Cash trade did not pick up as much as was hoped with another round of light business. Northern trade remained mostly at $150 with the South tightening up a bit to $95 to $96. Packers see no need to bid up to obtain supply. There seems to be no end to record-breaking boxed beef prices with a jump to $367.56 Thursday. The issue that may arise is that the meteoric rise of boxed beef may curtail consumer demand. This would reduce demand that needs to remain strong in order to reduce the backlog of cattle that need to come to the market. Live cattle futures are making a run at the top of the trading range, which could potentially trigger more trader buying interest if the top of the range is breached.
Buyers stepped back into lean hog futures Thursday after chart gaps were closed Wednesday. Traders seem confident higher price will unfold in cash hogs more quickly than cattle. Pork cutouts posted a record breaking gain Thursday, increasing $9.99. The previous record was a gain of $6.55. Pork is in a slightly different posture with increasing cutouts not threatening consumer price resistance as of yet. However, this could come over time as a JBS plant in Minnesota will reopen, not to produce meat, but to euthanize as many as 13,000 pigs per day for farmers. There may be a void in pork supply down the road. For now, the backlog of hogs will need to be reduced and plants reopening safely will take time.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live cattle futures are on the verge of a technical breakout, which could trigger strong buying interest from traders. | 1) | Slaughter plants are ordered to reopen, but it may take time to reopen safely and employ a full workforce. In the meantime, cattle numbers are backing up. |
| 2) |
The steep discount of futures to cash should result in stronger futures prices in time as prices need to converge. Boxed beef prices are expected to remain strong.
| 2) |
It is Friday and the lack of higher cash may not provide enough confidence for traders to buy into the cattle market aggressively.
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| 3) |
Hog futures shrugged off the setback on Wednesday with June pushing to the highest close since March 31 Thursday. Bullish traders are gaining more confidence over being long in the market.
| 3) |
Hog buyers see little reason to bid up for supply. The outlook for cash next week is much the same as it was this week.
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| 4) | The surge of cutouts and good product movement should continue to provide some support to the market even though there are a lot of hogs needing to come to the market. | 4) |
Volatile pork prices and demand uncertainties may push many traders to take a wait-n-see attitude over the next few days or weeks. Plant reopenings may take longer than anticipated.
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