The corn market’s jump has negatively affected both the live and feeder cattle futures.
Tuesday’s big market shake up comes from the corn market’s rally, which has pushed nearby contracts above $6.00 a bushel. Both the live and feeder cattle contracts knew there was a possibility the corn market could trade North of $6.00, but the market wasn’t expecting it this soon.
March corn is up 18 1/2 cents per bushel and March soybean meal is up $0.40. The Dow Jones Industrial Average is up 263.92 points and NASDAQ is down 243.33 points.
Even though live cattle technically have very few days left on feed when it comes to their lifespan, a surge in the corn market negatively affects live cattle futures too. February live cattle are down $1.95 at $136.97, April live cattle are down $1.95 at $142.25 and June live cattle are down $1.45 at $137.30.
Asking prices have yet to be posted in either region and packers are hoping this surge in corn prices shakes feedlots’ confidence. But if feedlots step back, take a second to look at the market instead of emotionally reacting, they shouldn’t be completely overwhelmed as boxed beef prices are continuing to creep higher and given the simple fact that packers need cattle for the weeks ahead, they know they have an opportunity to move this market higher if they rally as a united front.
With Monday’s slaughter being so lousy, I hope that it was just a fluke where worker absenteeism was the problem after New Year celebrations and it’s not that packers intend to run slower chain speeds. I fully believe the first scenario is more likely than the latter with boxed beef prices being as strong as they are, but we will know more by this afternoon.
The cash cattle market hasn’t summoned an ounce of attention and sits completely quiet. It’s unlikely that trade shakes loose until sometime after Wednesday.
Boxed beef prices are higher: choice up $1.63 ($267.66) and select up $0.68 ($259.58) with a movement of 58 loads (34.42 loads of choice, 10.73 loads of select, 5.93 loads of trim and 7.36 loads of ground beef).
Feeder cattle futures saw the corn market rally a whopping 16 to 18 cents early Tuesday morning, which inevitably rallied the nearby corn contracts above $6.00 a bushel. After nearly every order buyer, farm feeder and potential feeder cattle buyer in the country did some quick math on their coffee napkin — their wiggle room when it comes to buying feeders got a lot thinner.
The one thing we must remember is a lot of feeders are corn producers as well. The onset of higher corn prices can be stomachable when cattle prices rally alongside higher feed prices. It’s when input costs skyrocket and the cattle market dives lower that producers can’t financially manage the blow.
By this afternoon we will have a better understanding of how sale barns manage this pressure, as buyers could draw back and want to better understand the corn market’s trajectory before they dive into new feeders. January feeders are down $4.22 at $162.02, March feeders are down $4.05 at $165.47 and April feeders are down $3.82 at $168.65.
With the pork cutout value and cash prices both showing some strength, the lean hog contracts are trading modestly higher. February lean hogs are down $0.60 at $80.52, April lean hogs are up $0.22 at $86.87 and June lean hogs are up $0.25 at $98.15. The summer months of 2022 are showing the most strength where hog supplies are anticipated to be much thinner and hopefully summer demand will be strong.
The projected CME Lean Hog Index for 12/30/2021 is up $0.10 at $71.85 and the actual index for 12/29/2021 is down $0.45 at $71.75. Hog prices are lower on the National Direct Morning Hog Report, up $0.02 with a weighted average of $61.76 ranging from $61.60 to $65.00 on 3,818 head and a five-day rolling average of $61.54. Pork cutouts total 241.67 loads with 222.78 loads of pork cuts and 18.89 loads of trim. Pork cutout values: up $1.26, $87.28.