Active cash trade earlier in the week has limited the expectation of additional active interest from either side at this point. With the monthly Cattle on Feed report released Friday afternoon, some additional buying interest may develop leading up to and following the report. But cash cattle prices bounced all over the place, hitting weekly lows early in the week, but slowly gaining market momentum based on the rally in beef values. The overall range in live trade in the South is $106 to $113 per cwt, while dressed deals in the North are listed at $168 to $180 per cwt. It is uncertain where exact overall averages will land once the dust settles through the week. The Cattle on Feed report is not expected to show significant changes in overall cattle in feedlots, although placements in February are expected to remain lower with the average market estimate nearly 8% lower than year-ago levels. Strong marketing levels are likely during the month of February, helping to keep the overall market current. Futures trade continues to be driven by overall economic uncertainty, combined with the aggressive surge in wholesale meat values over the last week. This helped to solidify limit gains Thursday, and pointing to additional follow-through support at the end of the week. Given the growing concerns of COVID-19, and how this will impact overall beef demand beyond initial buying by consumers in grocery stores around the country, could add some growing uncertainty to traders that have quickly moved back into the market. The fact that food service dining has significantly changed over the last week is likely to have a significant impact on the overall longer-term direction of the market. Friday slaughter is expected near 119,000 head.
Limit gains in lean hog futures Thursday helped to spark renewed interest through the complex, although buying interest appears to be focused more on outside market direction than any changes in pork or lean hog prices at this point. The focus on strong consumer demand for pork helped to add triple-digit support to cutout values, which is leading increased overall support back into the complex. There continues to be underlying uncertainty in deferred futures, which have been unable to see significant market support in spot contracts. The continued large production runs likely in the next few months is expected to be a major apart of the lackluster buying in summer and fall contracts. Cash hog prices are called $1 lower to $2 higher with most bids expected steady to $1 higher. Slaughter Friday is expected at 491,000 head. Saturday runs are expected near 305,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong triple-digit gains continue to develop in beef cutout values. This continues to point to aggressive wholesale price support based on the intense buyer interest by consumers as they stock up on meat supplies. | 1) | The volatility in the market, combined with expanded trading limits could quickly cause markets to retreat from recent gains. There still remains additional long-term concerns about overall meat demand as new restrictions are being put into place in order to limit COVID-19 spread. |
| 2) | The ability to follow outside commodity markets higher Thursday left live cattle and feeder cattle limit higher. This is a refreshing change as nearby contracts have moved away from lows set at the beginning of the week. | 2) | The recent surge in wholesale beef values through the week is likely to create significant "sticker shock" to many consumers once these higher prices hit the store shelves. This could quickly change buying patterns as consumers focus on expected financial tightness through the upcoming weeks and months. |
| 3) | Active gains are seen in pork values, helping to spark underlying momentum through the end of the week. The gains in wholesale pork prices have been supportive, but have not seen the significant gains in beef values. This is creating the expectation that pork prices have additional "catching up" to do. | 3) | Pork production remains strong through the country as the focus has moved away from global and export trade while the country is trying to get COVID-19 under control within its own borders. This may limit long-term price gains in the near and distant future. |
| 4) | Limit gains in April lean hog futures is enough to expand trading limits Friday, although all other contracts posted more subdued gains. This could lead to additional support at the end of the week following firm gains in most other commodity trade. | 4) | The availability of expanded limits could create increased market uncertainty heading into the weekend. Given the strong price surge Thursday and potential for traders to cover positions at the end of the week, widespread volatility is very possible. |
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| #completecalfcare |
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