Monday Midday Livestock Market Summary - Losses Redevelop in Hog Futures

General Comments

Sharp triple-digit losses have redeveloped Monday morning with contracts breaking through support levels of $52.97 per cwt through early trade. Limited support has pushed nearby lean hog trade off of session lows, but the complex remains under strong pressure based on fundamental weakness. Cattle trade is mixed in a narrow range after unable to sustain early buyer activity. Corn futures are lower in sluggish trade. March corn futures are 4 3/4 cents lower. Stock markets are higher in light trade. Dow Jones is 162 points higher with Nasdaq up 44 points.

LIVE CATTLE:

Limited trade activity is seen in live cattle futures early Monday morning. This is allowing prices mixed in a narrow range at midday with prices hovering from 30 cents lower to 2 cents higher. Gains in the limited cash cattle trade that was reported last week helped to spark some early morning buying activity. But the focus through cattle country is likely more focused on cleaning up from the latest round of snow and ice storms, which may limit commercial trade activity through the day. Cash cattle activity remains sluggish with inventory taking and show list distribution the main order of business when it comes to marketing. The limited trade last week is creating additional questions, with expected left over cattle from last week needing to be moved off of yards. Boxed Beef cut-outs at midday are higher, $2.20 higher (select) and up $0.03 per cwt (choice) with light movement of 39 total loads reported (16 loads of choice cuts, 8 loads of select cuts, 3 loads of trimmings, 9 loads of ground beef).

FEEDER CATTLE:

Lack of trade activity early Monday seems to be the main focus through feeder cattle trade with prices scattered from 25 cents lower to 27 cents higher in very limited activity. The lack of consistency through the complex Monday is adding to the focus on increased underlying activity. This may add some additional stability to the complex as traders focus on sharp losses in hog trade as well as continued pressure through the grain complex. Little new market information is expected to develop through the rest of the complex, allowing for stagnant market direction to likely continue the rest of the trading session.

LEAN HOGS:

Sharp triple-digit losses swept through nearby contracts once again with April through August futures now trading $1 to $2.10 per cwt lower. Although spot month April futures have pulled back from session lows, the tone of the market has quickly weakened. Hopes late last week of export deal news and trade talks with China has once again fallen on deaf ears for hog traders as no new information is available and traders are looking for any sense of support. April futures are holding at $53.27 per cwt Monday morning. A close below $52.97 would set contract lows and break through support levels seen last week. This would likely further weakness across the complex. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.28 at $46.62 per cwt with the range from $43.00 to $47.00 on 3,540 head reported sold. Cash prices unreported due to confidentiality on the Iowa/Minnesota Direct morning cash hog report. Pork carcass values bounced higher Monday morning following triple digit gains in most primal cuts. Pork cutouts added $1.52 per cwt at $60.53 per cwt with 89 loads traded. Lean hog index for 2/21 is $53.65, down $0.41, with a projected two-day index is $53.13, down $0.52.

#completecalfcare

Monday Morning Livestock Market Update - Limited Cash Cattle Trade Posts Gains

GENERAL COMMENTS:

Limited trade developed in the North late Friday, although the wait was worth it for feedlot managers as prices developed at $202 per cwt, $2 higher than the previous week. The lack of trade at these levels and abandoning trade in the South is clearly a concern going forward. There could be some spillover trade Monday in order to acquire enough cattle to keep plants full or near full through the week. For the most part, both sides will move to the routine task of collecting numbers with inventory-taking and showlist distribution in cattle country. Futures are expected mixed to mostly higher with follow-through support from late last week, as well as the firm cash market shift supporting futures trade.

Cash hog values are steady to $1 per cwt lower as traders return from the weekend and the latest round of winter weather. The weather conditions are expected to delay overall hog movements yet again, curtailing overall processing schedules early in the week. Futures are expected mixed in a choppy and generally unsettled trading range as traders are still focused on the uncertainty of last week's follow-through gains. The ability to hold prices above last week's low of $52.97 will be huge but will be the focus of many traders through the early part of the week. If recent lows can hold, traders will likely step back into the market, building on these support levels. Slaughter runs are expected at 455,000 head Monday.

