Cash cattle trade activity took a back seat Monday to the aggressive liquidation in futures trade and widespread commodity and financial losses early in the week. Bids and asking prices are undeveloped and likely to remain so until there is some sense of stability in the futures trade. Showlists were mixed early in the week, which continues to show limited availability of market-ready cattle through the end of the month even after light-to-moderate trade developed last week. It is likely that cash market trade will be pushed to the last half of the week, and despite attempts to hold prices steady to higher by feedlot managers, the bearish tone of futures trade is going to make this a difficult task. Futures trade is expected to remain lower early Tuesday, although the complex still remains oversold and currently driven by fear that the global economic wheels may be falling off due to the spread of coronavirus. As always, fear is a very poor measuring tool, as many times the overall movements driven by the fear are not rational, especially when it comes to the market. Because of the price point, the beef market is the most vulnerable to an economic downturn than any of the other meat markets, creating the extreme reaction seen early in the week. With April live cattle futures and most feeder cattle futures closing limit lower Monday, expanded trade limits are available, creating the opportunity for markets to swing $4.50 per cwt in live cattle contracts and $6.75 per cwt in feeder cattle before trade is halted. Given the still bearish tone in outside markets, the potential for additional widespread liquidation remains strong despite any fundamental support developing in meat values and domestic demand support likely to build over the upcoming weeks. Tuesday slaughter is expected near 121,000 head.
Sharp losses on Monday in lean hog futures followed the generally weaker trend through all commodities and most financial markets. With the Dow Jones Index falling over 1,000 points by the end of trade Monday, the bearish overall tone of markets in general continued to be the main story, instead of a hog market narrative. Even though lean hog futures posted aggressive losses, compared to pressure in cattle markets, the hog complex was able to fair slightly better with traders unable to move prices limit lower at the end of the session and contracts continue to hold within the moderate sideways pattern over the last month. There is growing uncertainty about how long the panic selling surrounding global movement of coronavirus will be, but this may create some additional volatility through the rest of the week. Cash hog prices are called $1 lower to $1 higher with most bids expected steady. Slaughter Tuesday is expected at 495,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Boxed beef values bounced higher Monday. This move higher continues to focus on the ability to move additional product during the month of February as the overall wholesale and retail outlook for beef is not nearly as bearish as the future complex moves early in the week. | 1) | Cattle futures closed limit lower in live cattle and feeder cattle trade. This opens the door for expanded trading limits and causes increased concern that the still bearish outside markets will drive additional liquidation through the complex. |
| 2) | The cattle complex remains oversold, and without the bearish outside market factors, buyers should quickly step back into the complex, bringing back a portion of the early-week losses. This may take some time to regain market confidence, but it is expected that buyer activity will quickly develop once the dust settles. | 2) | Cash cattle markets will have their work cut out for them in order to be anywhere near steady money despite the need for packers to gain access to additional cattle. The bearish move in futures trade is likely to skew the direction of cash markets lower through the week. |
| 3) | Strong gains developed in wholesale pork values Monday, helping to bring some stability to market fundamentals while futures trade tumbled lower. The ability to continue to support overall pork values is expected to help sustain longer-term support in the lean hog complex. | 3) | Sharp losses in cash hog values Monday sparked additional concerns that packers are pulling away from the steady-to-higher market trend from the last few days. This could add increased fundamental weakness through the lean hog complex. |
| 4) | Even with increased uncertainty about economic health across the world, it is important that strong U.S. pork production is creating a high demand product that the world needs. This is expected to continue to spark underlying support through the complex as move product moves into export channels and long-term trade relationships develop. | 4) | Sharp losses in stock markets on Monday, and the Dow Jones falling over 1,000 points, is still a major concern that may limit additional lean hog buyers from moving back into the market before the end of the month. |
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| #completecalfcare |
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