DTN Midday Livestock Comments 05/06 11:41
Lower-Trending Thursday Consumes Lean Hog and Feeder Contracts
Both the lean hog and feeder cattle contracts dipped lower heading into
Thursday afternoon, while the live cattle contracts continued to flirt with the
idea of trading somewhat higher.
DTN Livestock Analyst
It's been a quiet day throughout the livestock complex as the contracts are
trending mostly lower, and the market isn't in a hurry to jump higher or lower.
The live cattle contracts are seeing some modest support seep in from traders,
but the complex largely is still indecisive on whether to trade higher or lower
the rest of the day. July corn is up 6 1/2 cents per bushel, and July soybean
meal is up $1.90. The Dow Jones Industrial Average is up 191.45 points, and the
NASDAQ is up 14.55 points.
The live cattle contracts are soaking up the modest support that traders are
cautiously extending, but the market has thus far been skeptical about trading
fully higher. June live cattle are up $0.02 at $114.47, August live cattle are
up $0.05 at $117.77 and October live cattle are down $0.25 at $122.85. One
would think that the stellar beef demand that the market's been shown would
drive fat cattle prices and incentivize packers to want to kill as many cattle
as possible while demand is thriving -- but, unfortunately, that's not the
case. With packers having a large percentage of their cattle already bought for
this time through forward contracts, their need to dive into the cash market is
minimal. The cash cattle market is still quiet without any bids having been
renewed. It's looking like the bulk of this week's business is essentially
Beef net sales of 16,900 metric tons (mt) reported for 2021 were down 28%
from the previous week and 18% from the prior four-week average. The three
primary buyers were Japan (4,600 mt), Mexico (3,000 mt) and Taiwan (2,900 mt).
Boxed beef prices are higher: choice up $2.48 ($307.26) and select up $3.95
($290.13) with a movement of 47 loads (29.44 loads of choice, 7.64 loads of
select, 3.54 loads of trim and 6.80 loads of ground beef).
The corn market may only be securing a modest rally, but its relentless
nature is having a dramatic toll on the feeder cattle contracts. May feeders
are down $0.62 at $130.85, August feeders are down $2.12 at $143.10 and
September feeders are down $2.22 at $145.25. It's utterly painful to look at
the cattle market from a cattle feeder's perspective -- all inputs are higher,
fat cattle are selling for shameful prices, and yet, slaughter speeds are
running at mediocre levels and boxed beef prices are sharply higher. There's
money floating around throughout the market, but it's not working its way down
to the cattle feeders or cow-calf producers.
Traders decided it was best to step to the sidelines of the lean hog complex
and to allow for the market to sit idle and catch its breath after the week's
impressive rally. June lean hogs are down $0.10 at $114.32, July lean hogs are
up $0.07 at $114.52 and August lean hogs are down $0.07 at $109.72. It's not
that the market is lacking fundamental support, or that the morning's export
report was bearish, but simply that traders want to give the market an
opportunity to trade slightly lower to mostly steady before driving higher.
Cash prices are weaker Thursday morning, but given the volatile nature of the
current hog market, drastic swings are fully anticipated.
Pork net sales of 48,200 mt reported for 2021 were up 36% from the previous
week and up noticeably from the prior four-week average. The three primary
buyers were Mexico (19,400 mt), China (15,000 mt) and Japan (4,700 mt).
The projected lean hog index for 5/5/2021 is up $0.66 at $108.55, and the
actual index for 5/4/2021 is up $0.52 at $107.89. Hog prices are lower on the
National Direct Morning Hog Report, down $2.83 ranging from $108.38 to $125.00
on 3,605 head and a five-day rolling average of $111.72. Pork cutouts total
137.53 loads with 110.79 loads of pork cuts and 26.74 loads of trim. Pork
cutout values: up $2.72, $114.63.
ShayLe Stewart can be reached firstname.lastname@example.org
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