DTN Midday Livestock Comments 02/03 11:38
Livestock Prices Slightly Higher Friday Morning
Active futures contracts for live cattle, feeders and lean hogs were all
trading slightly higher at midday Friday with April cattle still challenging
new contract highs and April hogs possibly finding support.
DTN Lead Analyst
The Labor Department's report of stronger-than-expected job growth in
January offered some more good news in a week that is already having bullish
influence on cattle prices.
Live cattle futures are slightly higher at midmorning Friday with the April
contract up a nickel at $163.90, staying close to new high territory. This has
been a week of bitter cold weather for cattle in the Northern Plains and as far
south as Kansas. Even Friday morning's map shows subzero readings throughout
Iowa and single digits in Kansas, one last extra shot of cold before readings
start to warm this weekend and usher in a mostly warmer February.
This week will also be remembered for Tuesday afternoon's inventory report,
reporting the lowest U.S. cattle inventory since 2015 and the lowest number of
beef cows on record going back over 50 years. Early Friday, the U.S. Labor
Department said nonfarm payrolls increased by 517,000 in January, much more
than expected and showing that the economy is doing better than many in the
business news have been worrying about. For the most part, beef demand remains
active and the slaughter pace is humming along.
Friday morning's report from USDA showed choice cuts down 20 cents at
$264.90, down almost $3 on the week, so far. Selects were up 12 cents at
$253.78, up over $3 from last Friday afternoon. Slaughter estimates have
maintained an active pace this week and Dow Jones estimates Friday's cattle
slaughter at 121,000, down 1,000 from a week ago. Saturday's slaughter is
estimated at 30,000, up 3,000 from a week ago. Cash trade has been quiet this
week and should get busy Friday afternoon. Emboldened by Tuesday's report and
after every live cattle futures contract posted a new contract high Thursday,
packers are likely to find a difficult market to bid into this week.
Just over a couple hours into Friday's trade, March feeder cattle are up 20
cents at $186.12, holding a modest gain for the week. March corn overcame a
lower start and is now trading two cents higher, despite Thursday's 10-point
increase in Argentina's good-to-excellent crop rating, now at 22%. Corn prices
are on track, however, for a modestly lower close this week, offering slight
help for feeder prices. As with live cattle, the influences on feeder prices
have been mostly bullish this week. Stressful winter conditions throughout much
of the western Plains, a historically bullish inventory report on Tuesday and
good news on the jobs front on Friday morning offering a more promising outlook
for beef demand.
Overall, feeder cattle prices remain well-supported despite the strain of
high feed costs. The National Weather Service shows increased chances for
precipitation in the western Plains in the six- to 14-day period, but DTN
meteorologists say the more beneficial amounts are likely to lean east.
Increased precipitation in the western Plains, if it could happen, would
provide helpful relief for many cattle producers. The CME Feeder Index posted
$180.90 for Thursday, Feb. 2, up $1.33 from a week ago.
At midmorning Friday, April hog futures are trading a little higher, up 20
cents at $86.20 after a slightly lower start. Hog futures are still showing
signs of support after Wednesday's venture to new low ground was quickly
rejected Thursday. Thursday's report from USDA showed 30,900 mt of pork export
sales with Mexico named the top buyer, not horrible, but not enough to explain
the new buying interest in hogs. Thursday's new highs in live cattle futures
likely helped, but the most bullish encouragement came from a bounce in the
prices of negotiated hogs. Negotiated prices that briefly fallen below $70 in
mid-January were quoted at $72.65 in Friday morning's national Daily Direct Hog
report, a modest bump for the week and possible sign of support.
USDA's morning pork report posted Friday's cutouts down $2.30 at $79.20,
back near where price was a week ago and pressured by a $13.21 drop in bellies.
USDA reported 156.57 loads of pork cuts and 17.69 loads of trim.
Hog slaughter remains active and was estimated by Dow Jones at 486,00 for
Friday, down 1,000 from last week. Saturday's slaughter is estimated at
161,000, up from 87,000 last week. CME's lean hog index was projected at $73.05
for Thursday, up 41 cents from a week ago. With this week's bounce in cash hog
prices coinciding with a successful test of support in the futures market, the
outlook for hog prices is showing signs of improvement.
Todd Hultman can be reached at Todd.Hultman@dtn.com
Follow him on Twitter @ToddHultman1
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