As spring flooding issues continue to move south and east, and the devastation in many areas already hit and where water has peaked, the focus will be on short- and long-term implications to the market. From a production and packing sense, keeping cattle safe and well fed as well as finding transportation and passable roads continues to be the main focus of many cattle producers through the last week. This will continue to be a challenge as new areas start being impacted by floodwaters. The fact that snowmelt from the mountains is not likely to even be a factor at this point, has many processors in all areas of cattle country concerned that these flooding issues may continue to be a recurring theme through most of the spring and early summer. April live cattle futures remain stuck in a wide $3.50 per cwt trading range that may keep prices from breaking these barriers in the next few weeks.
Strong underlying support in lean hog trade continues to spark increased overall support through the complex. There is growing uncertainty as to just how much more optimism can develop as traders are looking for increased buyer support from domestic and export markets. The idea that China will continue to be a main player in the pork market has helped to feed the bullishness of the market, although the most recent export sales to China may or may not continue at these levels. The fundamental assumption that China will need pork is a sound one, but there still remains a lot of uncertainty and a wide gap between demand numbers and expectations that need to be clarified in order to sustain this type of rally. Cash hog values are expected to be steady to $2 per cwt higher, with most bids likely $1 per cwt higher. Expected slaughter Tuesday is pegged at 471,000 head, but depending on weather and road conditions, slaughter numbers could be revised each day through the week.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Continued high water issues through many areas in the upper Midwest have been a concern for cow herds as well as cattle in feedlots. The ability to move cattle to unflooded lots and higher ground will likely keep markets supportive as heavy death losses are expected.
| 1) |
There is no way to currently assess the damage or amount of cattle impacted in the last couple of weeks. This will likely have long-term implications in the nation's beef herd, spreading the impact over several years.
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| 2) |
Renewed gains in beef cutout values has focused on expected demand support through the near future, while expectations that packers may not be able to keep up with demand in the short term.
| 2) |
April live cattle futures remain stuck in the current $3 per cwt trading rut the last several weeks. This may continue to limit the ability to break through long-term resistance levels of $130 per cwt, thus limiting further back and forth trade within the current range.
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| 3) |
Lean hog futures have moved to 2019 highs with April contracts holding above $71 per cwt. This support has quickly expanded the market rally to $19 per cwt above February lows, allowing for active buying to continue to flood into the complex.
| 3) |
Moving feed and other needed supplies through the flood-affected areas has been a constant challenge because many of the roads are closed or washed out, making movement of trucks impossible in many areas. This will continue to be a challenge for the next couple of weeks in many high-producing hog areas.
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| 4) |
Pork values surged higher during early-week activity with pork cutout values gaining a one-day total of $3.50 per cwt. This surge higher quickly follows the cash and futures gains, but also solidifies buyer support based on expected product movement.
| 4) | The aggressive rocket-like progression of the lean hog futures chart is leading to increased questions of a market top. Given the unchecked surge higher, once markets peak, potential aggressive liquidation may quickly follow. |
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| #completeherdhealth |
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