Cash cattle trade has started to trickle into the market in the first half of the week, however, there has not been enough consistent business to establish a good trend. Cash values will likely continue to show weakness from last week's levels based on the packers' limited ability to take cattle. Daily slaughter rates are coming in well below 90,000 head, which is nearly 30,000 head below the general pace for the spring. With plants either closed due to virus outbreaks, or running at reduced capacity based on limited attendance, overall slaughter capacity remains extremely limited. For all of the equipment and processing systems utilized at these modern plants, the entire packing system continues to be extremely dependent on many people working together in unison in order to keep a plant running. Some additional cash market interest is expected the next couple of days, but the overall limited packer capacity will likely limit price values at this point. Futures trade is expected to remain mixed as traders try to sort out the direction through the end of the week based on rapidly surging wholesale meat values and eroding cash prices. Increased talk about potential tight meat supplies at the consumer level is sparking double-digit surges in choice and select cutout values. This has moved cutout values over $50 per cwt higher in the last two weeks based on the concern of meat supplies available to consumers. Thursday slaughter is expected at 88,000 head.
Lean hog futures are expected mixed in limited early trade. The focus on limited packer buying is creating increased volatility in the market, although the overall current pressure in lean hog values may limit additional liquidation at this point. Although cash hog values bounced higher, the concern is about being able to get hogs to market. The inability for plants to either stay open or run at an effective capacity continues to be a major challenge. Even if plants are able to open, the ability to instill social distancing measures in these facilities is nearly impossible, and may continue to spark increased spread of the virus between workers. Traders will also look for export market moves from China in the weekly Export Sales report. This is not expected to change the direction of the market, but the industry is searching and hoping for any sign of good news at this point. 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.
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| 1) | Meat values continue to surge higher with the focus on limited meat supplies coming out of plants. This will continue to point to higher overall beef values, which in time should spark underlying support for cattle if processing availability develops. | 1) | The rapidly widening spread between cattle prices and wholesale beef values is sparking increased underlying concern in the entire complex. This is adding additional uncertainty not only where prices are going at the moment, but how markets will recover once processing levels return to normal levels. |
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Limited buying has developed in feeder cattle futures and deferred live cattle trade midweek, helping to spark renewed focus on potential additional buying from commercial and noncommercial traders at current price levels.
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Limited cash buying activity expected by packers is likely to continue to put pressure on the cash market. This is adding increased concern about the ability to move market-ready cattle heading into early May, especially when temperatures start to increase in many areas.
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| 3) |
Cash hog values posted firm gains as the surge in pork values has led to limited gains in hog prices even though processing capacity continues to be limited.
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Pork supplies in storage increased from year-ago levels, with significant gains in bellies and picnic cuts. These are meat cuts that are focused on food service industries, as this industry was the first to see the impact of lower demand during the month of March.
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| 4) | Pork values continue to surge higher, helping to focus on potential support in retail price levels, and growing demand for pork available to the consumer. | 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 weeks.
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