March 11, 2014
Fed cattle, steady to higher
Feeder cattle, steady to higher
Lean hogs, higher
Wall Street opened sharply lower Monday on concerns about economic softness in Asia. The indexes recovered most of those losses, but still settled lower and are lower again overnight. Traders believe unrest in Ukraine is easing.
Overnight trade points firm in cattle, higher in hogs.
Cash fed cattle. On Monday USDA reported negotiated cash trade was inactive on light demand in all feeding regions.
Nebraska feedlots responding to a Dow Jones survey report offering 2,000 fewer cattle than last week. Colorado show lists are down 1,000 from last week. Kansas offerings are down 8,000. Texas show lists are up 5,000 from last week. That nets out to 6,000 less cattle on this week's show lists in the four states.
Monday's morning choice cutout was up $1.71 at $237.74, with select up $1.95 at $234.82. Afternoon boxed beef cutout values were sharply higher on moderate demand and light offerings. Choice was up $2.88 at $238.90, with select up $3.12 cents at $235.99 on 105 loads.
USDA estimated Monday's cattle slaughter at 105,000, down 8,000 from last week and down 12,000 from last year.
Recapping last week's trade, the Texas Panhandle saw light trade with light demand on Thursday and limited trade on light demand on Friday. For the week, live sales sold mostly $2 lower with the bulk of sales $148 on a light test.
Trade and demand were light on Wednesday and Thursday in Kansas. For the week, live sales sold $2 lower at $148.
Trade and demand were light on Wednesday in Nebraska with moderate trade on light demand on Thursday. For the week in Nebraska, live sales sold mostly $2 lower at $150, with dressed sales steady to $3 lower from $237 to $240.
Trade and demand were light on Thursday in Colorado. For the week, live sales sold $2 to $2.50 lower at $150.
Trade and demand were light on Thursday and Friday in the Western Corn Belt. For the week in the Western Corn Belt, live sales sold $2 to $3 lower from $147 to $148, with dressed sales steady to $4.50 lower with the bulk of sales from $235.50 to $240.
The latest HedgersEdge packer margin index was $18.15 per head Monday, compared with minus $26.70 Friday.
Cash feeder cattle. Compared to two weeks ago, Oklahoma National Stockyards reported yesterday's feeder steers steady to $2 higher. Feeder heifers were steady to $3 higher. Demand was moderate to good for feeder cattle with least demand on heavier weights. Stocker cattle and calves $5 to $10 higher. Demand remains extremely good for lighter weight cattle.
Feeder cattle were in medium to fleshy conditions with average to many full weigh-ups. Feeder cattle continue to run with the bulls as corn futures retreated yesterday. Receipts totaled 79% over 600 lbs and 26% heifers.
Cattle futures. Cattle futures ended mostly higher amid weakening projected costs for corn, a staple feed grain.
Most-active June fed cattle rose 52 cents to $136.40. Contracts beyond June gained at least 35 cents.
March feeder cattle gained $1.32 to $173.70. April through November gained at least $1.55 as corn futures prices slipped.
Bottom line. Rising wholesale cutout values and spillover support from hogs buoy fed Cattle futures. Cheaper corn lifts feeder cattle.
Cash hogs. Market participants pushed Monday's live cash hog prices higher.
However, trade chatter hints that live hog buying interest may ease in weeks ahead as packers adjust slaughter schedules to expectations hog supplies will keep tightening.
USDA's afternoon reports showed Monday's weighted-average:
* National base price up 33 cents at $106.31.
* Iowa-Minnesota up $1.15 at $108.44.
* Western Corn Belt up 91 cents at $108.03.
* Eastern Corn Belt was up $1.67 at $104.02.
Price changes are compared to USDA's afternoon report for Friday.
USDA estimated Monday's hog slaughter at 413,000, up 16,000 from last week and down 4,000 from last year.
Data USDA collected under Mandatory Reporting showed Monday's morning plant cutout up $1.60 at $113.59. Afternoon cutout values were:
FOB plant up $2.95 at $114.94.
FOB Omaha up $2.42 at $113.55.
Based on 216 total loads.
Based on the new cutout Dow Jones estimated Monday's packer margin index at plus $6.19 per head vs. plus $3.12 on Friday.
On Friday the CME two-day lean hog index advanced for a thirty-first day, rising $1.10 to $104.73. It's the highest price since August 2013 and 31.6% above a year ago. Its recent lows are $79.91 on Jan. 20, $79.23 on Dec. 23 and $80.83 on Nov. 25. Recent peaks are $81.05 on Jan.10, $82.91 on Dec. 4, $91.48 on Oct. 24, $98.25 on Sept. 20 and $102.56 on Aug. 15.
Hog futures. Front-month April and June hogs settled at their exchange-imposed $3 daily limit up to the highest ever closing prices Monday. An extended rise in wholesale pork and cash hog prices due to expectations baby pig death losses due to porcine epidemic diarrhea virus will severely crimp slaughter hog supplies going forward drove the rally.
Monday's USDA World Ag Supply and Demand Estimates trimmed this year's forecast U.S. pork production by 60 million pounds to 23.4 billion pounds, citing a drop in hog numbers. Projected production is still 1% higher than 2013 levels. The reduced production estimate also supported gains in futures.
Tightening hog supplies have grocers and restaurants paying higher wholesale prices for pork products. Some retailers booked products months ago at lower prices. Packers, who now have to deliver on those contracts, while paying higher prices for live hogs face pressure on margins. Whether consumers will be willing to pay higher prices for pork when it eventually reaches the meat case remains to be seen. They may balk.
Packer margins based on spot prices are reasonably easy to estimate. Degree of forward meat sales and forward coverage on cash hog purchases makes weighted average margins really difficult to estimate.
PEDV losses and seasonal forces will shrink pork production in the weeks ahead. The market is wrestling with whether the on-going rally has lifted hog and pork prices to a level that will match expected supplies with buying interest going forward.
April hogs locked their $3 limit up at $116.00 early in the session, the highest ever closing price for any front-month contract. Monday's jump in prices marked the fifth record high over the past week. June hogs also locked $3 up at $123.50, also a fresh high for that contract.
Bottom line. Fears that intensifying PEDV death losses could trim summer slaughter 10% or more keep feeding the hog market bull. Some traders sense futures are starting to become overpriced. Uncertainty of magnitude of PEDV death losses keeps supply highly uncertain.