remain generally calm and uneventful. March corn is down 1/2 at $4.72 and March soybean meal is up $3.30 at $389.70. The Dow Jones Industrial Average is up 64.48 at 37,468.83.

LIVE CATTLE:

Live cattle trade remains generally quiet with prices mixed in a very narrow trading range. Although firm gains have developed in feeder cattle trade during Friday morning, very little follow-through interest has developed in live cattle contracts. Lightly traded and soon to expire December contracts are posting a moderate loss, while other nearby contracts have been able to inch higher, although single-digit gains have been seen through the morning in a couple of nearby contract months.

It appears that traders seem comfortable with current positions in front of Friday's Cattle on Feed report. Pre-report estimates projected a 2.2% increase in on feed numbers from a year ago. This estimate seems to be the tipping point, as an on-feed number above this level will account for a gain from November levels, and the highest on feed numbers since May 2022. But for now at least, traders seem to be generally confident and in consensus that market expectations should represent the report findings.

Cash cattle trade has started to slowly develop in the North with light trade reported at $271 per cwt on a dressed basis. These prices are $3 per cwt higher than last week's weighted average price, and are a welcome sign following the consistent moves lower over the past few weeks. Live trade is not yet developing, but bids are still being passed in all areas at $170 per cwt. Currently asking prices remain at $173 to $175 per cwt live basis and $272 and higher on dressed cattle that have not yet been sold. It very well could be late Friday afternoon and after the 2 p.m. report release before cash cattle trade wraps up heading into the Christmas holiday.

March corn is down 1/2 at $4.72 and March soybean meal is up $3.00 at $389.4. The Dow Jones Industrial Average is up 49.77 at 37,454.12. 

Boxed beef prices are higher: choice up $1.05 ($292.18) and select up $1.63 ($262.90) with a movement of 60.12 loads (39.18 loads of choice, 6.01 loads of select, 8.03 loads of trim and 6.90 loads of ground beef).

FEEDER CATTLE:

Feeder cattle futures have consistently moved higher Friday morning, but midday buyer support has redeveloped across the complex, helping to push feeder cattle trade to triple-digit gains. Although most of the buyer support is focused on short covering following Thursday's market pullback, the underlying support across the complex continues to add increased interest ahead of the afternoon cattle on feed report.

Over the past two months, cattle placement numbers have been the driver behind the prices tumble in feeder cattle and live cattle trade. Although placements will still be a major focus, it appears that most attention will be once again moved back to cattle on feed numbers. Placements are expected to be well under year ago levels due to the strong placement levels seen in October and November.

January feeders are $1.55 higher at $223.25, March feeders are $1.53 higher at $224.9 and April feeders are $1.65 higher at $230.10.

LEAN HOGS:

Lean hog futures are shifting higher Friday morning, although limited trade volume is likely to limit overall trade interest through the rest of the session. Following a firm pullback in prices early in the week, late week short covering and position adjustments are the focus Friday.

Traders are also trying to make any last adjustments to positions in front of both the quarterly hogs and pigs report and the upcoming holiday weekend. Expectations of light hog herd reductions are the majority consensus of the market, although even these inventory and planned pullbacks in numbers are not expected to be viewed overall optimistic as many have hoped overall production would slow faster than what the upcoming report is expected to show.

February futures continue to lead the market higher, with moderate gains seen through the rest of the complex. February lean hogs are $1.15 higher at $71.8, April lean hogs are $0.83 higher at $77.775 and May lean hogs are $0.58 higher at $84.125. Hog Prices are unreported due to confidentiality on the Daily Direct Morning Hog report. Pork Cutouts totaled 213.45 loads with 196.83 loads of pork cuts and 16.62 loads of trim. Pork cutout values are up $0.32 at $80.65.

Friday Morning Livestock Market Update - Limited Volatility Ahead of Reports

GENERAL COMMENTS:

Cattle just could not find sufficient buying interest to support the market Thursday. Steady cash is factored in and looks like it may be a reality. Some trade has developed in Nebraska at $170 live and $270 dressed, while Iowa has seen light trade at $268-$270. It is a bit surprising both sides have been holding without doing business up until the final day of the week and ahead of the holidays. Business may wait until the Cattle of Feed report is released which may not be more beneficial to either side if it comes in near expectations. Cattle on Feed numbers as of Dec. 1 are estimated at 102.2%. Placements in November are estimated at 95.9% with marketings at 93.3%. Traders will continue to position themselves ahead of the report and the three-day weekend, which may result in sideways trade. Boxed beef was mixed with choice up $2.00 and select down $0.33.

More of what we saw Thursday may dominate the trading Friday as traders position themselves ahead of the Quarterly Hogs and Pigs report and the three-day weekend. Some light spreading was done to reduce risk, resulting in February and April closing higher. The National Daily Direct Afternoon Hog report showed a surprising gain of cash. It was only up $0.14, but higher, nevertheless. Cutouts showed a loss of just $0.01 rounding out a noneventful day. The estimates for the report Friday are for all hogs and pigs on Dec. 1 at 99.6%, kept for breeding at 98.7%, and kept for marketing at 99.6%. Saturday slaughter is expected to be light at 53,000 head as some plants will be dark for the weekend.

	BULL SIDE		BEAR SIDE
1)	Cattle futures have a chart gap quite a bit higher than the current market that may be filled at some point.	1)	Cattle futures may be developing a sideways pattern as traders remain uncertain over demand moving into next year.
2)	Steady to higher cash trade should provide support to the market as it will give greater confidence to feedlots to set their sights higher next week.	2)	Cattle placements over the past three Cattle on Feed reports have been higher than expected. Another repeat of this would be negative for prices.
3)	Weekly export sales of 37,500 metric tons (mt) were 33% above the previous week, indicating international demand may be improving.	3)	Hogs may have a difficult time finding long-term support without solid strength from both cash and cutouts.
4)	The Hogs and Pigs report may show higher sow slaughter took place, which could be supportive to the market over time.	4)	Reduced slaughter over the next two weeks may leave packers less aggressive with supply readily available.