Cash cattle markets are likely to remain quiet early Monday following light-to-moderate activity again last week. There will be increased focus on the amount of cattle actually traded late last week when mandatory reports are released through the morning. This is expected to leave showlists large once again as the reduced packing availability levels over the last several levels has continued to back up cattle in feedlots. With the expectation that increased production, from plants is likely to be the next couple of days, this could offset some of the pressure. But the backlog of market-ready cattle will still cause the industry to dig out of the current situation for an extended period of time. There is uncertainty as to what production schedules will look like if plants are up and running, because of safety measures put in place to limit the spread of the virus might limit overall buying early in the week. Bids and asking prices are not likely to develop until midweek or later, but the continued wide gap between wholesale beef values and cash markets should help to spark some additional interest. It is still unclear if and how much of the recent gains in wholesale price levels can, or will be passed through the retail levels at this time, which could create some major demand shifts in the upcoming days and weeks. Futures trade is called mixed following the strong upward shift last week with a combination of position taking and follow-through buying developing across the complex. With traders quickly moving away from long-term lows through late April, the potential to see further moves higher may be limited by bearishness in outside markets during overnight trade Monday morning. Monday slaughter is expected at 96,000 head.
Strong late week gains in lean hog futures are expected to create moderate follow through buying as traders focus on the potential that the worst of the virus-affected plant reductions may be in the past. With the expectation that Tyson's Indiana plant, and Smithfield's Sioux Falls plant will be operating at least on a partial level starting Monday, the focus of increased production levels is the main focus of the complex at this point. Limit gains on Friday is helping to build additional underlying support, although the strong shift higher in futures prices may also create an opportunity to cover positions given the bearishness of outside markets. Strong underlying pressure was seen in most other commodity and financial markets during overnight trade, which could quickly limit the support in livestock trade and especially the lean hog complex. But if increased packing plant activity develops through the week and plants are able to convince workers that conditions have improved in order to keep them and their families safe, this will go a long way in stabilizing the market and helping to dig out of the backed up supplies of hogs in the country. Cash hog bids are expected 50 cents lower to $1 per cwt higher with most bids 50 cents higher. Slaughter Monday is expected at 385,000 head.
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| 1) | Light-to-moderate buying in live cattle trade in most areas late last week posted firm gains from week-ago levels with most cattle selling at $105 per cwt. Given the reduced ability to process cattle, the focus on increased slaughter numbers should help to continue to support higher cash values in the near future. | 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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Boxed beef values continue to skyrocket higher. The increased value of wholesale beef prices continues to focus on the tight supply of beef available to consumers, but this continues to create a wide disconnect between both cattle values and retail market prices.
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Increased market-ready cattle available to the market will continue to leave the cattle complex backlogged even though plant production is expected to improve over the upcoming days. This could limit strong underlying support in futures and cash values Monday.
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Wholesale pork values posted additional record daily gains late last week. The surging values in wholesale prices could help to bring needed price support to the entire complex, but the ability to increase overall pork output from plants will be needed in the near future.
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Sharp losses in outside commodity and futures markets during overnight trade could quickly bring underlying pressure to lean hog futures trade Monday morning as traders focus on market adjustments following limit gains on Friday.
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| 4) | The expectation that increased plant capacity will be seen starting this week is welcome news. This could help to remove some of the pressure on market-ready hogs in the coming days, although the system remains extremely backed up over the last few weeks. | 4) |
Even though more packing plants are expected to partially open Monday, the uncertainty is whether enough workers will return to work due to the recent concerns of getting sick. This could significantly limit overall processing speeds over the upcoming daysEven though more packing plants are expected to partially open Monday, the uncertainty is whether enough workers will return to work due to the recent concerns of getting sick. This could significantly limit overall processing speeds over the upcoming day.
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