Cash cattle activity is still undeveloped going into Wednesday morning with bids and asking prices seemingly hard to pin down. With the lighter expected packer runs and increased troubles keeping plants either operational or near full speed, the question of how many additional cattle will need to be bought to fill the lighter runs could delay most cash market activity until late in the week. The announcement that the JBS plant in Greeley, Colorado, will be closed with an anticipated reopening the last week in April will not only create significant uncertainty in the market, but will also cause a major impact in overall numbers of cattle moving through the system. This announcement is not significantly shocking, until now on the beef processing side, small and midsize plants had been closed, leaving this affecting the entire system mindless of operational size. Cattle futures trade is expected to open mixed as traders sort out a combination of outside market moves while trying to adjust to the changing dynamic of beef processing and demand challenges facing the industry. The lighter processing speeds at plants from a futures market standpoint is expected to help relieve some of the pressure off of tumbling beef demand and support beef values once again. But this continues to create an even greater disconnect between live animal prices and retail market prices through these changing market conditions. Wednesday slaughter is expected at 88,000 head.
Mixed trade is likely to redevelop in lean hog trade Wednesday morning but there are underlying concerns of packer activity levels through the next couple of weeks and how this will further disrupt the overall hog and pork system. Given the aggressive supply levels of hogs in the past year and growing amount of pork in storage through the year, it is premature that the country will run out of pork anytime soon due to a pullback in packer activity. But this will continue to disrupt the general flow of the system and likely bring about increased market shifts in live hog, futures trade and pork values in the days and weeks to come. The emotional moves during early March appear to be quickly returning to the entire hog market, adding potential market swings on a daily basis as traders try to get a glimpse of the future in a very foggy landscape. Cash hog prices are called steady to $2 lower with most bids expected steady to $1 per cwt lower. Slaughter Wednesday is expected at 452,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | Active gains in select boxed beef cuts Tuesday sparked increased follow-through interest on the expectation of reduced beef processing schedules for the next couple weeks at least. | 1) | Additional concerns of coronavirus outbreaks in beef packing plants will continue to limit overall processing abilities not only in plants that have temporarily shuttered, but also in operating plants that are challenged with getting enough workers to run at full throttle. |
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Strong triple-digit gains in live and feeder cattle futures helped to limit early-week concerns about active market pressure quickly developing across the complex. This could add even more support through in the complex the next couple of days.
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Firm pressure developing in several outside markets during overnight trade may limit the renewed cattle futures support that developed Tuesday. This is likely to add increased market volatility given uncertainty in all areas of the market.
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Buyer support in late summer and fall lean hog contracts continues to remind traders and all market participants that short-term market moves do not define the entire long-term outlook of the market. This could help to create a long-term view of positive moves despite current market conditions.
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Continued cash market pressure is likely to continue through the week as reduced plant capacity during the upcoming weeks will put negotiated trade on the back burner with cash-bought hogs being a second priority to already committed hogs.
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| 4) | Firm gains developed in wholesale pork values on the expectation that reduced packer activity will allow for clearance of the abundant amount of pork currently in storage. | 4) |
As June lean hog futures take the seat as most actively traded spot month contracts, there is concern that additional price pressure will develop in the next few days due to the virus affecting the ability of the pork system to function correctly.
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