December 13, 2013
Fed cattle, higher
Feeder cattle, higher
Lean hogs, lower
Gains in stock futures overnight suggest Wall Street might break its three-day losing streak.
The beef complex advanced overnight on continuing corn slippage. Thursday's recovery bounce in hogs ran out of steam overnight.
Cash fed cattle. On Thursday USDA reported negotiated cash trade was at a standstill in all feeding regions.
Market watchers anticipate cattle will eventually trade at steady to slightly weaker prices than last week's sales.
Some traders think this week's larger show lists in Texas, Nebraska and Colorado will weigh on prices owners will receive in those regions.
In the south, owners are pricing their cattle between $132 and $134 live or higher, passing up multiple packer bids at $129. In Nebraska, owners are passing bids of $206 dressed. They want $210 or higher.
Last week beef processors bought large volumes at prices steady to a $1 weaker than the previous week.
Thursday's morning cutouts were mixed with choice down $2.11 and select up 57 cents. Afternoon cutout values were weak to lower on light to moderate demand and moderate offerings. Choice slid $2.16 at $200.45 with select off 48 cents at $186.62. Load count totaled 186.
USDA estimated Thursday's cattle slaughter at 116,000. Total so far this week of 477,000 is down 6,000 from last week and down 26,000 from a year ago.
Cattle futures. Yesterday corn prices tumbled on news that U.S. senators had introduced a bill that would eliminate the mandate for ethanol blending into gasoline. Corn faced more pressure from concerns that China would reject more shipments of U.S. grain.
Retreating corn ignited feeder Cattle futures. Bullishness then spread to fed cattle.
Thursday's feeder cattle surged to eight week highs on expectations of falling feed costs. Most-active January gained $1.40 to $167.07. Pit close on March was up $1.05 at $166.35. Feeder contracts through May advanced at least $1.05.
Fed cattle followed feeders higher. December live-cattle advanced 35 cents to a pit close of $132.25. February rose 30 cents to 133.10.
The CME listed no tender notices to deliver on the expiring December fed cattle contract yesterday.
Bottom line. Talk in the senate on easing renewable fuels standard sinks corn futures. Expectations of lower feed costs boost beef complex. Standoff between cash cattle owners wanting $132 to $134 and packers using larger show lists as leverage continued. Logjam should break today.
Cash hogs. Hog buyers bid 50 cents higher to $1 lower Thursday on variable demand. Trade chatter indicates demand at some plants picked up slightly late in the week.
USDA's afternoon reports showed Thursday's weighted-average:
* National base price rose 42 cents to $78.36.
* Iowa-Minnesota rose 46 cents to $78.72.
* Western Corn Belt up 57 cents at $78.56.
* Eastern Corn Belt up 27 cents at $78.08.
Price changes are compared to USDA's afternoon report for Wednesday.
USDA estimated Thursday's hog slaughter at 436,000, Total so far this week of 1.737 million is down 9,000 from last week, but up 22,000 from a year ago. Projections for Saturday's slaughter are around 138,000 head, down from last Saturday's 143,000 head.
Data USDA collected under Mandatory Reporting showed Thursday's morning plant cutout down 9 cents to $88.42. Afternoon cutout values were:
FOB plant down $2.27 at $88.13.
FOB Omaha down $1.87 at $87.75.
Based on 353 total loads.
After advancing six straight days and rising $2.08 over that period, the CME two-day lean hog index, calculated using USDA data, slipped Wednesday for a fifth day. It dipped 20 cents to $81.15. It's approaching its recent low of $80.83 on Nov. 25. Its recent peaks are $82.91 on Dec. 4, $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 $13.71 per head vs. plus $18.29 on Wednesday.
Hog futures. Hogs recovered some of their recent losses on short-covering after tumbling to multi-month lows in most deferred contracts Wednesday.
December settled at $81.32 after ending little changed Wednesday. Spot month hogs had been down seven consecutive days.
Heavy hogs upping pork production more than expected have weighed on the market at a time when some analysts expected meat processors to be facing shrinking slaughter runs due to earlier pig death losses due to porcine epidemic diarrhea virus.
Deferreds bounced back on thoughts their recent sharp move lower may have overdone the move to the downside. That could prove correct if PEDV eventually trims slaughter runs.
Trade chatter suggests that when PEDV strikes a sow unit pig production essentially drops to zero for eight weeks. The huge unknown is how many sow units are experiencing such outbreaks. Losses are said to be most severe when the cold is most bitter.
Some analysts say it is still too soon to anticipate a supply pinch due to PEDV, which rapidly spread across the country this fall. They expect impacts to appear in February or March.
Thinly-traded December hogs picked up 40 cents to $81.32. It expires today. Most-active February rose 22 cents to $88.00. It had slipped to its lowest level since Sept. 5, my father's birthday, on Wednesday.
Bottom line. Enough heavy hogs keep coming to provide enough pork to pressure prices. Still, futures bounced back on thoughts the recent extended down move was overdone. Huge uncertainties persist on potential impacts from PEDV on hog supply.