Tuesday Morning Livestock Market Summary - Traders Search for Support Following Monday's Market Tumble

GENERAL COMMENTS:

Cash cattle trade activity took a back seat Monday to the aggressive liquidation in futures trade and widespread commodity and financial losses early in the week. Bids and asking prices are undeveloped and likely to remain so until there is some sense of stability in the futures trade. Showlists were mixed early in the week, which continues to show limited availability of market-ready cattle through the end of the month even after light-to-moderate trade developed last week. It is likely that cash market trade will be pushed to the last half of the week, and despite attempts to hold prices steady to higher by feedlot managers, the bearish tone of futures trade is going to make this a difficult task. Futures trade is expected to remain lower early Tuesday, although the complex still remains oversold and currently driven by fear that the global economic wheels may be falling off due to the spread of coronavirus. As always, fear is a very poor measuring tool, as many times the overall movements driven by the fear are not rational, especially when it comes to the market. Because of the price point, the beef market is the most vulnerable to an economic downturn than any of the other meat markets, creating the extreme reaction seen early in the week. With April live cattle futures and most feeder cattle futures closing limit lower Monday, expanded trade limits are available, creating the opportunity for markets to swing $4.50 per cwt in live cattle contracts and $6.75 per cwt in feeder cattle before trade is halted. Given the still bearish tone in outside markets, the potential for additional widespread liquidation remains strong despite any fundamental support developing in meat values and domestic demand support likely to build over the upcoming weeks. Tuesday slaughter is expected near 121,000 head.

Sharp losses on Monday in lean hog futures followed the generally weaker trend through all commodities and most financial markets. With the Dow Jones Index falling over 1,000 points by the end of trade Monday, the bearish overall tone of markets in general continued to be the main story, instead of a hog market narrative. Even though lean hog futures posted aggressive losses, compared to pressure in cattle markets, the hog complex was able to fair slightly better with traders unable to move prices limit lower at the end of the session and contracts continue to hold within the moderate sideways pattern over the last month. There is growing uncertainty about how long the panic selling surrounding global movement of coronavirus will be, but this may create some additional volatility through the rest of the week. Cash hog prices are called $1 lower to $1 higher with most bids expected steady. Slaughter Tuesday is expected at 495,000 head.

	BULL SIDE		BEAR SIDE
1)	Boxed beef values bounced higher Monday. This move higher continues to focus on the ability to move additional product during the month of February as the overall wholesale and retail outlook for beef is not nearly as bearish as the future complex moves early in the week.	1)	Cattle futures closed limit lower in live cattle and feeder cattle trade. This opens the door for expanded trading limits and causes increased concern that the still bearish outside markets will drive additional liquidation through the complex.
2)	The cattle complex remains oversold, and without the bearish outside market factors, buyers should quickly step back into the complex, bringing back a portion of the early-week losses. This may take some time to regain market confidence, but it is expected that buyer activity will quickly develop once the dust settles.	2)	Cash cattle markets will have their work cut out for them in order to be anywhere near steady money despite the need for packers to gain access to additional cattle. The bearish move in futures trade is likely to skew the direction of cash markets lower through the week.
3)	Strong gains developed in wholesale pork values Monday, helping to bring some stability to market fundamentals while futures trade tumbled lower. The ability to continue to support overall pork values is expected to help sustain longer-term support in the lean hog complex.	3)	Sharp losses in cash hog values Monday sparked additional concerns that packers are pulling away from the steady-to-higher market trend from the last few days. This could add increased fundamental weakness through the lean hog complex.
4)	Even with increased uncertainty about economic health across the world, it is important that strong U.S. pork production is creating a high demand product that the world needs. This is expected to continue to spark underlying support through the complex as move product moves into export channels and long-term trade relationships develop.	4)	Sharp losses in stock markets on Monday, and the Dow Jones falling over 1,000 points, is still a major concern that may limit additional lean hog buyers from moving back into the market before the end of the month.

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Monday Closing Livestock Market Summary - Livestock Markets Dive Lower

GENERAL COMMENTS:

As if Mondays weren't tough enough already, the news of the coronavirus spreading into South Korea and Japan panicked the market and sent livestock contracts lower -- limit lower in some cases. Hog prices closed lower on the National Direct Afternoon Hog Report, down $1.03 with a weighted average of $48.72. March corn is down 4 3/4 cents per bushel and May soybean meal is down $2.80. The Dow Jones Industrial Average is down 1,031.61 points and NASDAQ is down 355.31 points.

LIVE CATTLE:

Live cattle contracts didn't fare too well through Monday's fearful selling spree. February live cattle closed $2.72 lower at $117.00, April live cattle closed $3.00 lower at $115.25 and June live cattle closed $2.90 lower at $107.37. New showlists appear to be mixed, higher in Texas, and Kansas, but lower in Nebraska/Colorado. Cash cattle trade has yet to really develop, but when it does this week it will most likely be painful to watch unless the market turns around and makes a come back all while changing the moral of producers, traders and investors.