BULL SIDE	BEAR SIDE
Beef in cold storage was listed at 495 million pounds, this is nearly 20 million pounds less than 2017 levels in the delayed Cold Storage report.	Cattle in feedlots grew 2% during the month of December. This focus on growing supply will likely curb overall market expectations, although the delayed nature of the report is not expected to add much market action early Monday.
Late-developing cash cattle trade in the North pushed prices $2 per cwt higher than the previous week. With cash markets at $202 per cwt, and packers remaining short-bought, the expectation for further gains is developing.	The inability to actively trade cattle last week indicates that packers are willing to hold out and potentially cut overall plant output rather than actively continue to move prices higher. This could quickly change the direction of the market if packers continue to abstain from buying activities through the next couple of weeks.
Strong lean hog futures gains late last week is helping to distance price levels from recent levels. Trades are looking for increased volume to develop in order to build on recent market support.	Pork in cold storage increased 15 million tons from 2017 levels, in the delayed release of the reports. This reiterates the focus on growing pork supplies, which has remained under pressure the last few months.
Firm cash hog prices developed late last week, sparking increased underlying support expected to develop through the next couple of days. The need to gain access to market-ready hogs means packers have to spend more money.	Limited activity is expected in futures trade Monday morning. This is expected to add even more uncertainty to the direction of the market, which has wildly shifted higher and lower late last week.

#completecalfcare

Friday Closing Livestock Market Summary - Livestock Prices Mixed in Light Trade

GENERAL COMMENTS: Limited activity slowly developed in livestock trade Friday as traders backed away from wide market swings this week and focused more on position-squaring ahead of the weekend. This left prices mixed in a narrow trading range in most contracts. From Friday to Friday, livestock futures scored the following changes: Feb LC up $2.05; Apr LC up $1.70; Mar FC up $0.30; Apr FC up $0.08; Apr LH off $4.08; May LH off $2.98. Cash cattle trade remained at a standstill as of midafternoon Friday, and it appeared that active trade would hold off until late afternoon and evening Friday once again. This has becoming a pattern over the last few weeks of both sides holding out until Friday evening. Bids had improved slightly and were holding at $123 to $125 live and $202 dressed. Even though the gap was slowly narrowing, it was still below asking prices of $128 live and $205 to $207 dressed. The National Daily Direct afternoon hog report was $0.42 higher ($43.50-$47.85, weighted average $46.76) on 9,206 head sold. Corn futures were mixed in light activity with the March down 1/4 cent per bushel. The Dow Jones Index was 181 points higher with Nasdaq up 67 points.

LIVE CATTLE: Live cattle futures saw firm late-week gains of $0.07 to $1.05. The front-month February contract closed $1.05 higher, though support was mainly due to traders trying to roll out of the expiring contract. The rest of the contracts were stuck in narrow trade ranges from 7 to 30 cents per cwt as traders continued to focus on increased support. With beef demand remaining strong and expected market firmness through spring, live cattle futures are expected to hold in the top end of trading ranges over the next couple of weeks. Beef cut-outs: higher, up $0.94 (select, $212.35) to up $1.32 (choice, $219.39) with light demand and offerings, 82 loads (33 loads of choice cuts, 12 loads of select cuts, 8 load of trimmings, 28 loads of coarse grinds).

MONDAY'S CASH CATTLE CALL: Steady. Activity early next week will return to normal information-gathering. Showlists will be delivered and inventory will be taken as both sides assess market direction and needs. Bids and offers are not expected until midweek or later.

FEEDER CATTLE: Feeder cattle futures trickled lower in limited activity. Futures closed $0.32 lower to $0.35 higher. Limited volume seemed to be the consistent theme Friday with narrow losses developing in all nearby contracts. The Jan. 1 Cattle on Feed report released Friday afternoon showed a 2% placement loss in December 2018 compared to December 2017, but since the information was delayed, the impact of the numbers is likely to be minimal when trade resumes next week. CME cash feeder index for 2/21 is $141.31, up $0.20.

LEAN HOGS: Lean hog futures closed mixed ($0.50 lower to $0.22 higher) in limited trade. April struggled to draw support back to the complex as traders focused on squaring positions Friday. Outside of the spot-month April contract, which posted a 50-cent loss, the rest of the complex remained mixed to mostly higher with futures contained in a narrow range. The lack of follow-through support due to light trade volume is expected to be viewed as bearish, as traders tried to capitalize on the Thursday rally. Pork cutout values continue to erode with strong price pressure in most primal cuts. Pork cutout values fell $2.22 per cwt, moving to $59.01 per cwt on 337 loads. CME cash lean index for 2/20 is $54.06, down $0.07. DTN Projected lean index for 2/21 $53.65, down $0.41.

MONDAY'S CASH HOG CALL: Steady to $1.50 lower. Continued cash market pressure is expected to develop early next week as packers focus on the backlog of hogs over the past week or so, as well as the next round of winter weather that may continue to delay hog movement over the weekend and into Monday morning. Monday slaughter is expected at 468,000 head, dependent on weather.

