CATTLEUSA DRIVE - Friday, January 24th

I have more questions…

• What is it about storms that makes my wife want to leave the house? I don't think there's been a single snowflake she hasn't driven over in the last 3 years.

• Why is it that my kids come home from school grumpy and don't want to talk, but then get wound for sound right at bedtime? And how do I change that?

• Why is it that working with family is often hard? We've known them our whole lives, shouldn't we expect them to continue doing or saying ridiculous things?

• Why do we let the USDA print entirely inaccurate numbers without trying to put an end to it? Can we sue, or would it matter?

• Why, by nature, do we get the most bullish at the top and the most bearish at the bottom?

• Why do I have this urge to play the cattle:hog spread so bad again?

I can't answer most of those questions, but the last one I have a pretty strong reason. I caught a chart today that showed the value of beef compared to pork at the grocery counter, and it was screaming trade at me. On this chart, going back 25 years, there has only been 4 times where that spread has stepped outside of the norms. Last week was the 4th time for reference, and 2003, 2014, and 2021 were the other 3 years. In multiple letters, I've written how strong domestic demand is for what's normally our poorest month of January. Although choice has slid back to $330, prime is still catching a hot premium, so I would assume this $3 break in boxes is more weather related than consumer driven. Now add in that beef is finally overvalued compared to pork, I'm inclined to sell Live Cattle and buy Lean Hog futures, as a spread. To go along with that, I know many pork producers continue to fight the new strain of PRRS, which I think will show up in slaughter numbers starting around the April time frame. Unless the norms don't matter anymore, April hogs look cheap and April fats look high comparing the end products. As always, and especially trading this spread, there is substantial risk in this trade, so be prepared and comfortable with losing money.

Tomorrow we get the unbelievable opportunity to read what the government guesses are for cattle on feed in this country. It feels like the market is ignoring that report more than ever before, so should we skip over it since they're made up/manipulated numbers anyways? Shoot back your opinion and we'll see if it's worthy of discussing tomorrow. Give the people what they want, or so they say. Have a good night.

-Fat cattle kill at 123,000 vs 122,000 a week ago and 126,000 a year ago

-Choice boxes down 1.06 to $330.96 and select down .78 to $317.21 for a spread of 13.75 on 163 loads

-CME feeder index for 1/22 came in at $277.55

-LRP’s ending last week settled at $204.12

-Hog kill at 472,000 vs 482,000 a week ago and 478,000 a year ago.

-Afternoon Pork reported up 1.60 at $91.77 on 293 loads

-CME lean hog index on 1/21 reported at 81.72

-CME pork cutout index on 1/22 reported at 90.85

-LRP’s ending 1/23 settled at approximately $81.93

Precipitation was greatest in the Rocky Mountains where the upper elevations recorded a good week of snow. Precipitation was widely scattered throughout the Southeast where some portions of north Florida had over 200% of normal precipitation for the week. There are multiple regions that have had several weeks of dryness with minimal precipitation.