Cash cattle interest remains quiet early Tuesday morning following limited activity on either side Monday. It is likely that most cash market movement will be delayed until midweek or later, but the focus on reduced processing speeds is likely to create more limited access to the market by many feeders over the near future. The underlying support in cattle futures prices, especially gains in deferred contracts trade early in the week, is likely to limit downward pressure this week. The more immediate concern for the entire beef industry and market is the reported cases of COVID-19 at different plants. This has led to suspended production at two plants to date, although additional production losses are expected as plants focus on intense cleaning and moving up planned cleaning closures for the near future. Increased absenteeism at many of these plants is also limiting overall capacity at plants that have remained open and willing to try to keep production lines stable. Futures prices are expected mixed early Tuesday morning. On Monday, April futures posted expanded limit losses, while all other contracts except for June futures posted moderate-to-strong gains, creating a divide between immediate price levels and a potential market recovery for the rest of the summer. With limited hope in new COVID-19 cases, which are below Saturday's high levels, is creating optimism. The Dow Jones closing over 1,600 points higher Monday with another strong rally during overnight trade is sparking potential optimism through the beef complex. Tuesday slaughter is expected at 118,000 head.
Tyson announced late on Monday that it was suspending production at its Columbus Junction Iowa plant "out of an abundance of caution" following 24 positive coronavirus cases at the plant. Tyson has stated that the production levels would be diverted to other plants. But it is uncertain just how this will impact overall futures trade, which have shown firm market support Monday. Aggressive triple-digit support in deferred contract months appears to be coming from renewed recovery efforts as traders seem able and willing to look past current demand concerns due to the slowing economy. Strong buyer support in most commodity and financial markets Monday is helping to relieve the pressure over the last month with outside markets posting firm additional gains during overnight trade. Limited trade is expected early Tuesday, but more clarity is expected through the day as more news of expected slaughter capacity is likely. Given the upcoming holiday weekend, which typically cuts production schedules, the overall lower plant output may have less of an impact than during normal production weeks. Cash hog prices are called steady to $1 lower with most bids expected steady to $1 per cwt lower. Slaughter Tuesday is expected at 491,000 head. Saturday runs are expected at 42,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong underlying support in deferred live cattle futures and all feeder cattle markets points to a potential market bottom being reached. This could help to regain firm buyer support leading into the long Easter weekend. | 1) | Access to available slaughter capacity for market-ready live cattle in feedlots is expected to continue to be the one of the biggest challenges over the near future. This issue could continue to remain a struggle as plants struggle with limited workforce and decisions to suspend packing capacity due to COVID-19 cases at individual plants |
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Sharp gains in stock prices both Monday and in overnight futures trade Tuesday morning has sparked renewed support in outside markets, which traditionally is a signal for beef markets. This could help to spur commercial and noncommercial buyer support the rest of the week.
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Even though firm buying may develop in futures trade, this could still delay any significant change in beef demand over the near future. With "stay at home orders" in place in most states, retail demand has slowed as well as food service activity significantly reduced.
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| 3) |
Triple-digit gains developed in all but lightly-traded April futures Monday. The unified support developing through the last half of the trading day sparked underlying bullish market momentum as traders focus on the potential that long-term support levels may have been seen.
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Reduced travel and family and church get-togethers over the Easter holiday will likely significantly decrease typical holiday demand. This may continue to have a long-term impact in overall pork movement through the upcoming days and weeks.
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| 4) | The oversold nature of the lean hog complex the last two weeks is creating incentive for widespread buying to redevelop during the month of April. The opportunity for traders to buy into the lean hog market at or near a market bottom could create increased momentum over the near future in futures and cash values. | 4) |
Despite strong upward moves in deferred lean hog futures as traders seemingly are starting to look past the virus impact, the focus on still struggling short-term demand may limit aggressive market support Tuesday.
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