Boxed beef prices close higher: choice up $1.98 ($207.07) and select up $0.67 ($202.37) with a movement of 98 loads (56.12 loads of choice, 12.11 loads of select, 13.12 loads of trim and 16.97 loads of ground beef). Monday's slaughter is estimated at 118,000 head, 11,000 head more than a week ago and 3,000 head more than a year ago.

TUESDAY'S CASH CATTLE CALL: Lower. The futures market (whether rational or not) is tumbling hand over fist. Unless the later part of the week strengthens and producers don't rapid fire sell their cattle early in the week, cash prices will most likely be lower.

FEEDER CATTLE:

Feeder cattle contracts suffered tremendously Monday as a bulk of the contracts sold with limit losses. March feeders sold $4.17 lower at $136.02, April feeders sold $4.50 lower at $137.60 and May feeders sold $4.50 lower at $138.35. Until the market builds some certainty around knowing how wide and vast the coronavirus is going to spread, worry about other country's economies becomes worrisome. Compared to last week feeders in Missouri both steers and heifers sold $5.00 to $10.00 higher, with the sharpest advancement of 400 to 550 weight feeders. As the market begins too look to spring and the opportunity of grass, both feeders and farmer feeders are interested in buying up calves but have to pay a little more since there aren't as many around this year. The CME feeder cattle index 2/21/2020: down $1.05, $141.02.

LEAN HOGS:

Lean hog prices kept more ground than the cattle contracts did but still closed $1.20 to $2.40 lower. April lean hogs are down $2.40 at $64.62, June lean hogs are down $1.90 at $79.95 and July lean hogs are down $1.45 at $81.27. Pork cutouts totaled 276.90 loads with 255.78 loads of pork cuts and 21.12 loads of trim. Pork cutout values: up $1.32, $66.32. Monday's slaughter is estimated at 495,000 head, 10,000 head more than a week ago and 139,000 more than a year ago. The CME lean hog index 2/20/2020: up $0.09, $55.87.

TUESDAY'S CASH HOG CALL: It's hard to say what cash prices will be with so much uncertainty floating around the marketplace. Lower is the better guess as every sector of the industry seems to be cautious of the marketplace right now.

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Monday Morning Livestock Market Summary - Limited Trade Direction Expected

GENERAL COMMENTS:

Initial trade is expected to remain sluggish through most cattle markets with cash market interest on the back burner once again with bids and asking prices not expected until near midweek. Showlist distribution and inventory taking is likely to be the main focus Monday morning with feeders attempting to maintain the momentum of last week's higher prices in live cattle trade. Expected larger supply levels through much of the spring and summer months is creating some additional caution with packers attempting to curb cash spending levels due to weaker margins and the lack of significant price improvements in beef values the last couple of weeks. Asking prices are expected to remain elevated when cattle are priced in the next couple of days, but the gap between asking prices and initial bids is likely to remain wide, with potential active trade not seen until the last half of the week. Futures are expected mixed following the moderate-to-strong pressure last week in spot April live cattle trade. April live cattle futures fell $2.08 per cwt from the previous Friday, taking out most of the early February rally. Although April futures are still holding above support levels, and February lows at $117.17 per cwt, the concern that follow-through pressure early in the week could further weaken the entire complex. A move below support levels through the end of the month would likely stimulate additional active liquidation despite the direction of short-term fundamentals. Lighter-than-expected placements during the month of January remain the bright spot of the market, indicating that tighter supplies of feeder cattle to place into feedlots remain the main focus, helping to build long-term support back into the overly sold cattle complex. Monday slaughter is expected near 121,000 head.

Mixed trade is expected during initial activity Monday as traders continue to struggle with the ability to spark aggressive buyer support given additional questions of coronavirus impacts across the world. Although the number of cases reported and daily deaths is starting to slow, the concern of the long-lasting impact on the economy remains significant. The fact that the virus is impacting normal daily activities not as much because of the number of people infected, but the attempt to keep the virus from spreading, is touching every part of local and national economies through China and other countries in the world. Limited fundamental support is expected to continue to slowly develop during early week trade with traders focusing on long-term demand growth while domestic pork supplies still remain abundant. Cash hog prices are called 50 cents lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Monday is expected at 495,000 head.

