DTN Livestock Midday: Pressure Building Despite Lower Corn

Cattle feed lot. Photo: K-State Research and Extension - Creative Commons

One would have thought the 40-cent decline in corn futures would have sent feeder cattle contracts through the roof; instead the contracts are trading fully lower as well.

GENERAL COMMENTS:

Seeming to want to better understand if the corn market intends to fall lower just through Thursday trade or continue to decline, traders have stepped away from not only corn futures but also the livestock contracts.

July corn is down 40 cents per bushel and July soybean meal is down $26.20. The Dow Jones Industrial Average is up 425.25 points and NASDAQ is up 88.15 points.

LIVE CATTLE:

The cash cattle market is a tricky one this week as half the market seems to be set on holding out and demanding higher prices amid stellar boxed beef profits, but the other half was willing to trade cattle on Tuesday with delayed delivery extending into the second week of June.

As feedlots look at the corn market and see prices finally starting to remember that gravity eventually pulls everything back down to earth, some feedlots are hopeful and are tired of the market’s steady to lower prices and want to see more offered. Unfortunately, the board isn’t helping feedlots’ quest to demand higher prices as the market tumbles at least $3.00 lower in most of the contracts.

June live cattle are down $3.70 at $114.90, August live cattle are down $4.00 at $118.32 and October live cattle are down $3.85 at $122.70. The cash cattle market is still quiet with only one bid renewed in Nebraska at $119.

Beef net export sales of 13,100 metric tons (mt) reported for 2021 were down 22% from the previous week and 35% from the prior four-week average. The three largest buyers were Japan (4,100 mt), China (2,400 mt) and South Korea (2,000 mt).

Boxed beef prices are mixed: choice up $2.00 ($317.08) and select down $0.71 ($296.45) with a movement of 50 loads (21.94 loads of choice, 7.16 loads of select, 5.31 loads of trim and 15.59 loads of ground beef).

FEEDER CATTLE:

Even though corn futures are mostly 31- to 40-cents lower, the feeder cattle contracts are lower too. Early Thursday morning the contracts were reveling in the fact that for another day it looked like traders were going to support higher trade as the rising cost of inputs had subsided for the time being. But I guess that teaches us not to put the cart before the horse.

As the corn market plunges lower, traders seem to be growing more and more aware of how volatile the market can be when prices are as exuberant as they’ve become in corn t and have consequently stepped away from the market all together. May feeders are up $0.40 at $137.15, August feeders are down $0.85 at $149.67 and September feeders are down $0.85 at $151.20.

LEAN HOGS:

Lean hog futures continue to trade lower, not seeming to care one way or another what the market’s fundamentals do. June lean hogs are down $2.17 at $109.87, July lean hogs are down $2.35 at $109.57 and August lean hogs are down $2.20 at $105.45. The morning’s export report was lower, but still China continues to be one of the market’s three largest buyers, which is always encouraging.

Given that it’s only the middle of May and the peak of grilling season remains ahead of the market, pork demand should continue to thrive. Since the market has jumped to abnormally high prices, we must remember that volatile price swings are expected.

Pork net export sales of 14,700 mt reported for 2021 were down 69% from the previous week and 25% from the prior 4-week average. The three largest buyers were Mexico (5,300 mt), China (3,000 mt) and Japan (2,000 mt).

The projected CME Lean Hog Index for 5/12/2021 is down $0.01 at $110.94, and the actual index for 5/11/2021 is up $0.22 at $110.95. Hog prices are lower on the National Direct Morning Hog Report, down $1.55 with a weighted average of $110.06, ranging from $104.44 to $121.00 on 2,134 head and a five-day rolling average of $110.82. Pork cutouts total 139.09 loads with 121.30 loads of pork cuts and 17.80 loads of trim. Pork cutout values: up $6.34, $120.45.

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