Cash cattle developed Wednesday surrounded by falling markets in nearly every venue. Although trade activity was light to moderate, the lower prices midweek may set the tone of the week, but continued widespread market pressure could further pressure cattle prices before relief is seen. Cash trade took place in the South at $110 per cwt, generally $3 per cwt lower than last week. Activity in the North ranged from $173 to $176 per cwt, with most trade at $175 per cwt. This is $6 per cwt lower than last week, indicating continued movement focused on the pressure in futures trade and concerns that the fears of sliding consumer demand losses are starting to develop. It is expected that additional cash market trade will develop, but prices could see further weakness if additional widespread outside market pressure develops. Livestock futures are expected to continue to shift lower after limit or near limit moves through the end of trade Wednesday. Even though live cattle and feeder cattle contracts posted limit losses in all deferred contracts, expanded trading limits are not being utilized as the two nearby contracts did not close limit lower. The market pressure in cattle trade continues to follow the direction of outside markets, and specifically the stock market, which is posting another 1,000-point loss in the Dow Jones futures trade during overnight trade. Thursday slaughter is expected near 121,000 head.
Hog futures have been well insulated from the widespread carnage seen in most other markets through the last couple of weeks as the focus on hog markets still points to a recovering China market. But the sharp losses in outside trade Wednesday could not be totally overlooked as moderate-to-firm losses developed in nearby contracts. It is likely that the stock market pressure and continued concern of slowing activity through the U.S. will have further impact in the hog complex during the rest of the week. With more and more public events canceling and the general population encouraged to limit exposure to large groups, further pressure is likely in the near future, which may start to impact the fundamental market and production structure of the industry, as well as overall demand. Traders will closely be monitoring the export sales report released Thursday morning, looking for any sign of hope from China pork exports last week. Cash hog prices are called $1 lower to $1 higher with most bids expected steady to weak. Slaughter Thursday is expected at 495,000 head. Saturday runs are expected at 150,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Wholesale and retail beef values remain generally steady compared to the widespread pressure in futures and cash market trade. There continues to be little disruption in production or distribution of beef product, allowing for steady access of beef to consumers in most areas.
| 1) | Aggressive losses redeveloping in Dow Jones Futures trade Thursday morning is expected to lead to additional sharp pressure in cattle trade as traders follow outside market direction once again. |
| 2) | With packers continuing to keep packer schedules active, the limited overall negotiated trade the last couple of weeks is expected to keep packers extremely short-bought. This should create the need to secure additional cattle numbers through the next couple of weeks in order to fuel still aggressive plant runs through the end of the month. | 2) | Midweek losses once again pushed deferred live cattle to contract lows Wednesday following the second largest drop in the stock market in history. The focus on widespread cancelations of public events in order to curb the spread of the virus is adding further demand concerns. |
| 3) |
Traders are looking toward Thursday morning's weekly Export Sales report for indication of further sales of pork to China. This could help to limit the losses in the complex if active sales and shipments are reported from last week.
| 3) | Continued strong pork production is not expected to quickly change, limiting the upside market support even if active export trade develops over the coming months. This could once again focus on domestic saturation, leaving prices in a sideways market trend. |
| 4) | Lean hog futures continue to hold above lows set both in late January and earlier this week. Continued focus on a recovering China market is helping traders in the lean hog complex focus on longer-term market direction. | 4) | Despite focus on potential demand improvements to China, the widespread pressure in outside markets may be too great to spark buying interest through the lean hog complex, which so far, has held its ground compared to all other commodity markets. |
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