The light cash cattle trade last week is creating questions about whether packers will continue to pull back on production levels in the upcoming weeks as increased virus cases continue in the country. The announcement that workers are reported testing positive in many types of manufacturing and processing plants across the country has started to added uncertainty to overall beef production levels. With cases of coronavirus reported at the JBS beef plant in Grand Island, Nebraska, there is still no report that production levels have changed going into the week, but the temporary closure of the company's plant in Pennsylvania is creating uncertainty in the complex. It is possible that packers will enter the week following limited trade last week, looking forward and remaining short-bought going through the early part of April. With the Easter weekend approaching and production levels limited, it is likely that packers are facing another week of scaled-back production. Bids and asking prices may not develop until midweek or later, which may limit cash market support over the next couple of days. Futures trade is expected mostly lower with firm pressure developing late last week, keeping the entire market weak. Live cattle futures will have the access to expanded trading limits Monday following April contracts closing limit lower Friday. Feeder cattle trade moves back to normal trading limits of $4.50 per cwt Monday morning. Monday slaughter is expected at 118,000 head.
Continued pressure in the meat complex continued to cause widespread losses in the complex late last week. Most of the selling activity remained physiological in nature given the uncertainty of overall short-term pork demand and how the nation will react to increased virus cases and surging deaths during this time. In turn, buyers have been hard pressed to step back into the market given the erosion of technical and fundamental factors alike. This is likely to create additional pressure in nearby contracts early Monday. Although the potential to spark limited-to-moderate buying in deferred trade could help to stabilize the market, there is uncertainty about whether it is enough support to regain strong buyer support in the upcoming week could add increased volatility early in the week. Cash hog prices are called steady to $2 lower with most bids expected $1 per cwt lower. Slaughter Monday is expected at 493,000 head.
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| 1) | Feeder cattle futures are trading at the lowest prices since 2010 on the continuous monthly chart. For feeders looking to add to lots, and expecting long-term beef demand support, this may be the greatest opportunity to purchase feeder cattle in the last decade. | 1) | Sharp limit losses in April live cattle futures Friday will cause expanded trading limits in live cattle once again Monday. This will continue to create uncertainty as beef demand remains in question given the economic tumble. |
| 2) | Packers are expected to be entering the week short-bought following limited trade last week. If futures trade is able to show any signs of life over the next couple of days, cash spending may be forced higher given the short week. | 2) | Beef demand traditionally follows the direction of the economy. There has been nearly 10 million new jobless claims in the last two weeks, and that number is expected to grow. Concern about beef demand growth, especially for high value cuts, is front and center on most traders' minds. |
| 3) | Light-to-moderate buyer support developed in deferred lean hog contracts late last week. This focus on renewed buyer support in late 2020 and early 2021 contract months points to continued hope that pork demand will rebound once virus cases start to subside. | 3) | Strong pressure last week in cash hog values and pork cuts continues to add pressure to nearby lean hog contracts going into Easter week. |
| 4) | Growth in open interest the last few trading days is limiting continued erosion in the market despite the lower prices. Buyers are starting to re-own lean hog contracts at the lower prices, which typically helps to regain market support. | 4) | Easter traditionally means significantly increased pork demand, but with social distancing in place and many states having "shelter in place" orders in effect, the expectation that holiday gatherings will be limited could significantly affect pork demand in the next week. |
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