General Comments:
Limited cash market direction is expected Friday with some additional light trade possible before the end of the week. But given that cash market trade has slowly developed through the entire week, the overall price ranges are likely already set. The fact that the ranges are established can give some support to the market, but with the huge ranges seen over the last month, there is little confidence that additional trade will develop Friday. Trade has been seen generally from $110 to $120 per cwt live basis, and $174 to $190 dressed. This is generally steady with last week, but it is hard to pinpoint where an average price may fall given a gap big enough to drive a truck through. Given the support in futures trade, it is expected that most end of the week prices will end up near the top end of the recent range, but this is speculation at this point, with no firm numbers to back that up until early next week when overall sales totals are seen. Futures trade is focused on defending recent gains following the holiday weekend. With spot contracts rallying $3.75 per cwt so far during the week, contracts have moved above the $100 per cwt and is trading at the highest level since February. The ability to end the month of May on a high note would carry increased momentum into June trade. Friday slaughter is expected at 110,000 head.
Lean hog futures continue to look for any sign of support following Thursday's near limit losses. The focus on issues between China and Hong Kong and response by the U.S. continues to be the main focus in the lean hog complex as it may continue to focus on eroding export markets to the country. Although historically, China imports of pork have been the major focus, and Hong Kong just a drop in the bucket compared to overall totals, the potential that further strain between U.S. and China will develop is significantly impacting the lean hog complex. Although the previous two weeks of export pork sales to China have pointed to significant losses, traders are once again looking for holiday-delayed data Friday morning for additional direction seen before the Memorial Day holiday. This could spark underlying weakness through the hog complex Friday and lead to further potential early June weakness. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids steady to $1 lower. Slaughter Friday is expected at 421,000 head. Saturday runs are expected at 316,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Nearby live cattle futures have posted three-month highs as underlying buyer support continues to focus on the ability to shift prices higher through the end of the month. This is likely to spark renewed underlying support going into early June.
| 1) | Sharply higher retail beef values have created sticker shock for many consumers. This has also created limited menus for some restaurants as they slowly reopen following the shutdowns. Reduced overall demand for beef products due to the higher prices could spark a ripple effect through the entire cattle market in the coming weeks and months. |
| 2) |
Strong support in cash cattle trade seen through the end of May continues to hold a significant premium to futures trade. Continued growth in demand and retail beef values is likely to keep cash values firm through the near future.
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Wholesale boxed beef values continue to steadily slide lower. This is creating mixed market direction following the firmness in cash and futures prices, while beef values quickly back away from historic highs.
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Traders are looking for positive support from the weekly Export Sales report Friday morning. Not only will sales to China be the focus, but traders will also focus heavily on movement to Mexico and Canada.
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Cash hog values have continued to show increased weakness as packers continue to create more scheduled deliveries of hogs. This recent weakness is expected to be accelerated by the sharp futures losses during the last half of the week.
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Pork cutout values firmed slightly Thursday, giving hope that even though strong pressure is seen in cash and futures trade, the focus on food service business reopening will help to spark additional price support in pork prices.
| 4) |
Additional weak export sales numbers from China in the holiday-delayed report released Friday morning could spark more widespread weakness in futures trade at the end of the week.
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