1/24/2025 Market Commentary

Live Cattle: The cash cattle market continues to surprise traders, and the futures market has no choice but to play catch up. Early trade in the south at 201 gave way to 202 trade later in the week, but the north will have the title to the headlines. Feedlots waited until Friday to start trading, and they received the higher money they were seeking. Small trade started at 208, then 210, then 212, with rumors of trade as high as 214 in the country. The futures took out the all-time high of 199.825 on Wednesday, then broke the $200 level for the first time and haven’t looked back. Since the first of the year, February cattle have gained $13.175/cwt in 16 sessions. Weights continue to climb and will continue to look worse than normal on a year-over-year basis due to the winter storm a year ago. Overall, the funds are in control of the cattle complex, now holding massive long positions and willing to defend at all costs, along with cash fundamentals enticing new buying. Cattle on Feed numbers were released this afternoon, showing Cattle on Feed at 99%, Placements at 97% and Marketings at 101%. Placement was close to 5% below the average guess and below the low end of the guess, while On Feed and Marketing numbers were right on the average guess.

Feeder Cattle:  Feeder cattle futures continue to notch out new contract highs. The most active April contract posted new highs both of the final 2 days of this week. Rumors of the Mexican border being opened to feeder cattle imports continue to swirl, but the official reopening date continues to get pushed back. It feels to me that traders are very aware and are keeping a close eye on this topic, but until there is a resolution in place, the funds continue to add to their record-long position. Cash feeders are now moving sideways with the rally we have seen in the corn market, but cattle futures are providing support. Single-day index values for the last 2 days have been 280.01 and 279.90 respectively. January Feeders will expire at noon on Thursday, January 30, and the index and futures will need to be in line by then.

Lean Hogs: After starting the week sharply lower on Tuesday, Lean Hog futures traded mostly sideways but found some recovery to finish the week. Index values continue to work mildly higher, along with a cutout market that is also supported. The cold storage report shared this afternoon shows bellies in cold storage at 61% of a year ago and 152% of a month ago. Overall, pork in storage is down 6% from a year ago and up 2% on the month.

Corn: Futures markets traded up to the $5 mark this week with May and July contracts trading through. Limited buying support was found at those levels and futures finished the week back below $5 in all months. Argentina reduced their export tax by 7%, and we will likely see more corn exports flowing out of the country as a result. Ethanol production in the U.S. was up 4K million barrels per day compared to last week. Year to date, production is 3.8% above a year ago, which is needed to meet the USDA estimate that has been set. Cash basis continues to fade with the rally in the futures along with aggressive farmer selling.