Monday Morning Livestock Market Update - Increased Hope Develops as Additional Packing Capacity is Expected

General Comments:

Cash cattle trade last week was wild to say the least. Overall live trade posted a wide range over $20 per cwt with prices generally $14 to $17 per cwt higher than the previous week. Dressed northern trade posted even wider ranges once the dust settled late Friday with prices within a $38 per cwt trading range. Even though we know prices were higher, it is uncertain just how much higher the weighted average will be given the scattered trade through the week. This could create some additional momentum for both sides to step back into the complex as traders look for increased support to bring some much needed stability into the current complex. Even though boxed beef values continue to shift higher, the gains were much less aggressive than what was seen the last couple of weeks, which may mean a market high may be near in wholesale beef values. Limited cash activity is expected to be Monday and likely through the first half of the week as both sides try to assess where to go from here following last week's rally. This will leave showlist distribution and inventory taking the main focus Monday as more attention is placed on how increased packer capacity develops across the nation. Futures trade is expected mixed. The support in nearby futures trade Friday focuses on the firm cash market support, while general pressure in deferred contracts is causing some concern of active follow-through support. The potential for limited position-taking following recent surges higher may be met with early week short covering as traders look for increased processing production. Monday slaughter is expected at 94,000 head.

Mixed trade is expected to continue to redevelop through the lean hog futures early Monday morning. The focus on strong triple-digit pressure in all contracts Friday is adding some additional concern in the complex and the overall lack of follow-through support as packers come back online. The sooner meat production and deliveries get back to normal, the more focus will be placed on potential market stability. But this will put less focus on the processing and demand system and cause more attention to the already ballooning hog production numbers that are expected to continue over the next few months. The recent gains during April have established strong market support in the June contracts at $43.17 per cwt. This is nearly $18 per cwt under current market prices. This market cushion could allow for the establishment of a wide sideways market trend that could hold through most of the summer. Cash hog bids are expected 50 cents lower to 50 cents per cwt higher with most bids steady to firm. Slaughter Monday is expected at 334,000 head.

	BULL SIDE		BEAR SIDE
1)	Aggressive cash cattle price support last week was a welcome sight following the widespread pressure the last two months. This is focusing on the potential to narrow the wide gap between cattle and wholesale beef values as packer activity increases.	1)	Limited price support late last week in feeder cattle trade and deferred lean hog futures is creating some concern that buyers will remain cautious about stepping into the market over the next couple of days. Market volatility remains very active, creating the potential for a pullback in prices.
2)	The expectation that steady-to-active gains in packer capacity over the coming days and weeks will help to replenish the strained supply chain of market-ready beef available to consumers. This should help to bring additional support to the entire complex.	2)	The wide cash market ranges last week creates some uncertainty as to where market direction will go through the rest of the month. With boxed beef values still elevated, but increasing at a much slower pace, the concern that short-term highs may have been set last week could create some market positioning in the near future.
3)	Attempts to slowly reopen businesses, especially food service facilities is expected to help spark increased overall demand in pork movement in the coming days. This is likely to spark renewed focus on pork values.	3)	As more packers increase capacity, this turns the focus away from processing issues and back to the burdensome amount of market-ready hogs available for slaughter. This was an issue before packer delays, and has become compounded in the last several weeks.
4)	Lean hog futures still remain well rooted well above support levels set during early April. With current prices in spot June futures trading $18 per cwt above long-term lows, the expectation that renewed commercial and noncommercial interest will continue to develop should help spark buying interest.	4)	Pork cutout values moved lower Friday for the first time in a couple weeks. The lack of follow-through support in pork values is based partially on expected increased plant capacity, while consumer buying demand still remains a concern due to reduced food service activity.

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