With the week quickly coming to a close, little direction has yet been seen in cash cattle trade. The underlying support in futures trade and strong push higher in wholesale beef values, combined with limited cash trade last week would suggest that packers would become moderately aggressive when it comes to steady-to-higher prices. Growing concerns of lighter packer runs, and how this will affect procurement levels through the end of the month, may limit increased bids by the end of the week. The limited cash cattle market in the North so far this week is not enough to establish a good market test, but significant gains in packer bids are needed to close the gap between bids and asking prices. Asking prices are expected to remain near previous levels of $108 live basis and $168 and higher dressed. But if packers do not deviate away from recent bids of $155 per cwt dressed basis, significant cash prices pressure may be seen at the end of the week. Futures trade has gained support through the last couple of days, based partially on the significant discount to cash markets. Although cash basis levels have moved away from near record highs over the last week, a move to more normal basis levels in the upcoming weeks would be a concern and could spark some underlying market swings.
Maintaining desired production levels despite increased outbreaks of COVID-19 at packing and processing plants is keeping the packing and processing system at the "choking point." This is restricting product flow and will likely back up supplies of live cattle and tighten fresh beef supplies in the upcoming weeks, and it will add another level of uncertainty to the already stressed cattle market. Friday slaughter is expected at 91,000 head. Strong underlying support in pork cutout values Thursday was too little too late to help spark interest into cash hog or futures trade through the Thursday session. But with end-of-the-week positioning likely early Friday morning, lean hog futures trade could remain mixed in a moderate range. The continued abundant hog supplies and reduced packing capacity due to closed plants and other plants struggling to maintain full schedules due to labor issues will likely further add to the availability of market-ready hogs. Traders continue to focus on short term versus long-term demand levels, but getting pork to the consumer in a stable and regular fashion will likely be a challenge given the uncertainty of plant output through the upcoming weeks. With June futures the spot-month contract, prices moved to new contract lows Thursday, adding additional concerns of follow-through pressure based on the inability to maintain previous support levels. The inability for prices to hold above $45 per cwt, is likely to add to the already bearish market tone in the complex. Cash hog values are expected steady to $2 per cwt lower with most bids expected $1 per cwt lower. Slaughter Friday is expected at 443,000 head. Saturday runs are expected at 222,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong additional gains in beef cutout values have created increased focus on the value of beef moving into the retail system. With gains over the last two days offsetting recent weakness, the concern of tightening supplies is pushing for even higher beef prices. | 1) | Packing plant reductions of daily schedules continues to limit the amount of cattle moving through plants, backing the feeding system all the way back to feeder cattle sales. This may continue to limit cash values in all sectors based on the slow movement of animals through the pipeline. |
| 2) |
The discounted futures prices is sparking underlying support in June lean hog futures through the last half of the week. Not only are June futures well below cash values, but the $9 discount below April futures is sparking follow-through futures support..
| 2) |
The wide gap between live cattle futures and cash values remains concerning, especially given the growing supplies of market-ready cattle through the upcoming weeks. An abrupt shift to basis levels could create significant volatility through the complex.
|
| 3) |
Pork cutout values have surged higher with the focus on lighter packer schedules creating some concern that pork supplies will tighten over the near future.
| 3) |
Strong price pressure is seen in cash hog values. Packers continue to struggle to keep up the pace of processing market-ready animals, leaving uncommitted cash purchased hogs at the end of the list. This could further pressure cash prices through the near future.
|
| 4) | Continued efforts and plans on reopening the economy using a "staged" strategy over the coming weeks is helping to rekindle hope that demand will be redeveloped in all segments of the market, but especially in food service industries. This would help support pork demand. | 4) |
Lack of definition as to when packers can get back to work in idled plants around the country adds increased uncertainty to the complex. The longer the shutdowns continue, the bigger the backlog of market-ready hogs will be through the country.
|
 |
| #completecalfcare |
No comments:
Post a Comment