Live Cattle futures closed sharply higher with the February up the $3.00 limit in response to packers paying $5-6/cwt higher cash prices today with prices at $147/cwt in TX and KS, and $150 in NE/CO. Surprisingly, boxed beef values only increased about 30 cents/cwt.  Either boxed beef will go up tomorrow, or the packers are giving away some of their profitable margins.  The sharp move in Live Cattle futures lifted Feeder futures as feed costs held steady on the day.

The higher this market goes, the more downside price risk all market participants face. This sharp increase in cattle and therefore beef prices is going to test how much some consumers “need” beef.  I better buy/freeze a bunch of the $6/lb steaks the grocery stores are featuring this week.

Despite the huge move in cattle futures, hog futures remained in the doldrums with a mixed close.  Lacking cash market strength, the February LH contract needs to move lower to bring cash and futures together next month.   The pork cutout slipped about 30 cents.

Old-crop soybean futures traded lower most of the day but rallied from noon to the closing bell to manage mostly small gains. Soybeans faced pressure from weaker soybean oil prices, favorable weather in So America, harvest ramping up in Brazil, ideas that China is switching contracts from USA to So America and weaker basis levels in the U.S.

Corn futures tried to move higher but ended little changed.  Traders are watching the condition of Argentina’s corn crop.   Wheat futures are fighting to avoid a break below the recently-established contract lows.  There’s some sign of US export wheat demand but the world is flush with wheat, so upside potential would seem to be limited.

Energy prices are up sharply due to the extreme cold temperatures expected to last another week or more, as well as expectations of declining distillate stocks.

Corn Mar +1 426 (424-29); Jly unch 439; Dec unch 447 Bean Mar -1 1279 (1272-86); Jly +2 1252; Nov +4 1113 Meal Mar +3 419; Oct +3 349 Oil -26 3784 Wheat Mar -1 561; Jly -1 574 KC +3 625; MGE +3 617 Oats unch 399 Rice +5 1550

  At 3:30 pm CT (higher than 1 pm pit closing prices) LC Feb +300 limit 14455; Apr +195 14217; Jun +150 13380 FC Jan +95 17075; Mar +205 17037; Aug +110 17240 LH Feb -50 8547; Apr +50 9287; Jun +5 10190 Milk Feb -33 2207; Mar -45 2060

US$ +.1% Dow -41 16373 SP +1 1845 NAS +17 4243 Tran +79 7549 VIX -.03 12.84

WTI +177 9674 Brent +150 10823 Gas +5 267 NG +26 469 (+6%)   Natural gas prices are at 2.5 year highs.

HO +3 304 Eth -3 185

Gold -5 1236 Slvr -8 1978

2-yr +.02 0.41% 5-yr +.07 1.71% 10yr +.06 2.87% 30yr +.01 3.76%

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