Cash cattle activity remains quiet with limited interest from either side going into Tuesday morning. The strong rally in prices seen last week may be a limiting factor in follow-through support through the week, especially given the fact that cattle futures have significantly backed away from previous highs. The underlying pressure developing in boxed beef values is pointing to expected demand slumps as retailers seem to have caught up with the surge of buying activity seen over the last couple of weeks and significant demand erosion is likely to be seen from the food service industry. With the expectation that social distancing and "stay home orders" that are in place are being extended through the end of April, this will continue to significantly affect the amount of beef moving through the restaurant systems. Even though businesses are trying to stabilize business through drive thru, carry out and delivery services, this still is a far cry from replacing the "dine in" demand across the nation. Reports that JBS will reduce slaughter plant production due to a COVID-19 case in an Eastern U.S. plant will likely add increased pressure to live cattle futures. At this point, it is not expected that this will affect fabrication or grinding operations, and should have a limited impact on the overall daily slaughter levels, but it still may have a significant impact on futures and cash prices as this is the first indication that Coronavirus will affect production levels of beef production. Tuesday slaughter is expected at 118,000 head.
Lean hog futures set contract lows Monday in all nearby contracts except April futures. With the complex posting limit losses each of the last three trading sessions, follow-through pressure is likely to develop Tuesday morning. Expanded trading limits of $4.50 per cwt are once again available for traders on the last day of March as trades look for any sense of underlying support that would spark renewed interest into the complex. The continued pressure in pork cutout values points to the growing concern that overall pork demand will start to erode over the near future as retailers have restocked shelves and are keeping up with consumer demand. The lack of active demand in the restaurant industry is also taking its toll on overall pork movement. Although the market remains weak, the potential for buyer support still does exist as traders may view current positions as long-term buying opportunities, but first the market has to break out of the sharply lower market shift in order for buyers to feel comfortable jumping back into the market. Cash hog prices are called steady to $1 lower with most bids expected $1 per cwt lower. Slaughter Tuesday is expected at 495,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cash cattle market basis levels still remain with recent cash market prices listed $30 per cwt over the most active June contract. This remains the largest basis levels in nearly two decades. | 1) | Active pressure is starting to slowly but steadily develop in boxed beef prices. This could further weaken the overall futures and cash values as the ability to sell beef following the recent gains may be limited. |
| 2) | The ability to spark renewed buyer support in deferred live cattle trade Monday is pointing to a sense of renewed market stability seen through the complex. This could help to limit the recent losses creating a path for buying interest over the coming days. | 2) | The potential that packing plant slowdowns, or shutdowns due to increased coronavirus levels could once again bring increased pressure into the market as traders focus on the inability to keep cattle supplies current in the upcoming weeks. |
| 3) | Limited bullish market support is seen in the lean hog futures market, but traders continue to focus on longer-term demand for pork. This is putting less pressure on deferred contracts, helping to focus on potential market gains later in the year. | 3) | With expanded trading limits in place for the third-consecutive day, it is concerning to think that for the short term, such a weaker trend is becoming a significant pattern through the complex. This could lead to further liquidation in the coming days. |
| 4) | The depressed lean hog futures complex remains an excellent buy opportunity for investors wanting to step into a market, which is expected to be at or near the bottom. Buying at these levels with expected long-term demand likely could be an excellent investment opportunity. | 4) | Pork cutout values have continued to quickly erode as the ability to move pork product at retail locations is starting to slow. This may add increased underlying pressure to a market with increasing supply levels over the near future. |
 |
| #completeherdhealth |
No comments:
Post a Comment