Cash cattle markets are still generally quiet midweek, although limited early week trade developed in Nebraska and Iowa late Tuesday. Prices were listed at $150 per cwt dressed basis, which is generally $4 per cwt lower than last week. Significant cash market activity is expected in the next couple of days, although it is uncertain just how active bids will be early Wednesday. The focus on the president's action Tuesday to use the Defense Protection Act in order to deem the meat packing industry as critical infrastructure is likely to spark increased activity as this will allow plants to focus on reopening plants. The other part of this is to limit the liability for packing plant companies. At this point, this is creating more questions than answers as how and when this will be implemented. The balance between keeping workers safe and maintaining the meat supply to retail locations and consumers will continue to be a delicate balance that will likely create significant controversy over the coming days and weeks. This should allow a light at the end of the tunnel for idled plants to resume production and allow a portion of the cattle, which are backed up on feedyards to slowly move to market in the coming weeks. Futures trade is expected mixed to mostly higher with potential for additional underlying support early in the week in live and feeder cattle futures as the industry tries to increase processing. Wednesday slaughter is expected at 93,000 head.
Lean hog trade has seen firm support early in the week with underlying momentum likely to redevelop early Wednesday. The impact on overall short- and long-term hog supplies already taken through the industry may continue to focus on an adjustment of overall hog numbers, especially later in the year. At this point, it is still unclear just how many hogs have been impacted as reports of euthanizing has circulated over the past few days. But even though it may have an impact on short-term, market-ready supplies, the expectation that young hog numbers may be even more affected will change the overall availability of market-ready hogs through the fourth quarter of the year. Market watchers and traders will be looking for additional information and direction on how the President's order to keep plants open will impact the market and production levels. Even if plants reopen, the uncertainty of how to keep plant employees safe will continue to be a significant challenge in the days and weeks to come. Cash hog bids are expected steady to $1 per cwt higher with most bids 50 cents higher. Slaughter Wednesday is expected at 339,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) | The executive order by the president that meat packing plants are critical infrastructure is expected to clear the path to reopening production levels in the near future. This should help to limit the disconnect between market-ready animals and the availability of beef to the consumer. | 1) | The wide disconnect between live cattle prices and wholesale beef values remains a significant barrier in the market, especially with limited upward movement in retail beef prices at this point. This could bring about significant shifts in boxed beef values in the near future, leading to additional volatility through the rest of the market. |
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Surging boxed beef values continue to focus on the expectation of tight supplies in the near future. This may add even more support to the complex as traders focus on moving away from recent long-term market lows.
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Even with federal support to keep packing and processing plants open, the logistics of moving to a more normal production schedule will take time. This could create additional uncertainty as the details of the plan are not yet fully disclosed.
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The actions taken through the pork industry due to nowhere to go with market-ready hogs in some areas over the last week is expected to have longer-term implications on pork supplies, which could tighten the supply chain through the end of the year.
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The focus on packing plants moving back to a more normal schedule in the future has quickly pulled aggressive futures market support away from the complex. This left nearby contracts with moderate gains Tuesday following strong expanded trading limits earlier in the day. Additional futures volatility may develop through the end of the week.
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| 4) | Strong underlying technical support has moved into lean hog futures through the last half of April. This has pushed June lean hog contracts over $12 per cwt higher over the last two weeks, creating additional market momentum through the oversold hog complex. | 4) |
The strong shift higher in wholesale pork values through the last couple of weeks may limit demand growth if these gains are filtered through retail markets. Given the economic pressure and significant amount of consumers unemployed, demand for pork is expected to remain extremely sensitive as prices start moving higher.
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| #completecalfcare |
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