Cash business is generally undeveloped going into Thursday morning. Although limited trade developed in the North on a dressed basis Wednesday, the amount of activity is still too small to create any market trend. The pullback in plant processing levels across the country and continued announcements of positive COVID-19 cases at packing plants continues to create questions of how active packers will be in sourcing cattle through the end of the week. It is expected that some bids will start trickling into the market over the next day, but any cash market activity may be delayed until Friday, if at all. Even for packers that have not shut down, the expectation that nearly all plants are running reduced levels of production either on the kill floor or fabrication lines due to reduced employee attendance will continue to reduce overall beef output over the near future. Continued uncertainty of meat demand, especially for higher end cuts such as roasts and steaks due to changing buying patterns in the food service industry continues to add concern to the ability to keep product availability balanced through this time. The strong push higher in beef cutout values has more to do with uncertainty about continued beef supply rather than current change in demand. This still leaves the livestock producer holding the bag, as the ability to find processing facilities for market-ready cattle is becoming even more difficult, even for cattle that are already committed. Futures trade is expected mixed as the moderate shift in nearby contracts Wednesday helped to break away from the wide market swings early in the week. The ability to keep markets generally calm going into opening bell could help to stimulate additional buyer support through the end of the week. Thursday slaughter is expected at 93,000 head.
Market stability and narrow price gains in June lean hog futures Wednesday was a breath of fresh air to a complex that is still embedded in uncertainty and growing challenges due to COVID-19. Smithfield farms announced the closure of two of its plants Wednesday, which continues to focus on the intertwined nature of the entire industry. The two plants that have been recently announced are processing plants, and not slaughter facilities, but the changes are partially connected to the absence of Smithfield's Sioux Falls plant that was taken out of production earlier. It is still unclear just how the rest of the industry will continue to deal with the reduced slaughter levels in this time of strong hog production. This could disrupt both ends of the pipeline, creating a ripple effect through both cash hog markets and pork values well after COVID-19 is front-page news. Mixed trade is expected early Thursday morning, as traders continue to focus on outside market direction as well as potential changes to the processing levels in the entire industry. Cash hog values are expected steady to $1 per cwt lower with most bids expected 50 cents per cwt lower. Slaughter Thursday is expected at 449,000 head. Saturday runs are expected at 210,000 head, but still hard to pin down.
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| 1) | Sharp triple-digit gains in beef cutout values, especially select cuts have sparked increased support in overall beef prices due to concerns of eroding processing schedules. This may stimulate demand for meat already available to the market. | 1) | Limited packer capacity is expected across the entire industry, which is likely to limit the amount of cattle purchased at the end of the week and ultimately pressure cash cattle values. |
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Firm underlying demand in nearby cattle futures Wednesday helped to create much needed stability through the complex. This may add increased support as traders focus on establishing price support..
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Expected demand pressure for beef products, especially high value cuts is likely to continue through the near future due to scaled back restaurant options for consumers.
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Firm gains across lean hog futures midweek has offset market uncertainty surrounding pork plant slowdowns and closures. A string of positive market moves through the end of the week could stimulate additional underlying support.
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Firm pressure in wholesale pork values despite the pullback in processing schedules is pointing to the overall demand pressure the coronavirus is having on overall meat consumption around the country and world.
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| 4) | The pullback in processing levels at pork plants through the month of April should help to reduce overall pork supplies in storage that have aggressively built up the last couple of months. This may spark long-term support through the market even while hog production levels remain strong. | 4) |
Growing uncertainty about short- and long-term pork exports through the next couple of weeks is sparking uncertainty about how product movement will develop through the rest of the spring and early summer.
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