General Comments:
Cash
cattle trade is starting to develop with light to moderate activity
midweek at higher prices in all areas. Live cash cattle trade in the
South developed at $120 per cwt midweek, which is generally $6 to $10
per cwt higher than last week's price averages. Dressed northern
business is at $190 per cwt, also a strong double-digit jump of $11 per
cwt higher than last week's average. The focus on packers looking to
gain access to short-term supplies to fuel current and future slaughter
schedules is sparking the renewed support in cash values. There is
expected to be some additional trade trickling into the market, but at
this rate, it is uncertain if either side will hold out until after the
Cattle on Feed report is released Friday afternoon. Thursday reports
include the weekly Export Sales report Thursday morning, monthly Cold
Storage and monthly Livestock Slaughter reports during the afternoon.
These reports are not expected to create significant changes in market
direction individually, but combining all the information from the
reports over the next couple of days will help to set the tone of the
market over the next week. The expectation is that the net result of
these combined reports will remain bullish for the cattle industry, but
there are still a lot of questions about meat supplies and consumer
demand. Futures trade remains split between the recent support in
futures trade, while trying to look ahead to any significant shifts in
late week activity and report surprises that may develop before the end
of the week. This is likely to keep prices mixed with limited early
activity Thursday morning. Thursday slaughter is expected at 102,000
head.
Mixed trade is expected through lean
hog futures complex following the renewed support in deferred lean hog
contracts midweek. Trader volume and overall interest is expected to
slowly erode through the rest of the week as traders prepare for the
long holiday weekend. Although in general, the Memorial Holiday weekend
is lacking much of the fan fair and attention as most years due to
social distancing and limited travel and gathering, but the fact that
markets will remain closed Monday will still limit overall trade
interest the next couple of days. Nearby lean hog futures are looking
for a sense of stability after eroding from recent market highs. The
attention of many traders will be placed on the morning Export Sales
report and pork exports to China last week, the Cold Storage and
Livestock Slaughter reports released after closing bell Thursday will
also have increased interest given the shakeup in packer activity the
last couple of months. Cash hog bids are expected $1 lower to $1 per cwt
higher with most bids steady to firm. Slaughter Thursday is expected at
403,000 head. Saturday runs are expected near 161,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Sharp
gains in cash cattle prices through the week point to increased
underlying support in the complex as prices have shown increases of $6
to $11 per cwt over last week's average price levels. This momentum
continues to build underlying support in the complex.
| 1) |
Sharp
triple-digit losses in feeder cattle futures broke away from the
previous narrative of expected lighter cattle placements in April. This
may lead to additional market volatility through the end of the week as
limited confidence is seen around pre-report estimates, especially when
it comes to placement numbers.
|
| 2) |
Retail
beef prices appear to be starting to shift higher at retail levels,
combined with increased openings of food service locations, the
expectation that increased underlying support may develop over the near
future could help stimulate additional widespread market gains.
| 2) |
Given
the strong cash market support, but limited gains in futures trade,
cash basis levels still remain extremely high. The concern that basis
levels will eventually move back to normal market levels could create
additional market disruptions when this shift develops.
|
| 3) |
Strong
triple-digit gains developed in deferred lean hog futures Wednesday,
led by spring 2021 contracts. This continues to focus on the expectation
that supply tightness may develop once the industry works through the
current glut of market-ready hogs over the upcoming weeks and months.
| 3) |
Firm
pressure is seen in pork cutout values and cash hog values midweek,
creating concern that further fundamental weakness may occur the rest of
the week.
|
| 4) |
The
potential for increased export sales to China in the weekly Export
Sales report could help to spark renewed underlying buying in nearby and
deferred lean hog contracts.
| 4) |
If
China exports and shipments are not seen in Thursday mornings weekly
Export Sales report, underlying weakness may quickly develop through
nearby lean hog futures trade as the recent momentum and building pace
of China business in the market is starting to be an expectation by
some.
|
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| #completecalfcare |
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