Cash cattle activity made great strides Wednesday with light-to-moderate trade developing across most areas of cash cattle country. Cash prices appear to be settling into a range that may contain the majority of activity through the end of the week. Southern live business is at mostly $120 per cwt, $10 higher than last week's price levels, while Northern dressed trade is at $190 per cwt. This is a $17 per cwt rally from last week's weighted average, and will likely add additional support to the overall market through the rest of the week. Even with additional trade developing through the end of the week, it is uncertain if price levels will deviate from current ranges, which could limit additional short-term support the rest of the week. Futures trade is expected mixed to mostly lower. The ability for April live cattle futures to gains Wednesday despite pressure in all other contracts continues to focus on traders rolling contracts to the June contracts, which are trading at a significant discount ($12 per cwt) to the spot contract. There is growing concern about longer-term meat demand and the current retail support, especially in the ground beef market, sustaining the current beef market support. Thursday slaughter is expected at 122,000 head.
Firm pressure in lean hog futures Wednesday and the swift move lower in pork cutout values is adding additional weakness to the entire lean hog complex Thursday morning. Although traders are expected to focus on news from the weekly Export Sales report Thursday morning as well as expectations from the quarterly Hogs and Pigs report released after trade closes Thursday, the building pressure in outside markets and opportunities to further adjust positions following the intense market rally over the past week could leave prices unsupported. At this point, overall market emotion seems to be in check, which could limit downward pressure as traders look for new and fresh fundamental and technical direction and news in the complex. Cash hog prices are called 50 cents lower to $2 higher with most bids expected steady to $1 cents higher. Slaughter Thursday is expected at 495,000 head. Saturday runs are expected at 273,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | April live cattle futures have rallied $16.60 per cwt over the last week, sparked by incredible support in wholesale beef values. The ability to try to catch up with consumer beef demand, which has surged over the last couple of weeks, has regained most of its losses during the month of March. | 1) | Boxed beef values shifted lower Wednesday, potentially limiting the incredible run higher over the last week and a half. Further erosion of wholesale beef values will quickly put in question the ability to hold current market values through the complex. |
| 2) | Strong double-digit gains are quickly flooding into cash cattle markets with live cattle in the South posting a $10 per cwt rally from last week, while dressed cattle are holding $17 per cwt gains. This underlying support in the market is likely to bring additional support leading into the month of April, as the period of panic liquidation surrounding COVID-19 seems to be ending. | 2) | Meat cases at retail locations around the nation are being constantly restocked. It is uncertain just how active daily buying will be over the near future once the surge of market activity passes. It will take additional days and weeks to catch up with the new pattern of buying seen through the nation, which could add increased volatility into wholesale and retail prices. |
| 3) | Despite a pullback in futures prices Wednesday, the lean hog futures complex is still trading higher than before the March price tumble, earning back all of early-month losses. This renewed support and expectations that additional meat demand will continue is helping to bring support to the complex. | 3) | Strong triple-digit pressure in pork cutout values Wednesday added to overall long-term market support. If prices continue to erode through the end of the week, the recent bullish futures market interest is likely to quickly erode. |
| 4) | Traders will be closely watching the morning release of weekly Export Sales reports Thursday morning. New export sales and deliveries to China last week will be the main focus, and a sizable gain could rekindle support through the entire complex. | 4) | The afternoon release of the quarterly Hogs and Pigs report is expected to point out strong year-over-year inventory gains as the expansion seen over the last year building up to expected strong China pork demand continues to push more hogs through the system. This is expected to continue through spring and summer months. |
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| #completecalfcare |
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