Wednesday Morning Livestock Market Update - Traders Are Optimistic Over Pork Demand

GENERAL COMMENTS:

Traders are waiting for cash to provide direction. Higher boxed beef prices indicate strong demand, lending to the potential for packers to pay more for cattle. The anticipation has been for stronger cash, but at these lofty levels traders remain cautious. The decline in live cattle was offset by the strength of feeder cattle. The January contract gained $2.25, pushing it to a record high. There is no letup in demand for feeder cattle in the country as buyers need to buy or go without and pay higher prices next week. The price spread of $76.70 between the February live cattle and January feeder cattle contracts is unprecedented. Boxed beef prices were higher with choice up $0.51 and select up $3.34 moving the price spread to $15.78.

Hog futures found support with the April contract unable to push through price resistance while June and later contracts made new highs. It is impressive that the June and July contracts are over $103 -- a level that has not been seen in a while. Cutouts did not provide support with a gain of only a penny, but the fact that it did not decline provided hope that demand may increase and pork values climb. The National Daily Direct Afternoon Hog report showed cash up $1.00. Packers may need to purchase more hogs, lending to another day of higher cash.

	BULL SIDE		BEAR SIDE
1)	The trend in cattle futures remains up with traders feeling confident higher prices are to come.	1)	Cattle futures are overbought and managed-money traders are holding record-long futures positions. This could trigger a price retracement.
2)	Consumer demand remains strong as boxed beef prices continue to increase. This should keep the packers buying aggressively.	2)	If cash cattle trade at steady money at some point, the feedlots might turn more aggressive and they will move heavyweight cattle as quickly as possible.
3)	Hog futures have regained the losses since December and moved above technical resistance Tuesday.	3)	Hog futures have increased for four consecutive days and could stabilize or retrace as short-covering may have run its course.
4)	Traders anticipate demand for pork to improve as the seasonal weakness may be behind us.	4)	Cash hogs may be higher Wednesday, but that may be all for the week as packers likely will have purchased their needs. Cash remains in a sideways range.

Tuesday Closing Livestock Market Update - Live Cattle Close Lower as Traders Wait to See What Happens in the Cash Market

GENERAL COMMENTS:

It was a lackadaisical day for the livestock complex as it was mostly uneventful. Still no cash cattle trade has developed but some early packer interest could begin to arise on Wednesday. March corn is down 2 cents per bushel and March soybean meal is down $2.00. The Dow Jones Industrial Average is up 221.16 points.

LIVE CATTLE:

The live cattle complex closed lower Tuesday afternoon as traders are very skeptical of overly supporting the contracts ahead of seeing what's accomplished this week in the cash cattle market. Thankfully, the market's other fundamental facets are holding strong as today's slaughter was aggressive, and although the choice cut was lower at midday, it closed higher this afternoon which is reassuring. Still no cash cattle trade has developed and bids and asking prices remain elusive at this point. February live cattle closed steady at $197.40, April live cattle closed $0.05 lower at $198.15 and June live cattle closed $0.32 lower at $192.20. 

Tuesday's slaughter is estimated at 125,000 head – 1,000 head less than a week ago and 17,000 head more than a year ago.

Boxed beef prices closed higher: choice up $0.51 ($333.35) and select up $3.43 ($317.57) with a movement of 118 loads (75.27 loads of choice, 18.03 loads of select, 9.46 loads of trim and 14.75 loads of ground beef).

WEDNESDAY'S CATTLE CALL: Higher. Given that beef demand is still robust, packers will likely end up paying more money for cattle again this week.

FEEDER CATTLE:

The feeder cattle complex maintained its higher position through the day's end even though the live cattle contracts closed lower. Unlike the live cattle complex that is waiting to see how fed cattle trade this week, the feeder cattle complex is simply elated by the continued strength and demand in the countryside for feeder cattle. This continues to be evident by the CME feeder cattle index's lofty price of $278.31. January feeders closed $2.25 higher at $274.10, March feeders closed $0.30 higher at $268.20 and April feeders closed $0.22 higher at $268.55. At Oklahoma National Stockyards in Oklahoma City, Oklahoma compared to last week feeder steers traded $6.00 to $12.00 higher, and feeder heifers sold $4.00 to $8.00 higher. Steer calves sold $6.00 to $12.00 higher, and heifer calves traded $10.00 to $13.00 higher. Instances up to $20.00 higher were noted on the calves that sold. Feeder cattle supply over 600 pounds was 62%. The CME feeder cattle index 1/13/2025: up $1.01, $278.31.

LEAN HOGS:

The lean hog complex again was able to round out the day higher as traders are pleased with the recent uptick in demand. February lean hogs closed $0.45 higher at $83.62, April lean hogs closed $1.20 higher at $90.50 and June lean hogs closed $1.07 higher at $103.55. It is worth noting that the spot February contract is nearing resistance at $84.00, but so long as pork cutout values continue to show consistent demand, there's a case to be made that traders could confidently conquer that threshold -- time will tell. Hog prices closed $1.00 higher on the Daily Direct Afternoon Hog Report, with a weighted average price of $80.14 on 4,499 head. Pork cutouts totaled 301.64 loads with 269.35 loads of pork cuts and 32.29 loads of trim. Pork cutout values: up $0.01, $90.21. Tuesday's slaughter is estimated at 477,000 head -- 10,000 head less than a week ago and 28,000 head more than a year ago. The CME lean hog index 1/10/2025: up $0.33, $80.76.

