December 6, 2013
Fed cattle, steady
Feeder cattle, steady
Lean hogs, lower
Wall Street appears poised to bounce back after five down days Friday as investors wait for a monthly jobs report. Job numbers could provide clues on when the Federal Reserve will start easing back on easy money.
Fed cattle and feeder cattle traded either side of steady overnight. Hogs continued to ease lower.
Cash fed cattle. Thursday morning USDA reported light trading in Kansas at $132, steady with last week. Trading spread to the Texas Panhandle, also steady at $132. Nebraska saw limited trading with a few at $132 live and $209 dressed, but not enough to establish a market. Trading advanced to moderate to active in Kansas on good demand continuing at $132.
Even though cash was steady, bad weather may have spurred packers to buy before feedlots face weather stresses next week. Light volumes suggest packers are not well bought.
Thursday's morning cutouts were mixed with choice down 58 cents and select up $1.15. Afternoon cutout values were weak on light demand and light to moderate offerings. Choice was down 89 cents at $202.41 with select down 42 cents at $189.62. Load count totaled 152.
USDA estimated Thursday's cattle slaughter at 122,000. Total so far this week of 483,000 is up from last week's holiday-shortened 373,000, but down 12,000 from a year ago.
Cattle futures. Fed cattle succumbed to pressure from lackluster beef exports. The U.S. Meat Export Federation reported in November the pace of sales so far this year to major U.S. beef importers like Japan, Mexico and China was only slightly higher than 2012.
Mixed wholesale beef prices have traders pondering whether cash fed cattle and beef prices will be able to maintain themselves going into the holiday.
On Thursday front-month December fed cattle fell $1.02 to a composite close of $131.70. Most-active February slid $1.40 to $133.02.
Feeder cattle also slumped. Most-active January slid 65 cents to $164.40. Composite close on March was down 90 cents at $164.45. May slid $1.15 to $165.80.
Bottom line. Cash fed cattle trading steady with last week may signal packers want to line up cattle ahead of bad weather more than those steady prices suggest firmness in the market. Soft export demand casts concern over the market.
Cash hogs. Thursday's hogs ran steady to $1 lower, amid sufficient supplies of heavy-weight hogs in most regions. A sharp drop in hog futures and Wednesday's weaker wholesale pork prices also pressured Cash hogs. Plus some pork processors had already booked hogs needed this week by Wednesday.
USDA's afternoon reports showed Thursday's s weighted-average:
* National base price slipped 89 cents to $77.78.
* Iowa-Minnesota fell $1.08 to $77.70.
* Western Corn Belt down $1.12 to $77.67.
* Eastern Corn Belt slid 37 cents to $78.03.
Price changes are compared to USDA's afternoon report for Wednesday.
USDA estimated Wednesday's hog slaughter at 438,000. Total so far this week of 1.751 million is up from last week holiday-shortened 1.297 million and up 24,000 from a year ago.
Data USDA collected under Mandatory Reporting showed Thursday's morning plant cutout down 32 cents at $88.85. Afternoon cutout values were:
FOB plant up14 cents at $89.33.
FOB Omaha up 16 cents at $88.59.
Based on 390 total loads.
The CME two-day lean hog index for Wednesday, calculated using USDA data, advanced 22 cents to $82.91. It's up six straight days and $2.08 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 Thursday's packer margin index at plus $17.26 per head vs. plus $14.86 on Wednesday.
Hog futures. Hogs extended their slump Thursday, for a third day, sliding to the lowest price for the front-month contract in eight months amid heavy hog weights and larger-than-expected pork production.
Market bulls sense that a slaughter hog supply pinch will come due to pig death losses due to porcine epidemic diarrhea virus. Another potentially bullish force is producers culling fewer sows and saving more gilts to up breeding herds. However, given gigantic strides in breeding herd productivity of recent years, producers do not need to expand the herd much to boost pork output.
Bears say, "Prove to us that sizeable slaughter runs will not keep coming."
Although the total number of hogs to be slaughtered this week is around 1.7% below this time last year, the average market weight jumped to a record 281.7 pounds last week--2.4% larger than hogs this time last year--making the forecast for total pork production higher than normal.
The composite close on front-month December fell $1.07 to $82.60. February slid 25 cents to $88.75. The $6.15 premium of February over December says cash prices will advance seasonally. Traders remain mystified as to when the rise will begin.
Bottom line. Big supplies of heavy hogs boost pork tonnage pressuring cutouts. Plenty of pork keeps pressure on hog prices.