DTN Livestock Midday: Contracts Battling Own Markets

©Debra L Ferguson Stock Photography

The livestock contracts are battling their own markets through Thursday’s trade and aren’t drawing much attention from traders.

GENERAL COMMENTS:

Thursday’s market hasn’t thrown the livestock contracts too many curveballs as one can easily sympathize with traders’ caution in supporting the lean hog contracts given how far the market has already rallied. And it doesn’t come as a surprise that, when corn prices are gaining momentum, the feeder cattle contracts are lower.

July corn is up 13 3/4 cents per bushel and July soybean meal is up $0.90. The Dow Jones Industrial Average is up 123.37 points and NASDAQ is up 68.23 points.

LIVE CATTLE:

Thursday has thus far supported the live cattle market and allowed for the nearby contracts to trade mostly higher. June live cattle are up $0.15 at $117.55, August live cattle are up $0.07 at $118.35 and October live cattle are up $0.12 at $124.10.

The market hasn’t seen much new cash cattle trade develop, but higher bids are noted in eastern Nebraska, where packers are now offering $194, which is $3.00 to $4.00 higher than this week’s average. More trade is expected to develop throughout the day, but it will mostly be in small increments and only clean-up in nature.

Thursday’s WASDE report showed beef production was up 5 million pounds for the year, which may seem hard to image when the 2020 calf crop was smaller and processing speeds have been running at inadequate levels.

But when you really dig into the market and understand the countryside’s challenges, it’s easy to see how the year’s production could be higher than projected with severe drought conditions sending thousands of cows to town. Some of these cows will be put back into production, but some will go straight to slaughter.

Beef net sales of 16,100 metric tons (mt) reported for 2021 were up 28% from the previous week, but down 17% from the prior 4-week average. The three largest buyers were Japan (4,800 mt), South Korea (4,000 mt) and Mexico (2,500 mt).

Boxed beef prices are mixed: choice down $0.47 ($338.18) and select up $4.27 ($312.14) with a movement of 46 loads (23.57 loads of choice, 5.40 loads of select, 4.05 loads of trim and 13.22 loads of ground beef).

FEEDER CATTLE:

And once again, the cat-and-mouse saga of “If corn is higher, then feeders are lower” continues into Thursday’s trade. After finicky trading throughout Wednesday, the corn market has regained some of its momentum and that comes as a stark concern to the feeder cattle market as cow-calf producers need buyers to be aggressive in buying calves this summer and upcoming fall.

August feeders are down $0.32 at $147.97, September feeders are down $0.32 at $150.42 and October feeders are down $0.30 at $152.62. Feeders pray this year’s corn crop is stellar and ample supplies of corn weigh on current prices so feedlots the opportunity to feed these cattle at more reasonable costs.

LEAN HOGS:

Despite continued support from market fundamentals, the lean hog market can’t seem to convince traders into thinking higher trade is a good idea. June lean hogs are up $0.17 at $122.12, July lean hogs are down $0.32 at $121.17 and August lean hogs are down $0.17 at $118.57. Packers are having to continue to hunt and peck throughout the countryside as supplies of market-ready hogs are becoming harder and harder to find.

It was interesting to see on Thursday’s WASDE report that the second, third and fourth quarters of 2021 were all adjusted higher in their quarterly prices as demand is forecast to remain strong.

The projected CME Lean Hog Index for 6/9/2021 is up $1.20 at $119.91, and the actual index for 6/8/2021 is up $0.94 at $118.71. Hog prices are sharply higher on the National Direct Morning Hog Report, up $5.05 with a weighted average of $115.06, ranging from $101.80 to $130.00 on 4,385 head and a five-day rolling average of $108.95. Pork cutouts total 154.64 loads with 130.72 loads of pork cuts and 23.93 loads of trim. Pork cutout values: up $0.19, $134.57.

Pork net sales of 19,700 mt reported for 2021 were down 19% from the previous week and 24% from the prior four-week average. The three largest buyers were China (8,100 mt), Mexico (6,400 mt) and Colombia (1,600 mt).

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