December 4, 2013
Fed cattle, steady
Feeder cattle, steady
Lean hogs, steady to lower
Gains in stock futures overnight suggest Wall Street will overcome a three-day retreat. Traders await reports on private sector jobs from payroll processor ADP and Census Bureau data on new home sales. The Federal Reserve will release its Beige Book, a summary of regional economic conditions.
The cattle complex found little direction in overnight trade. A weaker tone surfaced in hogs.
Cash fed cattle. On Tuesday USDA reported mostly inactive trade on light demand in all feeding regions.
Cattle owners will point to two forces as reasons to ask higher prices. One is the 39,000 head reduction in this week's show lists, with 30,000 of that cut in Nebraska. The other is cold, snowy weather forecast for parts of Colorado, the Dakotas and western Nebraska. Bad weather could entice some early sales if owners can get their price.
Last week's live basis cattle traded mostly $1 to $2 higher than the previous week in a $132 to $134 range. Dressed basis cattle sold $2 to $3 higher from $209 to $210.
Tuesday's morning choice cutout slipped 47 cents with select off 95 cents. Afternoon cutout values were steady on choice while lower on select on light to moderate demand and moderate offerings. Choice was down 6 cents at $203.00 and select down $1.53 at $189.95. Load count totaled 188.
USDA estimated Tuesday's cattle slaughter at 121,000. Total so far this week of 238,000 is down 11,000 from last week and down 10,000 from a year ago.
Cattle futures. Fed cattle fell, as traders see the potential for climbing wholesale beef prices to potentially curb spending by some domestic grocery stores, restaurants and consumers on steaks, roasts and other beef products.
Wholesale beef prices had risen for six consecutive days before slipping Tuesday. Volume has started to thin. Some traders interpret low volume at recent near-record prices as a sign that consumer pushback is trimming buying interest at wholesale.
On Tuesday front-month December fed cattle slipped 72 cents to a composite close of $132.52. Most-active February slid 25 cents to $134.02.
Feeder cattle settled mostly lower. Most-active January slid 55 cents to $164.80. Composite close on March was down 52 cents at $165.15. April through August lost 45 to 62 cents.
Bottom line. Beef cutout slippage on eroding wholesale volume fuels thoughts retailers are feeling resistance from consumers on paying near-record high prices.
Cash hogs. Tuesday's packer bids ran mostly steady with Monday. Trade talk hints demand should rise throughout the week. Packers are gearing up for another large weekly kill, with a few more needing to secure supplies for later in the week.
Packers paying in the low end of base price ranges bought a larger share of the hogs, letting weighted averages drift lower.
USDA's afternoon reports showed Tuesday's weighted-average:
* National base price slipped 24 cents to $79.61.
* Iowa-Minnesota fell $1.43 to $80.34.
* Western Corn Belt down 96 cents to $80.25.
* Eastern Corn Belt dipped 19 cents to $77.97.
Price changes are compared to USDA's afternoon report for Monday.
USDA reported last week's Iowa-southern Minnesota barrows and gilts averaged 281.7 pounds, up 0.3 pound from the previous week 6.5 pounds heavier than a year ago.
USDA estimated Tuesday's hog slaughter at 440,000. Total so far this week of 880,000 is up 19,000 from last week and up 15,000 from a year ago.
Data USDA collected under Mandatory Reporting showed Tuesday's morning plant cutout down 83 cents at $90.70. Afternoon cutout values were:
FOB plant down 54 cents at $90.99.
FOB Omaha down 90 cents at $89.67.
Based on 411 total loads.
The CME two-day lean hog index for Monday, calculated using USDA data, advanced 37 cents to $82.25. It's up four straight days and $1.42 off its recent low of $80.83 on Nov. 25, but remains below its recent peaks of $91.48 on Oct. 24, $98.25 on Sept. 20 and $102.56 on Aug. 15.
Based on the new cutout Dow Jones estimated Tuesday's packer margin index at plus $14.19 per head vs. plus $14.21 on Monday.
Hog futures. Hogs posted heavy losses Tuesday, falling more closely in line with recent cash hog values, which have come under pressure as near-term supplies of heavy-weight hogs have grown. Slaughter weights have risen to record-high levels, further boosting pork tonnage.
Uncertainty about how long that trend will last has supported deferred contracts, as traders continue to search for signs that the market is approaching a supply pinch due to death losses from porcine epidemic diarrhea virus. PEDV is known to have killed many litters of young pigs across the country. But market watchers remain in the dark as to the number of hogs impacted. Lack of confirmation this week of that anticipated shift in the supply for hogs has caused traders to take out some of the premium built into the market Tuesday.
The market was counting on a $4 to $5 run in the cash at a time when a lot of producers are selling very heavy hogs. Spot December at $84.90 does not mesh with the national base at $79.60. Cash will rise or December will fall to narrow the gap before December expires in two weeks. Cash hogs will have a hard time advancing with a lot of heavy hogs coming.
The composite close on front-month December fell $1.12 to $84.90, the lowest close for the spot contract in over three months. February, the big loser, settled down $1.27 to $89.17, a nearly two-month low in that contract's lifetime.
Bottom line. Big supplies of heavy hogs weigh on cash markets. Unknown PEDV death losses create more supply uncertainty. The premium of December hogs over cash is wide as expiration looms.