Thursday, February 2, 2023  

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DTN Midday Livestock Comments          02/02 11:19

   Cattle Futures Cast Big Shadow on Groundhog's Day

   Livestock futures buying activity has picked up steam through Thursday 
morning, and the direction of trade has been decidedly upward.

Elaine Kub
Contributing Analyst


   Livestock futures buying activity has picked up steam through Thursday 
morning, and the direction of trade has been decidedly upward. Although the 
cash cattle market may continue to wait until Friday for major business, asking 
prices are noted in the South at $158 to $160. Meanwhile, buyers have propelled 
futures prices higher, with feeder cattle leading the daily gains in an attempt 
to match the bullishness of live cattle futures hitting new contract highs. 
Lean hog futures are also higher for the day but lingering near recent lows. 
March corn is down 5 1/4 cents per bushel and March soybean meal is up $4.20 
per ton. The Dow Jones Industrial Average is down 162 points.


   The weekly export-sales report showed net sales of beef at 25,200 metric 
tons, once again led by South Korean business, which even slightly beats out 
last week's highly positive report. February live cattle are up $1.10 at 
$159.525, April live cattle are up $1.125 at $163.35 and June live cattle are 
up $1.15 at $159.85. At its highest point so far during Thursday morning's 
trade, the nearby live cattle contract has hit a fresh contract high: $159.675. 
Although there's a lot of trading session left, this kind of momentum does help 
set the sentiment for cash cattle trade toward the end of the week. So far, 
asking prices in the South have been set at $158 to $160, and the market may 
continue to wait until Friday to really develop. Thursday's slaughter is 
estimated at 127,000 head, which is 1,000 more than a week ago and 13,000 more 
than a year ago at this time.

   Boxed beef prices are higher Thursday morning: choice up $0.11 ($265.18) and 
select up $0.68 ($253.46), with a movement of 71 loads (44.1 loads of choice, 
13 loads of select, 5.82 loads of trim and 7.96 loads of ground beef).


   Feeder cattle futures are casting shadows with towering triple-digit gains 
Thursday, with March feeders up $2.675 at $185.925, April feeders up $1.825 at 
$189.775 and May feeders up $1.475 at $193.875. If this market was a groundhog, 
it would be predicting six more weeks of winter. That would be OK for cattle 
country, if it meant some drought-busting snow or spring precipitation in the 
High Plains, but unfortunately, the short- and long-term weather forecasts all 
look like maximum pain for cattle operations. The ongoing ice storm that has 
hit Texas and Oklahoma snarls logistics for feedlots, and the long-term 
projection for continued drought adds no optimism for grass calves in droughty 
regions. Thursday's midday gains are helping the market to make a run at some 
new contract highs, like the live cattle market has been doing, except the 
March feeder cattle contract would have at least another $7 to move before it 
could retake its August highs.


   Pork and lean hog prices have been bouncing up and down in recent days, but 
not in any organized way that would counteract the overwhelmingly bearish trend 
in this market since the start of the year. On Thursday morning, February lean 
hogs are up $1.25 at $75.225, April lean hogs are up $1.25 at $85.55 and May 
lean hogs are up $0.80 at $94.575. The weekly export sales report, showing net 
sales of 30,900 metric tons for 2023, also included decreases for several 
important countries. Almost half of the weekly sales were attributed to Mexico. 
Meanwhile, on Wednesday, the Federal Reserve raised its benchmark rate by only 
a quarter of a percentage point, giving the stock market a reason to keep 
rising Thursday in a friendlier valuation environment. Although the lean hog 
market does tend to respond to outside market influences like this, on 
Thursday, the overwhelming recent bearish trend in pork prices may be a far 
more powerful factor. The pork cut-out value has moved lower than it's been 
since November 2021. It doesn't look like there's any reprieve of the large 
supplies, either -- Thursday's slaughter is projected at 490,000 head, which is 
1,000 more than a week ago and 79,000 more than a year ago at this time.

   The projected CME Lean Hog Index for Jan. 31 is down $0.07 at $72.51 and the 
actual index for Jan. 30 was down $0.13 at $72.58. Thursday's Daily Direct 
Morning Hog Report showed a weighted average price of $72.86 (up $2.43) on 
6,958 head. Prices ranged from $70 to $77, and the 5-day rolling average is now 
$71.17. Pork cutouts total an abundant 214.16 loads with 188.97 loads of pork 
cuts and 25.19 loads of trim. Pork cutout values: up $2.86 to $81.81.

   Elaine Kub, CFA is the author of "Mastering the Grain Markets: How Profits 
Are Really Made" and can be reached at or on 
Twitter @elainekub.

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