Cash cattle trade still remains generally limited going into the midweek session, but the tone has significantly changed over the last week with feeders aggressively focusing on taking advantage of the market rally both in futures and beef values over the past week to 10 days, and finally getting a portion of the recent spoils. Limited trade activity developed Tuesday with dressed prices at $188 per cwt. This is generally $3 per cwt higher than Monday's light trade, but nearing $13 per cwt ahead of last week's price levels. Asking prices remain at $125 and higher live basis and $190 and higher dressed, but if strong follow-through support is seen in live cattle futures, these could quickly be ratcheted higher. There still is a lot of trade that needs to be done before the end of the week, but initial Wednesday bids are likely to redevelop near $120 or higher live and $185 and higher dressed until further clarity is seen. Boxed beef values Tuesday were mixed with Choice cuts falling for the first time after moving higher for seven consecutive sessions. The continued retail demand support is still keeping meat flying off of store shelves, but if this goes on longer the question is whether high value will meats be able to sustain strong consumer demand. Futures trade is expected to move higher early Wednesday morning as traders continue to be focused on the aggressive support in stock markets and fundamental strength building in the cash and beef markets. All cattle trade will have access to expanded trade limits once again, allowing for potential wide market swings midweek. Wednesday slaughter is expected at 121,000 head.
Although lean hog futures continue to ratchet higher and help give support to the firmness through the entire livestock market, the intensity in lean hog futures is less intense than cattle market moves. The ability for April lean hog futures to hold triple-digit support and break through short-term resistance levels should not be overlooked though as the lean hog complex has moved to March highs. The lean hog market still has significant challenges due to a larger percentage of pork demand needing active export markets than the beef market in order to sustain active buyer support. This could limit further upward market support in the near future, although outside market strength may soon offset these concerns. Cash hog prices are called 50 cents lower to $2 higher with most bids expected steady to $1 cents higher. Slaughter Wednesday is expected at 495,000 head. Saturday runs are expected at 270,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | With the White House and Senate apparently reaching a deal on the stimulus package going through Congress (even though a vote has not taken place at this point), the expectation that the infusion of federal support into the economy is helping to push most prices higher through the week. This is having a direct impact on beef values over the last couple of days. | 1) | Cash cattle prices still remain at a significant discount to the recent rally in beef and futures values, but the strong basis levels could weaken if the futures market can't keep pace. |
| 2) | Cash cattle trade for the week is expected to make up lost ground as feeders continue to hold out for higher money going into Wednesday morning. The expectation that cash markets will move $10 to $15, (or even higher) than last week's average prices is sparking additional optimism the complex. | 2) | Long-term beef demand still remains in question due to food service and institution markets essentially halted due to the coronavirus. Choice beef cutouts fell on Tuesday after a seven-day streak, creating concerns about further weakness in high value meats. |
| 3) | Lean hog futures continue to surge higher with Tuesday's rally breaking through short-term resistance levels set in early March and moving prices to a March high. This move has officially retracted the aggressive losses the last two weeks, creating increased momentum through the complex. | 3) | Pork cutout values slipped lower Tuesday, creating some concern that further weakness may develop over the coming days as retail buying interest may not sustain higher value pork cuts. |
| 4) | Cash hog prices continue to ratchet higher as packers scramble to source hogs in order to sustain the strong margins seen in the last couple of weeks. This will continue to keep plants at or near capacity over the near future. | 4) | The inability for lean hog futures to hold early gains the last two trading sessions is concerning. This indicates that buyer depth may remain limited, and could keep prices from moving higher over the near future. |
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