General Comments:
Following light cash cattle trade Tuesday and Wednesday, there seems to be little active interest from either side to push the issue of price levels by the end of the week. Although it is expected that some additional clean-up trade may develop through the day Friday, the focus seems to be moved away from the direction of cash cattle trade and is squarely focused on the movements in boxed beef values. Although there has been aggressive losses of nearly $25 per cwt in choice boxed beef values the last two days, this is a drop in the bucket to the unchecked $245 per cwt rally in choice cuts over the last month. The fact that meat values have more than doubled in a month to levels never seen is mind boggling while much smaller movements have been seen in cattle prices or retail prices in that time period. This could create additional significant weakness through the wholesale boxed beef market over the coming days and weeks. This could create a chain reaction in additional pressure in live cattle prices, because the downward market risk is much more limited over the next few weeks given the already depressed price levels and focus on long-term support in the beef market. This could add some additional movement as traders try to adjust positions ahead of the weekend break with uncertainty of where markets will move next week and not wanting to remain unprotected over the weekend. Futures trade is expected to remain sluggish early Friday, although the firm outside market moves could help limit further losses, especially in deferred contracts. Friday slaughter is expected at 93,000 head.
Mixed trade is expected in lean hog trade through the end of the week. At this point, most of the livestock market attention is placed on the cattle complex and the direction of beef values. This is generally an unfair assessment to look past overall moves in pork values, which seem to be also eroding based on the uncertainty of where wholesale meat price values will go. The recent disconnect between wholesale cutout values, live animal markets and retail meat prices has become increasingly concerning, putting more focus on the thin negotiated trade in cutout markets. This may continue to cause market uncertainty, but for now, lean hog trade seems to have settled in a more stable pattern. Cash hog bids are expected $1 lower to 50 cents per cwt higher with most bids steady. Slaughter Friday is expected at 371,000 head. Saturday runs are expected near 239,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
The ability to trade cash cattle early in the week at steady -to-higher prices when compared to the weekly average continues to put more focus on packers need to gain access to cattle as slaughter numbers slowly creep higher.
| 1) |
Record losses have been reported in choice boxed beef values the last two days. This has started to unwind the recent surge higher in price levels and could bring additional widespread corrections to wholesale beef values.
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| 2) |
Live cattle futures prices have quickly broken away from the tumbling wholesale beef markets. Price stability in June futures Thursday is expected to point to mixed but limited late week movement in futures trade as traders focus on establishing support levels through the rest of the month of May.
| 2) |
Firm pressure in cattle futures focus on the uncertainty of how the moves lower in beef values will further impact futures and cash markets. Although the markets have been disconnected over the last month as beef values surged, the concern that a move lower will have similar impacts in cattle markets.
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| 3) |
Firming cash hog values during the last half of the week remains a positive sign that increased buyer support may continue to develop through the upcoming days.
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Strong losses are seen in pork cutout values. This is limiting overall support in the complex as the lean hog market seems to be quickly following the direction of the cattle market during late week trade.
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| 4) |
With the lightly traded May futures contract now off the board, traders can focus on June contracts without the disruption in front-month charts bringing confusion to the market. This will have limited long-term impact to the direction, but helps to bring uniformity to reported price moves by those not familiar to the hog market.
| 4) |
The weekly export levels in Thursday's report were very lethargic and limited with little overall momentum for traders during mid-May. This could further impact potential export expectations through the upcoming weeks.
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| #completecalfcare |
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