Live and feeder cattle futures are lower at midday Thursday, as are lean hog futures.
The annual release of Prospective Plantings and quarterly Grain Stocks on the last day of March has sent feed grains prices skyrocketing, with nearby corn futures up 22 cents to $7.60 per bushel. So, although feeder cattle futures trade spent most of Thursday morning in lightly lower territory, heavy selling has now dropped the market by $2 or more.
Lean hogs, meanwhile, have tested a wide range of prices amid a heavy volume of futures trade after Wednesday afternoon’s Hogs and Pigs report showed lower breeding herd inventors amid these high feed costs.
May corn is up 18 1/4 cents per bushel and May soybean meal is down $2.70 per ton. The Dow Jones Industrial Average is down 165 points and the NASDAQ is down 72 points.
Live cattle futures trade is relatively quiet Thursday morning compared to all the hullabaloo going on in other ag markets. The April futures contract is down $0.45 at $139.725, the June contract is down $0.725 at $137.275, and the August contract is down $0.30 at $138.25. The weekly export sales report showed beef sales down 17% for the week, but China is still buying despite their COVID lockdowns.
In the countryside, cash cattle business has a steady or willing tone this week, with Wednesday’s first trades even with last week’s weighted average, then some negotiated purchases for over 80% choice steers on Thursday hitting a weighted average of $142.44, and some dressed business at $222, or $1 higher than last week.
Thursday’s cattle slaughter is projected at 125,000 head, which is 1,000 more than week-ago numbers and 11,000 more than year-ago numbers.
Boxed beef prices are significantly higher: choice up $2.02 Thursday morning ($269.06) and select up $4.61 ($262.07) with a movement of 43 total loads (27.32 loads of choice, 6.63 loads of select, 0 loads of trim, and 8.71 loads of ground beef).
Nearby corn futures now trading above $7.60 are obviously going to pressure feedlot profitability, but feeder cattle futures down by triple digits in the middle of Thursday’s trading session still leave this market above its weekly low and within an upward trend on the chart.
The March feeder cattle contract is down $0.125 at $155.85, the April is down $2.175 at $161.50, and the May is down $2.05 at $166.85. Note that the March contract will have to converge with the CME Feeder Cattle Index, which was $155.41 on 3/29 and has been staying sideways all week with relatively low volumes at the sale barns.
Thinking longer-term, traders will notice new-crop December corn futures gaining even faster than the nearby contracts, with less than 90 million acres expected to be planted in the US in 2022. This puts new crop corn at $6.90 and reminds livestock traders that high feed prices are not going to be a short-term problem; They’re something that’s likely to challenge profitability well into 2023.
Futures trading activity has been busting all morning in the lean hog contracts after Wednesday afternoon’s quarterly Hogs and Pigs report gave the market many surprises to process. The general interpretation seems to be bearish for nearby contracts and bullish for deferred contracts in light of the diminishing size of the US breeding herd that will supply market hogs in late 2022 and beyond.
The April lean hog futures contract is down $1.775 at $102.75, the May is down $2.325 at $114.675, and the June is down $2.625 at $121.60. Active spread trading has pulled the 2023 contracts closer to the rolling 2022 prices, and during the volatility of the morning, July lean hogs hit a fresh contract high of $126.95, although they’ve since pulled back into losses.
Export sales were up 19% from the previous week, with reliable Mexico as a notable buyer of US pork. Thursday’s hog slaughter is projected at 480,000 head, which is 2,000 more than week-ago numbers but down 8,000 from a year ago.
The CME Lean Hog Index from 3/29 was 103.66 (up $0.10) and the projected index for 3/30 is 103.13 (down $0.53). Pork cutouts Thursday morning total 174.71 loads with 154.25 loads of pork cuts and 20.46 loads of trim. Pork cutout values: up $2.40, to $106.12.