#completecalfcare

Ag outlook shows demand for meat remains strong

Outlook for livestock and dairy is for another year of record total meat and dairy production.

Demand for meat is quite strong, and even with strong production and supplies, that is likely to continue, according to Shayle Shagam, livestock analyst at the U.S. Department of Agriculture and the World Agricultural Outlook Board.

Shagam, speaking at USDA’s annual Agricultural Outlook Forum on Feb. 22, said unemployment is projected to continue to decline, and consumer prices are expected to increase less rapidly than in 2018. Both of these factors tend to be support for meat demand.

“We like meat; we’ve always seemed to have a soft spot for beef,” Shagam said. “Even though exports are taking up an increased proportion of production, the U.S. consumer remains willing to pay for meat.”

He said the economic growth tends to support consumption of meat both at home and away from home. Real U.S. gross domestic product (GDP) is expected to grow by more than 2% in 2019, somewhat lower than last year’s growth.

USDA chief economist Robert Johansson projected that with low and stable feed costs over the past few years and projected going forward, the outlook is for another year of record total meat and dairy production.

Total red met and poultry production in 2018 increased for the fourth consecutive year, growing just over 2% to a record 102.4 billion lb. In 2019, red meat and poultry production is forecasted to increase about 2% to reach a further record 104.7 billion lb. Production records are expected for beef, pork and broilers, based on USDA's projections.

The large production levels weighed on prices during 2018, Shagam said. Prices for cattle, hogs and turkey were lower, but demand strength in the first half of the year supported broiler prices. Broiler prices did, however, come under pressure later in the year. For 2019, prices for cattle and turkey are expected to rise, but hog and broiler prices are expected to be lower.

The five-area steer price for 2019 is expected to average $115-122/cwt., up slightly from the 2018 average of $117, Shagam reported. “Despite increased production, beef demand is expected to remain strong, and the willingness of feedlot operators to hold cattle in feedlots longer may help support prices during much of the year,” he added.

Cow/calf operators and backgrounders will likely see lower prices during 2019 based on a combination of higher feed prices, expected large supplies of cattle in feedlots and adequate supplies of calves available for placement. Feeder steer prices in 2019 are forecasted to average $141-148/cwt., compared to $147 in 2018.

“Hog prices saw marked volatility in 2018, falling by over 20% from highs following the tariff retaliation and stronger supply and then some signs of recovery amid [African swine fever] outbreaks and uncertain prospects for China demand,” Johansson explained.

Commercial pork production for 2019 is expected to be a record 27.34 billion lb., 4% higher than in 2018. Although the increase will be primarily driven by higher slaughter hog numbers, carcass weights are forecasted to increase slightly in 2019. Despite facing record-high slaughter numbers, especially in the fourth quarter, recent expansion of slaughter capacity should be able to absorb the expected availability of slaughter hogs. U.S. hog prices (national base, 51-52% lean, live equivalent) are projected to average $41-44/cwt. for 2019, down from $46 last year, USDA reported.

In the face of relatively weak margins expected during 2019, the broiler sector is likely to remain cautious in flock expansion plans in the coming months. However, slaughter capacity is expected to expand in the later part of 2019, which will support demand for broilers.

Shagam said egg prices are more stable but will remain below 2018, more in the range of $1.22-1.29/doz. Following the big jump in prices after highly pathogenic avian influenza hit in 2015 and the volatility in recent years, eggs are returning to “more normal seasonal price patterns,” he said.

Exports

Exports for 2019 are expected to increase for all major commodities, although pork export growth is likely to be dampened by ongoing trade disputes.

Shagam said pork exports saw growth through November, but there was a shift in the buyers. He explained that prices helped push product to markets, even though exports to China and Hong Kong have been down since midyear 2018, when tariffs took effect. Meanwhile, pork exports to South Korea are up nearly 40%.

Beef exports in 2018 are expected to have increased about 11%, as U.S. beef prices remained competitive and global demand was firm. U.S. exports in 2019 will face the prospects of higher prices, but recent drought and flooding events in Australia may limit competing supplies. Beef exports for 2019 are expected to be 3.26 billion lb., just over 2% higher than 2018.

U.S. broiler meat exports for 2019 are projected to increase to 7.15 billion lb., up 1% from 2018 but still below the 2013 record level of 7.35 billion lb. “Competitive prices or export products in a number of price-sensitive markets will help support sales. Supplies of leg quarters, which supply a large share of U.S. exports, are expected to be ample with increased U.S. broiler production, and leg quarter prices thus far in 2019 remain below 2018,” Shagam said.

Read the full livestock and poultry outlook.

#completeherdhealth