Additional cash cattle trade developed Wednesday, with prices generally steady with the limited Tuesday trade. It appears that without a major adjustment in futures trade over the next couple of days, the recent levels may set the tone for the week. With futures trade closed Friday, both sides are likely to wrap up cash market deals Thursday so they aren't uncovered, in the event that something major changes over the weekend to impact overall cash market or widespread economic levels. Live cash cattle trade is 105 per cwt, generally $4 per cwt lower than last week, while steady with early-week activity. Dressed trade is $6 per cwt lower than last week at $168 per cwt. Overall cattle numbers sold through the week may remain generally light as limited overall production is likely to be seen in the upcoming days and weeks. Futures trade is expected to remain mixed Thursday. Although the strong upward surge this week is helping to spark underlying bullish expectations, the overshadowing uncertainty about beef demand through the next few weeks remains a major concern that could limit additional strong upward market shifts in the near future. Additional end-of-week position squaring is likely on Thursday as the overall focus on covering positions ahead of the long weekend may have more emphasis at this time than traditionally seen during the Easter weekend. Thursday slaughter is expected at 108,000 head.
Moderate price shifts are likely to continue Thursday as traders wrap up the week following a moderate-to-strong bounce off of long-term lows. With markets closed Friday due to the Easter weekend, and Monday trade following Easter traditionally sluggish, the focus on price adjustments and position squaring is likely to be high through most of the session. This could add increased end-of-the-week volatility in the complex, although in June contracts even limit losses at the end of the week would not shatter long-term support levels. But strong triple-digit losses Thursday would create significant technical damage to the recovery efforts this week, leaving traders to re-question if a "market bottom" has been established. Cash hog prices are called steady to $1 lower with most bids expected steady to $1 per cwt lower. Slaughter Friday is expected at 483,000 head. Saturday runs are expected at 54,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Sharp upward momentum in live and feeder cattle trade has sparked underlying support as traders focus on recovery efforts in the hope that increased widespread support will be seen in meat values and all other commodities through the upcoming days and weeks. | 1) | Weaker cash cattle trade compared to last week is creating growing uncertainty about the ability to keep pace with the strong gains in futures trade. |
| 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) |
The incredibly strong cash cattle basis levels during the last few weeks is creating concerns of what will happen if basis levels normalize through late spring and summer months. This could significantly damage cash cattle market values and long-term averages as the market recovers from the recent market crisis.
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| 3) |
Increased open interest has continued to develop through lean hog futures trade during the week, sparking increased interest from commercial and noncommercial traders as the potential to set a long-term market low seems to have been seen early in the week.
| 3) |
Sharp losses in all meat values Wednesday sparked renewed uncertainty in the ability to sustain current pork demand, leaving questions if further pressure is likely in the near future.
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| 4) | Moderate price premiums continue to hold in June futures. This not only is helping to stimulate the transition from the April contract, but it focuses on renewed long-term support rebuilding through summer contract months. | 4) |
Triple-digit gains in nearby lean hog futures midweek quickly shifted away from early-week gains. This has the potential to spark additional uncertainty in the complex going into a long three-day holiday weekend.
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