Friday’s closes brought a new three-month high to February hogs and new contract highs to the April and June contracts. Live cattle and feeders closed lower Friday; feeders were lower on the week.
For anyone looking at the news this week, there were plenty of reasons for cattle to trade lower. U.S. stocks fell lower with ongoing concerns about higher interest rates in 2022, along with some disappointing earnings reports. U.S. cases of coronavirus remain far above levels seen previous to this winter and are limiting cattle slaughter. Crops in southern Brazil and Argentina finally received some rain this week, but corn prices jumped higher anyway with traders concerned about Russian troops on Ukraine’s border. In spite of all the bearish news, February live cattle closed down 40 cents at $137.92 Friday and was down just a nickel on the week. It is also impressive that February cattle prices continue to hold above support at $136, the site of their 100-day average. The April and June contracts were down $1.07 each on Friday but remain above their recent levels of support.
The best we can say on cattle prices’ behalf is that it appears the market was encouraged by this week’s slight increases in the daily slaughter pace and remains optimistic about returning to higher levels soon. Unless there is some unexpected surprise late Friday, this week’s cash trade took place at mostly $137 in the South and $218 in the North. Northern trades were roughly steady with a week ago, but also included trades for early February, when slaughter may be even higher. Friday morning’s report from USDA showing 12,800 mt of beef export sales last week was not especially impressive, but it was interesting China was the top buyer, taking 3,900 mt. USDA estimated Friday’s slaughter at 114,000, up from 113,000 a week ago. Saturday’s slaughter was estimated at 61,000, up from 50,000 last week. For the week, cattle slaughter was estimated at 636,000, up from 618,000 last week. Boxed beef prices have been gradually increasing since mid-December and posted another higher week. Choice boxed beef finished at $292.41, up $8.10 from a week ago. Selects ended at $282.33, up $8.36 from a week ago.
After Friday’s close, USDA said 12.037 million head of cattle were on feed as of Jan. 1, 2022, more than expected and up 1% from a year ago. It was also the second highest Jan. 1 inventory on record. December placements were up 6% from a year ago, more than expected and the most since the series began in 1996. Marketings were only slightly higher than a year ago and the second highest for December on record. While the report is bearish for Monday’s prices, it is worth noting the placement weights fell in categories that were generally lower than a year ago, so deferred contracts may absorb more of the bearish pressure.
MONDAY’S CASH CATTLE CALL:
$1.00 to $2.00 lower. An early bearish response to Friday’s on-feed report could moderate by the end of the session.
It is fair to say the bearish news mentioned above did have more of a price impact on feeder cattle this week. This week’s 20-cent gain in March corn and ongoing concerns that cattle are gaining weight, while the slaughter pace has slowed, are two of this week’s stronger bearish concerns. March feeder cattle closed down $1.65 at $163.30 but did manage to hold above its 100-day average at $162.70. The January feeder contract expires Thursday, Jan. 27 and closed down $0.90 at $160.27, below the CME Feeder Cattle Index, posted at $161.20 on Wednesday. The more forward looking May feeder contract was down 80 cents on the week, but continues to project a more bullish future, ending at $171.92.