Generally light overall cash cattle trade developed last week with prices covering a generally wide range. The full range in Southern live trade was $148 to $160 per cwt, generally $5 per cwt lower than the previous week. Northern dressed trade was from $93 to $100 per cwt, lower than the previous week by $5 per cwt and more. Limited interest is expected this week even though there has been light buying in the last several weeks. The lighter production levels at plants have left packers with little incentive to purchase additional cattle. The continued uncertainty of plant operations of outbreaks in each plant is a day-to-day issue that will continue to be closely monitored on all levels. This will continue to create significant concern in all areas of the industry, but will likely leave cattle feeders with few options on where to send market-ready cattle. Friday's Cattle on Feed report posted supportive news as placements and total on-feed levels fell significantly from year-ago levels. Reductions were expected, but given the uncertainty in the market and variability of pre-report estimates, traders went into the report not having confidence in what overall direction would be. With feedlot cattle at 95% year-ago levels, and placements in March 77%, the focus on tighter long-term supplies is expected to help stimulate buying through the end of 2020 and early 2021. Futures are expected mixed in limited trade, as potential support from Friday's Cattle on Feed report is likely to spark deferred buying, which may quickly trickle through the rest of the complex. Monday slaughter is expected at 88,000 head.
Light end of the week buyer support in lean hog futures may spark renewed, technically-driven support early Monday morning. Given the shift higher in the last couple of trading sessions, technical long-term lows may have been set. Even though there is growing uncertainty about overall processing plants reopening in the near future, the concern seems to be fading of further widespread pressure. Strong retail demand continues with supermarket buying still active and pork supplies moving out of storage to meet the demand. An increased boost in food service demand is expected in the upcoming weeks with plans to gradually reopen the economy in several states. If some of these businesses do reopen, it is going to take a few days of lead time in order to build working stocks after being shuttered for a few weeks. Cash hog values are expected $1 lower to $1 higher cwt lower with most bids expected steady to 50 cents lower. Slaughter Thursday is expected at 322,000 head. Saturday runs are expected at 141,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong reductions in cattle placement levels during March is not a huge surprise given the market conditions, but the focus on long-term market support as these cattle work through the system through the end of the year is helping to put a better long-term outlook on the currently dismal cattle market. | 1) | Surging wholesale beef values continues to widen the gap between cattle prices and wholesale price levels. This continues to create a significant disconnect through the industry with uncertainty of how this disparity will be resolved without significant repercussions over the coming days and weeks. |
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Strong meat demand at retail locations is expected to continue as the concern of tight supplies due to lighter packing plant operations will continue to be the focus in the meat industry over the near future.
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Limited processing in the industry will continue to create challenges to move market-ready cattle through the system, and keeping the system current. This will create a backlog of larger animals needing to move through supply chain through the month of May.
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Underlying support in pork cutout values is helping to spark market stability through the complex as traders look for increased long-term support through the entire market based on the dispersal of previous pork stocks.
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Continued concerns of sluggish food service demand and how the plan to reopen businesses will develop on local and regional levels may create further concern for significantly regaining pork demand over the near future.
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| 4) | Firm gains in lean hog futures is helping to rekindle technical buyer support. With all contracts back above $50 per cwt through the end of last week, the potential that long-term lows have been set may be able to actively attract outside buyer interest given the weakness in most other commodity markets. | 4) |
Continued reductions in pork processing will continue to limit the availability to market hogs. At this point, price levels are not the main concern as it is reported that packers are not in the market even for already committed hogs due to lower plant throughputs. This will continue to back up the production system for weeksContinued reductions in pork processing will continue to limit the availability to market hogs. At this point, price levels are not the main concern as it is reported that packers are not in the market even for already committed hogs due to lower plant throughputs. This will continue to back up the production system for weeks.
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| #completecalfcare |
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