General Comments:
Cash cattle trade is expected to remain quiet Monday, although given the volatility of last week in the cash cattle markets, it is uncertain how long each side will be willing to sit on their hands before stepping into the market. With the long holiday weekend approaching, it is likely that both sides will be trying to get business done before Friday, but it could show limited activity this early in the week. Showlist distribution and inventory taking is expected to be a top priority Monday morning, but given the uncertainty over the last couple of weeks, limited trade by the end of the day should not be ruled out. Both sides are anticipating the announcement of the weekly average cattle price last week given the wide $20 per cwt trading range seen last week. It is expected that the overall average should be firm from the previous week, but given the inconsistent price levels in the North and South, pinning down an average price is more of a guessing game than anything else. The freefalling beef cutout value will continue to be the main story through the early part of the week with choice and select cuts posting record losses Friday. In just three days, choice cutout values have tumbled over $44 per cwt, with the potential for additional widespread losses to continue to develop as the wholesale beef market comes back in line with the rest of the market. Futures trade is expected mixed in limited early trade. The majority of trader interest remains focused on the direction of beef values through the week and leading to the holiday weekend. Although the upcoming Memorial Day weekend is typically a strong rally point for beef trade, the uncertainty of consumer patterns may leave this year's passing of Memorial Day similar to many other weekends given still tighter social distancing measures in effect through most of the country. Monday slaughter is expected at 95,000 head.
Mixed trade is likely to develop early Monday morning in lean hog futures trade. The underlying focus on weaker pork cutout values through the last several days is cutting the overall focus away on previous market support. But the strong pullback in futures prices during the last two weeks is creating the potential for moderate-to-firm short covering to step back into the market in the near future. With the holiday weekend approaching, most of the needed price adjustments and active trade will likely be in the first half of this week, which could allow for some additional market movement in the upcoming days. There still remains significant concern surrounding the lower overall packing plant slaughter numbers, although light-to-moderate improvement in numbers continue to be seen on a daily basis. The industry is still running well behind normal rates with an expected daily slaughter of under 400,000 head likely during early week activity. This accounts to over 500,000 head reduction per week, which continues to back up the industry significantly. The still-burdensome levels of pork production in the pipeline will continue to keep prices from moving significantly higher in the near future. Cash hog bids are expected $1 lower to 50 cents per cwt higher with most bids steady to firm. Slaughter Monday is expected at 384,000 head.
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Cash cattle trade ended the week on a high note with live cattle trading at the weekly high of $120 per cwt. The strong late week price rally despite the shift lower in boxed beef values is creating expectations that further cash support may develop heading into Memorial Day Weekend.
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Record losses in choice and select boxed beef prices developed Friday. 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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Strong nearby gains in live cattle futures late last week is focusing on price levels nearing $100 per cwt. This is still well below needed levels for most producers, but a $17 per cwt rally above support levels and testing short-term resistance levels.
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The upcoming holiday weekend will further reduce overall packing plant activity, further delaying the ability to catch up on cattle that are backed up through the feedlot system. This could limit cash spending the next couple of weeks.
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Slow but steady gains in packing processing rates the last two weeks is creating hopes that further improvements will continue to develop. As the media focus moves away from the coronavirus cases in packing plant communities, it is expected that more and more workers will return to work, helping to stabilize slaughter numbers.
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Firm pressure in lean hog futures at the end of last week is creating some concern that follow-through weakness may develop during early week trade.
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Open interest in lean hog futures contracts stabilized at the end of last week with total open interest levels gaining just 380 contracts. The hope that renewed buyer support moves into the market over the upcoming days could bring additional long-term support to the complex.
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Strong price reductions were seen in pork cutout values late last week. This focus on market pressure comes as record losses are seen in wholesale beef values as major corrections are starting to be seen in wholesale values, which are out of line with hog prices and retail pork markets.
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| #completecalfcare |
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