	BULL SIDE		BEAR SIDE
1)	Cattle placement of feeder cattle in January fell 1% from year-ago levels. This reduction of new cattle in feedyards signals tightness of cattle available on farms and ranches as has been expected the last few weeks. Cattle placements fell nearly 2% below previous trader expectations.	1)	Even though larger cattle on feed supplies were expected, the fact that cattle inventories are still 2% above year-ago levels is likely to limit aggressive buyer support through the end of the month.
2)	Light late week support slowly developed in boxed beef values Friday. This is helping to limit the underlying pressure in the complex as traders look for additional demand support in the next four to six weeks.	2)	Cash cattle prices remained steady to $1 per cwt higher last week. Although higher money is positive, this move higher is considered disappointing given the tighter supplies through the first quarter of the year and limited price support the past several weeks.
3)	Pork cutout values bounced higher through the end of last week. This increase in pork prices is expected to help create additional momentum through early week trade based on short- and long-term demand growth in domestic and export markets.	3)	Cash hog values have slowly eroded through the end of last week. This is creating concerns that additional weakness may develop through the end of February in both cash and wholesale pork values.
4)	Despite strong U.S. pork supplies it is important to remember that China and other Asian markets continue to be plagued by lower production due to African swine fever. Even though the focus has been on coronavirus, the need to supply food for these pork-dependent countries will help to create long-term demand support.	4)	Continued concerns of coronavirus heavily impacting the Chinese economy may severely limit the expected pork buying activity in the coming weeks and months.

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Friday Closing Livestock Market Summary - Livestock Contracts Close Lower

GENERAL COMMENTS:

Livestock markets closed lower as pressure took the steam out of the early part of the week's rally. Hog prices closed slightly lower on the National Direct Afternoon Hog Report, down $0.08 with a weighted average of $49.70. March corn was down 1 1/2 cents per bushel, and March soybean meal was down $3.70. The Dow Jones Industrial Average was down 227.57 points, and the NASDAQ was down 174.37 points.

From Friday to Friday, livestock futures scored the following changes: February live cattle down $1.10, April live cattle down $2.08, March feeder cattle up $1.68, April feeder cattle up $0.72, April lean hogs up $2.73 and May lean hogs up $1.03.

LIVE CATTLE:

The cash cattle market's demise this week was largely due to the futures market's uncertainty. Trade was light to moderate this week with Northern dressed deals ranging from $188 to $191, mostly $190, generally steady with the prior week's weighted average basis Nebraska. Live deals ranged from $117 to $121, mostly $119 to $120, steady to $1 higher. Southern live trade was at $120, $1 higher than the prior week's weighted averages. Seeing that packers are short bought on cattle, the market should have been able to jump prices easily $1.00 to $2.00 higher. But with the weaker board position, the support the cash cattle market needed never developed.

February live cattle closed $0.37 lower at $119.72, April live cattle closed $0.90 lower at $118.25 and June live cattle closed $0.65 lower at $110.27.

February's USDA Cattle on Feed report showed cattle and calves on feed up 2%, placements down 1% and marketing up 1%.

Closing boxed beef prices are higher: choice up $0.59 ($205.09) and select up $0.10 ($201.70) with a movement of 97 loads (50.68 loads of choice, 13.41 loads of select, 18.76 loads of trim and 14.09 loads of ground beef). Friday's slaughter is estimated at 121,000 head -- 10,000 head more than a week ago and 5,000 head more than a year ago. Saturday's kill is expected to be around 33,000 head.

MONDAY'S CASH CATTLE CALL: Steady. Until the board picks a direction, the cash market will sit idly.

FEEDER CATTLE:

Feeder cattle prices closed lower -- moderately lower in nearby contracts, while deferred contracts had losses greater than $1.00. March feeders closed $0.60 lower at $140.20, April feeders closed $0.42 lower at $142.10 and May feeders closed $0.72 lower at $142.85. On Thursday at Winter Livestock in Pratt, Kansas, 2,866 head of feeders sold. In comparison to last week, feeder steers weighing 800 to 1,000 pounds sold mostly steady to $2.00 higher. Feeder heifers sold $2.00 to $4.00 higher. Using a limited amount of comparable weights, weaned steer calves showed lower undertones, and heifer calves sold $3.00 to $6.00 higher. The CME feeder cattle index for 2/20/2020 was not available at this time.

LEAN HOGS:

Lean hog contracts closed mostly lower, simply pressured by the downward pressure on the entire livestock sector. April lean hogs closed $0.15 higher at $67.02, May lean hogs closed $0.45 lower at $74.02 and June lean hogs closed $0.10 lower at $81.85. Pork cutouts totaled 318.34 loads with 286.89 loads of pork cuts and 31.45 loads of trim. Pork cutout values: up $0.56, $65.00. Friday's slaughter is estimated at 467,000 head -- 14,000 head less than a week ago and 7,000 head less than a year ago. The CME lean hog index for 2/19/2020: up $0.24, $55.78.

MONDAY'S CASH HOG CALL: Steady. Next week's market is going to depend largely on what the futures market decides to do. Packers are cutting back on their kills, so if the board is strongly lower, packers will be leery of bidding hogs higher. But if the board comes out stronger, packers may pay a little more.   

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