Cash cattle activity is expected to remain quiet most of the day Thursday. Following what is expected to be another light cash cattle trading week last week, there is growing uncertainty of the ability to follow the recent shift higher in futures trade. Additional concerns of COVID-19 cases as individual plants around the country as well as reduced absenteeism at these plants is causing growing concern about being able to move market-ready cattle during the next couple of weeks. Given the continued pressure in overall restaurant and food service demand, overall movement of beef is expected to remain weak, causing a buildup of most beef products through the entire system. The strong pullback in cutout values last week is sparking growing concern that additional market weakness is still ahead as the country remains generally shutdown due to virus infections with a firm ending date still unknown. Futures trade is expected mixed. Easter Monday traditionally remains a lightly traded day, and this year is not expected to be any different despite the uncertainty through the market. Cattle futures quickly bounced well above long-term support levels last week, but the overall uncertainty of short-term demand and continued economic concerns may limit follow-through market gains over the near future. Monday slaughter is expected at 86,000 head.
Sharp losses late last week left the entire lean hog complex with unanswered questions ahead of the extended holiday weekend. With the market not traded since last Thursday, the focus on potential wide market moves once again Monday could spark increased volatility in the lean hog complex. Planned plant reductions due to Easter Monday will significantly cut overall plant runs during the day, but the "indefinite" closing of Smithfield's pork plant in Sioux Falls, South Dakota, combined with other challenges of keeping enough production workers on the line at other plants will become a major challenge in keeping the pork system moving. This is leading up to another day of potential wide, but mixed market shifts in futures trade despite expected limited volume. Cash hog prices are called steady to $1 lower with most bids expected steady to 50 cents per cwt lower. Slaughter Monday is expected at 364,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Price support levels set early last week continue to hold, creating the potential for follow-through buyer support to move back into the market as traders focus on a full week of trading following the Easter break. | 1) | Continued cash market pressure late last week coupled with a second week of limited activity is likely to put additional pressure on live cattle trade the next couple of days. |
| 2) |
Strong cash cattle basis levels still continue to hold despite the pressure in cash prices. This is creating the opportunity to market hedged cattle given the current basis levels available.
| 2) |
Limited activity in futures trade and lighter packer activity is planned Monday due to the Easter weekend. This could continue to put price pressure on futures and cash market trade early in the week.
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| 3) |
Continued talks about potential virus testing at food production facilities may help to calm growing fears in many of these meat packing plants, due to food production and meat packers deemed "essential" through the pandemic.
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Strong triple-digit losses in lean hog futures late last week sparked growing uncertainty about a market rally earlier in the week. This could create additional market weakness based on concern of pork demand growth in the near future.
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| 4) | Potential firm retail demand is expected for the Easter weekend, even though overall holiday gatherings were limited. This is part of the focus behind the triple-digit gain in pork values through the end of last week. | 4) |
The inability to regain buyer support over the next couple of days could quickly allow traders to retest long-term lows. A move below $48.32 per cwt in June futures is likely to spark additional bearish liquidation through the entire complex.
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