Livestock Call by John Otte

Cutout gains lift fed cattle futures, feeder cattle follow fed cattle higher, sharply higher midday pork cutouts reverse lower to dehorn hog bulls

Published on: Apr 17, 2014

April 17, 2014
Opens
Fed cattle
, steady
Feeder cattle, lower
Lean hogs, lower

Wall Street looks to open lower. Following three days of stock market gains stock futures turned lower overnight as disappointing earnings reports from Google and IBM late Wednesday dampen tech stock optimism.

Overnight livestock futures trade points steady in fed cattle, lower in feeder cattle and hogs.

Cash fed cattle. On Wednesday USDA reported limited negotiated cash trade on light demand in the Texas Panhandle, with a few early sales at $146. Trade was mostly inactive on light demand in all other feeding regions.

A dressed bid at $240 surfaced in Nebraska Wednesday morning. That bid bought very few cattle.

Wednesday's morning choice boxed beef cutout was up 30 cents at $223.16, with select up 82 cents at $213.96. Afternoon cutouts were higher on moderate to fairly good demand and moderate offerings. Choice was up 89 cents at $223.75, with select up $1.33 at $214.47 on 206 loads.

USDA estimated Wednesday's cattle slaughter at 115,000. Slaughter so far this week of 348,000 is down 2,000 from last week and down 15,000 from a year ago.

Futures markets will be closed tomorrow for Good Friday, so the bulk of the week's cash trade will likely occur today.

Cattle futures. Fed cattle ended higher Wednesday, amid steadily rising wholesale beef prices. Lift from stronger cutouts has offset down draft from expectations supplies of market-weight animals will rise in the weeks ahead.

Rising cutouts support sentiment that demand for burgers, roasts and other products could rise as temperatures climb seasonally across the country. Firming cutouts offset concerns that spring and summer slaughter supplies will rise following upticks in fall and winter feedlot placements.

Beginning of grilling season should coincide with Easter. Both events should be conducive to beef demand as Christians, some of whom have trimmed beef consumption in observance of Lent, get back on full feed, so to speak.

Sharply higher morning hog cutouts bolstered beef. That support waned as afternoon pork cutouts turned lower. Wholesale pork had steadily risen to fresh all-time highs until softening over the past week. Beef prices are typically more expensive per pound for retailers. But the two proteins become more competitive as the price gap between beef and pork narrows. The spillover lift may be both real and psychological.

April fed cattle rose 47 cents to $145.75. Most-active June climbed 20 cents to $135.62.

May feeder cattle rose 12 cents to $179.90. Most-active August was the big gainer, rising 40 cents to $182.97.

Bottom line. Modest late week cutout gains could offset slightly larger show lists to result in cash trade near last week's prices.

Livestock Call by John Otte

Cash hogs. Compared to Tuesday, on a plant by plant basis, Wednesday's weighted average base prices were $1.32 to $4.39 lower. Trading occurred throughout the full range from $105 to $116 on slow market activity with light demand.

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

* National base price down $2.09 at $114.70.

* Iowa-Minnesota down $2.64 at $114.89.

* Western Corn Belt down $2.67 at $114.67.

* Eastern Corn Belt was not available.

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

USDA estimated Wednesday's hog slaughter at 412,000. Slaughter so far this week of 1.204 million is down 21,000 from last week and down 51,000 from a year ago.

USDA tallied last week's Iowa-southern Minnesota barrows and gilts at 285.7 pounds, up from 285.5 the previous week and 9.2 pounds heavier than the 276.5-pound average a year ago. Heavier weights alone boost pork output by about 3.7% per head.

USDA reported Wednesday's morning plant cutout up $2.38 at $124.11. Afternoon cutout values were:

FOB plant down 57 cents at $121.16.

FOB Omaha down 70 cents at $119.91.

Based on 514 total loads.

Based on the new cutout Dow Jones estimated Tuesday's packer margin index at plus $5.62 per head vs. plus $1.54 Tuesday.

Tuesday's CME two-day lean hog index slipped for a ninth straight day, sliding $1.04 to $123.08. Its recent peaks are $130.35 on April 2, $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. Recent lows are $79.91 on Jan. 20, $79.23 on Dec. 23 and $80.83 on Nov. 25.

Hog futures. Hogs ended mostly higher Wednesday on the gains in the midday pork value. By afternoon, cutouts turned lower dampening bullishness.

Most-active June hogs surged $1.25 at $123.75. July was the big gainer, up $1.67 at $121.65. Deep deferreds slipped.

Bottom line. Negativity from weaker cash prices, a ninth down day in the CME's lean hog index gained momentum as Wednesday's solidly higher morning pork cutout turned markedly lower.