WEDNESDAY'S HOG CALL: Steady. It's likely that packers will have at least one more day of active buying in the cash market this week, but prices will likely remain steady following today's $1.00 advancement.

Tuesday Midday Livestock Market Summary - Traders Push Contracts Higher

GENERAL COMMENTS:

The day's trade has been mostly uneventful, but traders are helping to continue to drive the livestock contracts higher. Still no trade has developed in the cash cattle market. March corn is down 2 cents per bushel and March soybean meal is down $1.60. The Dow Jones Industrial Average is down 66.21 points.

LIVE CATTLE:

The live cattle complex is trading mixed as the nearby contracts are continuing to grind higher as traders believe that the market's fundamentals will prevail again later this week, but the deferred contracts are trading mildly lower. February live cattle are up $0.77 at $198.17, April live cattle are up $0.90 at $199.10 and June live cattle are up $0.65 at $193.17. It is worth noting that the choice cut is showing a little weakness this morning as choice cuts are down $0.70, but the select cut is still rallying as it's up $1.27. If this trend continues in the days ahead, it could be troubling for the market's aspirations to continue to rally as demand has been the backbone of the cattle market's rally through this cycle. It's too early to know if this is the case or not, but we need to continue to monitor boxed beef prices closely. Still no trade has developed yet in the countryside, and bids and asking prices are still not known.

Boxed beef prices are mixed: choice down $0.70 ($332.65) and select up $1.27 ($318.84) with a movement of 96 loads (58.83 loads of choice, 18.65 loads of select, 2.65 loads of trim and 15.43 loads of ground beef).

FEEDER CATTLE:

With the added market support of seeing the live cattle contracts trading higher amid a weaker tone in the corn complex – it's been an easy decision for traders to lead the feeder cattle contracts higher this morning. January feeders are up $2.75 at $274.75, March feeders are up $1.17 at $269.07 and April feeders are up $1.12 at $269.45. Thankfully demand continues to shine through as sales in the countryside remain utterly incredible, and with the board's rally again today, eagerness and momentum from the contracts could help bolster stronger trade throughout the week.

LEAN HOGS:

Continuing to rally thanks to the support of stronger pork cutout values, the lean hog contracts are still higher today. February lean hogs are up $0.27 at $83.45, April lean hogs are up $1.22 at $90.52 and Juen elan hogs are up $1.20 at $103.67. The biggest gains being seen this morning in terms of pork cutout values are the butt's $3.76 jump, and the belly's $3.27 increase -- but I think it's even more worthwhile to note that this morning, none of the cuts are showing a decline which illuminates the point that demand is strong.

The projected lean hog index for 1/13/2025 is up $0.23 at $80.99, and the actual index for 1/10/2025 is up $0.33 at $80.76. Hog prices are higher on the Daily Direct Morning Hog Report, up $1.88 with a weighted average price of $79.50, ranging from $74.00 to $80.50, on 605 head and a five-day rolling average of $78.84. Pork cutouts total 168.53 loads with 149.40 loads of pork cuts and 19.13 loads of trim. Pork cutout values: up $2.03, $92.23.

Tuesday Morning Livestock Market Update - Mixed Trading Activity Until Cash Provides Direction

GENERAL COMMENTS:

It was not surprising to see a price retracement Monday after the incredible run higher in livestock futures. Traders remain bullish on the market, but this lofty level increases the concern over the amount of upside potential remaining. Traders want further confirmation that higher prices will unfold and may wait until cash cattle trade before deciding direction. The idea is that cash will trade higher this week as the packers still seem short-bought and the slaughter pace has improved. Boxed beef prices were higher with choice up $0.51 and select up $3.43. The choice/select price spread is now at $15.78. Feeder cattle remain in strong demand and are holding a large premium to live cattle. Higher corn prices may have impacted futures to some extent. The Commitments of Traders report showed fund traders adding 13,288 long futures to increase their net-long positions to 144,486 contracts. They added 4,248 futures contracts to feeder cattle, bringing their net-long position to 24,592 contracts and a new record-long futures position.

Hog futures closed higher Monday but lost the early luster that was prevalent for much of the day. Cash provided some support but cutouts were negative. There was little for traders to get excited over with the rally potentially finished unless there is further underlying support. The National Daily Direct Afternoon Hog report showed cash up $0.14. Packers are expected to be aggressive Tuesday as they want to purchase early in the week. Pork cutout values were down $1.16. The Commitments of Traders report showed fund traders as net sellers of 11,047 futures contracts, bringing their net-long position to 92,860 contacts.

	BULL SIDE		BEAR SIDE
1)	The cattle slaughter pace is strong and packers need to purchase cattle to maintain the higher pace to meet demand.	1)	Feeder cattle futures are at a record-long position which increases the caution over the potential for profit-taking and a retracement. If stops are triggered, the market could pancake lower.
2)	Heavy cattle weights have not been a detriment to the market. This provides feedlots the confidence to hold for higher prices. This has feedlots in the driver's seat.	2)	Cash cannot trade higher forever and there is the potential for steady cash this week. This could increase the interest of feedlots to sell more aggressively before there could be further price weakness.
3)	Hog futures have had a 3-day rally, bringing prices back up in the previous sideways trading range seen in December. Futures may hold at this level in the near term.	3)	The lows may have been established in hog futures for the time being but the upside price potential may be limited.
4)	There are indications of demand improvement for pork, which should provide traders with the confidence to hold current long positions and potentially add to those positions.	4)	Cash hogs continue to struggle as packers bid up when needed and step back once the majority of their needs are covered. There are sufficient market-ready hogs available.