Cash cattle markets remain quiet with bids and asking prices hard to find early in the week. It is likely that even with the market freefall in futures trade seen Monday, active cash cattle trade may not develop until later in the week. With reduced overall slaughter capacity expected due not only to the plants that have stopped production due to the virus, but absenteeism in other plants will keep overall operating speeds limited for the near future. This will likely add additional pressure on cash markets as packers will utilize committed cattle first, filling the gap with cash-bought cattle. Sharp losses in futures trade Monday as traders returned from the long Easter weekend sparked renewed bearishness in the complex. These aggressive losses early in the week also opened the door for expanded trading limits in all cattle trade. Live cattle will be limited to a $4.50 per cwt loss, while feeder cattle futures will be allowed to move $6.75 per cwt before markets are halted Tuesday. The concern in the packing industry and further shutdowns focused on both ends of the processing line. Limited capacity will back up market-ready animals and limit the ability to keep the market current. But for the general public, continued reductions to processing capacity could quickly add additional meat shortages in the retail market if packers cannot keep up with demand. There is a lot of uncertainty at this point where demand levels are at due to the ever changing focus and lack of food service demand while increased retail demand continues to develop. Tuesday slaughter is expected at 106,000 head.
Two days into newly established CME daily trading limits, and the new expanded trading limits of $5.50 per cwt are available for traders. This wider market swing could add even more bearishness to the already dismal market structure that has pushed April and June contracts below $45 per cwt and June futures to new contract lows. The underlying weakness through the complex is focusing on the potential inability to keep the market current with increased announcements of packing plants having issues with increased COVID-19 cases. It is uncertain at this time how many additional plants will close due to outbreaks, and what overall plant capacities will look like in the coming days and weeks. Although the industry is "deemed as essential," there is little plants can do if the labor force isn't there to work. Even at reduced capacity, the concern of keeping up with retail demand over the coming days and weeks is starting to become a concern. Cash hog prices are called steady to $2 lower with most bids expected steady to $1 per cwt lower. Slaughter Tuesday is expected at 486,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Strong gains are starting to redevelop in boxed beef values early in the week as continued pressure in packing speeds is causing a concern that supply tightness of processed beef may once again be seen in the coming days and weeks. | 1) | Limit losses has sparked increased weakness through live cattle and feeder cattle trade. This is based on a growing uncertainty about whether packers can keep pace with the growing number of market-ready cattle in feedyards. |
| 2) |
So far, extremely strong cash basis levels remain. Even though cash markets have continued to slide in the last couple of weeks, the strong basis levels may limit the further impact of renewed liquidation in futures trade.
| 2) |
Without a strong shift higher in futures trade the next couple of days, further market softness is likely in cash cattle trade. At this point, it is uncertain just how many cattle packers need to buy in the negotiated market due to reduce plant capacity around the country.
|
| 3) |
Light gains are seen in pork cutout values early in the week with the expectation that additional retail market growth is coming.
| 3) |
Lean hog futures are moving to a new expanded trading limit Tuesday, allowing prices to shift $5.50 per cwt, which is $1 per cwt more than the previous expanded trading limit. The bearish tone in the market could allow for increased damage to the already frail lean hog market.
|
| 4) | August lean hog futures contracts are holding a $10 per cwt premium to spot June contracts. This move came on the expected demand growth through the summer months, which is helping to kindle limited hope that a recovery is just around the corner. | 4) |
Cash hog values are expected to continue to shift lower. With the Smithfield plant in Sioux Falls, South Dakota, closed for what is expected to be at least two weeks at this point, it will be a challenge to keep up with the current pace of market-ready hogs in the area.
|
 |
| #completeherdhealth |
No comments:
Post a Comment