Morning Livestock Review by John Otte

Seasonally rising cash fed cattle supply points to lower prices ahead, seasonally tightening hog supply points to higher prices ahead

Published on: Apr 17, 2015

April 17, 2015

Top U.S. poultry processor Tyson says an Iowa turkey farm which contracts with the company had a flock diagnosed this week with deadly avian influenza, among a spate of such cases afflicting upper Midwest turkey barns. It's the first bird flu case involving Tyson, though the company says its core chicken operations aren't affected and the impacted farm has been quarantined. The USDA confirmed the case Tuesday, marking the first Iowa poultry operation impacted by the current strain of the virus.

Cash fed cattle. On Thursday USDA reported negotiated cash trade was mostly inactive on light demand in all feeding regions.

Last week on Friday Kansas saw slow trading on light demand. In the Northern Plains and the Western Corn Belt trading was moderate with light to moderate demand. The majority of all sales for the week in these regions are for 15 to 30 day delivery. In Kansas for the week live sales sold $4 lower at $163. In Nebraska for the week live sales sold mostly $2.50 lower at $165.50. Dressed sales sold $3 to $5 lower from $260 to $263. In Colorado live sales sold $7 lower at $163 for the week. In the Western Corn Belt for the week the bulk of live sales sold $2 to $3 lower at $165. The bulk of dressed sales sold $5 lower at $260. For the week in the Texas Panhandle trading was inactive. The last fully reported market was from two weeks ago with live sales at $167.

Thursday s morning choice boxed beef cutout was up 22 cents at $261.02 with select up 39 cents at $251.61. Afternoon boxed beef cutout values were weak on light to moderate demand and moderate offerings. Choice was down 42 cents at $260.38 with select down 25 cents at $250.97 on 161 loads.

USDA estimated Thursday's cattle slaughter at 102,000. Slaughter so far this week of 429,000 is up 21,000 from last week but down 27,000 a year ago.

The latest HedgersEdge packer-margin index was positive $10.70 per head on Thursday, compared with negative $21.30 a day earlier.

Cattle futures. Live cattle advanced Thursday as beef supplies remain tight, pushing up the cash price in recent weeks. The most recent cash prices, in the $163 to $167 area, remain higher than the front-month April futures contract that settled Thursday at $160.80, up 7 cents on the day. That spread will narrow before April futures expire at the end of the month. Futures traders currently expect the gap to narrow by cash fed cattle retreating. Cash cattle owners think the supply and demand balance is tight enough that futures will have to rise.  Likely, futures will rise some and cash will give some ground.

June fed cattle gained 32 cents to $152.00. June trading nearly $9 below front-month April says the market expects cash fed cattle prices to retreat into summer as supplies rise seasonally.

May feeder cattle gained 57 cents to $215.00. Remaining contracts advanced at least 40 cents.

The CME listed no notices to deliver on April fed cattle futures yesterday.

Bottom line. Optimism for stronger demand and continuing tight supplies lift cattle complex. Market still expects fed cattle supplies to rise seasonally into early summer.

Morning Livestock Review by John Otte

Cash hogs. Compared to Wednesday, on a plant by plant basis, Thursday's weighted-average base prices were $1.19 lower to $1.33 higher, mostly 50 cents to $1.25 higher, with a few 50 cents lower. Market activity and demand were moderate. The base price range was $55 to $63.50.

USDA's afternoon reports showed Thursday's weighted-average:

* National base price down 16 cents at $62.14.

* Iowa-Minnesota average was down 19 cents at $62.73.

* Western Corn Belt was down 17 cents at $62.73.

* Eastern Corn Belt average was not reported due to confidentiality.

Price changes are compared to USDA's afternoon report for Wednesday.

USDA estimated Thursday's hog slaughter at 431,000. Slaughter so far this week of 1.745 million is up from 1.573 million last week and 1.621 million a year ago.

USDA reported Thursday's morning plant cutout down 75 cents at $66.54. Afternoon cutouts were:

* FOB plant down $1.15 at $66.14.

* FOB Omaha down 70 cents at $65.67.

* On 324 loads.

Wednesday's CME two-day lean hog index rose 82 cents to $62.98.

The Wall Street Journal estimated Thursday's packer margin index at plus 95 cents per head vs. plus $2.09 on Wednesday.

Hog futures. Hogs climbed Thursday to a nearly three-month high on a front-month basis, bouncing back after declining a day earlier on concerns about heavy hog supplies. Signs that retailers have been paying higher prices for pork for the spring-and-summer grilling season helped fuel the gains.

Some analysts said futures were bolstered by expectations that hog production will slow in the second quarter from the first, tightening supplies. Still, supplies of market-ready animals remain heavy as herds have bounced back from a deadly virus that killed millions of pigs over the past two years.

Wholesale pork prices remain significantly cheaper than beef, but average prices have risen in recent days as the grilling season begins, which has also helped support futures. Still, consumers seem likely to bolster pork volume because it's such good value compared to beef. That should support hog prices.

Most-active June futures climbed 90 cents to $76.37. Thinly traded and new front month May closed at the highest level since late January.

Bottom line. Consumers viewing pork as good value compared to beef should support hog complex prices.

As mother and five-year old Billy prepared to enter the church, mother said, "Billy, we must be quiet in the church and do you know why?"

"Yes," Billy replied. "It's because people are sleeping."

Catch up with the latest commodity marketing recommendations and daily market charts by subscribing to Farm Futures' free e-newsletter, Farm Futures Daily, and keep up during the day with Farm Futures on Twitter.