Cash cattle activity started to develop a rhythm Tuesday with light to moderate activity developed steady to higher than Monday's levels. Live trade developed generally at $110 per cwt, which is steady with early-week activity, while most dressed business developed at $170 to $175 per cwt, steady to $5 per cwt higher than the initial-week activity. The focus on market moves through the complex is being driven by the aggressive movement in wholesale beef values over the last two days. Boxed beef values have rallied more than $30 per cwt in choice cuts for the week, focusing on the intense consumer demand for beef and all meat as suppliers do all they can to keep fresh product on store shelves. Although at this point, there has been little evidence of significant demand pressure in beef and all meat markets from the food service industry, the expectation is that additional demand losses will develop over the coming days and weeks. But until the average consumer builds comfortable refrigerator and freezer stocks, the intense demand for fresh product is expected to continue. The direction of futures trade remains uncertain through overnight activity. The strong gains Tuesday will allow for another day of expanded trading limits in live cattle, while feeder cattle futures will move back to a normal schedule. This will leave all livestock trade with a $4.50 per cwt trading limit as traders balance early outside market pressure with strong fundamental beef price gains. Volatility is still expected to remain strong through most of the morning, but futures trade could be a loose cannon pointing in any and all directions through early trade. Wednesday slaughter is expected near 121,000 head.
Lean hog futures will have access to expanded trading limits once again Wednesday, following the aggressive Tuesday gains. It is still too early to tell if Tuesday's market shift higher will be able to regain long-term support based on firm underlying support in outside markets and aggressive gains in cash and pork values through the week. The building pressure in outside market trade and stock market futures pointing to a lower open, may quickly derail the recent market moves. If the upward shift in lean hog prices turns out to be a one-day reaction based on short covering and traders sweeping in to take advantage of an extremely oversold market, the concern that follow-through pressure may quickly and firmly develop through the last half of the week. Cash hog prices are called $1 lower to $2 higher with most bids expected steady to $1 higher. Slaughter Wednesday is expected at 496,000 head. Saturday runs are expected near 345,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Beef cutout values surged higher through the week with a two day total pushing choice cuts $30 per cwt higher for the week. This momentum in consumer demand is expected to limit aggressive follow-through pressure. | 1) | Active pressure in outside markets during overnight trade is causing questions if Tuesday's market gains will hold. The split between higher beef values and outside moving markets should keep live cattle prices volatile through most of the morning. |
| 2) | Steady to higher cash cattle trade from early-week activity is helping to spark renewed market support through the entire complex. This could help to bring the stability needed for the oversold cattle complex. | 2) | The wide back and forth market shifts of $4.50 per cwt in either direction over the last two days is creating lack of confidence that traders will stick to a market direction over the near future. |
| 3) | Strong triple-digit gains in cash hog prices continue to focus on packers' need for increased market ready product in order to keep up with the surging consumer demand. | 3) | Even though active consumer demand remains, the focus on extremely large pork production through the U.S. during the first half of the year will continue to limit upside market potential in the complex. |
| 4) | There continues to be underlying support building in the entire lean hog futures, creating the potential to establish long-term market lows following Monday's lows. This could actively bring back commercial buyer support through the upcoming days and weeks. | 4) | The limiting of travel and gatherings due to COVID-19 will continue to affect pork demand as Easter celebrations are just around the corner. This could add limited demand support in the first major pork holiday of the year. |
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