GENERAL COMMENTS:
As if the already backed up and built up supply of readily available fat cattle wasn't enough, Cargill announced Monday afternoon that their beef plant in Schuyler, Nebraska, would be temporarily shut down to deep clean. And although Tyson's plant in Dakota City, Nebraska, was supposed to reopen this week, officials have decided to keep the plant closed for now.
The brutal, agonizing truth is that until packing plants reopen and run at full capacity, the market has very little upside potential. Time is truly of the essence as each day adds to another week and the market can't endure many weeks of sub-500,000 head kills without imploding.
In order for the industry to stay current, packers need to process around 600,000 head of cattle a week. Last week's kill totaled a pitiful 425,000 head -- adding last week alone around 175,000 head of cattle to the industry's growing supply. This week is expected to do the same.
The problem then multiplies as the "roll-over" cattle aren't the only cattle that need processed. Each week there's new showlists printed with new cattle that are added to mix. The long-term effects of this unforeseen, colossal nightmare will haunt the industry for a very long time.
The only way to start chipping away at the problem is if packers come back online and run at speeds never seen before. We need the entire industry and every major packing plant to run as speeds like they did after the Holcomb fire plus every small packing plant across the U.S..
Hog prices closed lower on the National Direct Afternoon Hog Report, down $0.10 with a weighted average of $36.37, on 4,585 head sold. July corn is up 1 1/2 cents per bushel and July soybean meal is up $1.00. The Dow Jones Industrial Average is up 207.45 points and NASDAQ is up 124.49 points.
LIVE CATTLE:
Live cattle contracts closed the day mostly lower with a couple of deferred contracts showing some minor strength. June live cattle closed $1.60 lower at $86.47, August live cattle closed $0.60 lower at $92.45 and October live cattle closed $0.65 lower at $96.52. The story is the same throughout all of the contracts -- our weakening supply chain is putting pressure on the industry in every aspect.
Tuesday's slaughter is estimated at 80,000 head, up 8,000 head from last week and down 42,000 head from a year ago. There was a light trade in parts of the North with a huge range of $145 to $170, mostly $150, roughly $1 lower than last week's weighted average. The $170 was for 100% blacks high grading, the majority of these $145 and $170 are set for delivery sometime next week. Just a handful of business was reported in Kansas.
Boxed beef cutouts close higher: choice up $18.77 ($428.82) and select up $33.88 ($410.54) with a movement of 126 loads (73.10 loads of choice, 19.84 loads of select, 16.99 loads of trim and 16.19 loads of ground beef).
WEDNESDAY'S CASH CATTLE CALL: Steady. After the Fed Cattle Exchange more trade should come about -- steady to slightly lower is most likely the card that will be dealt this week.
FEEDER CATTLE:
Feeder Cattle contracts closed mixed with most nearby contracts lower and some deferred contracts higher. May feeder cattle closed $0.52 higher at $119.60, August feeders closed $0.72 lower at $128.25 and September feeders closed $0.35 lower at $129.45. Pressure is affecting the feeder cattle market just as much as it affects the other livestock contracts. With mixed signals coming from the board and a compromised supply chain, everyone feels like their walking on egg shells. At Miles City Livestock Commission in Miles City, Montana, compared to last week, the best test for feeder steers was 650-699 pounds, which sold mostly $5.00 lower. All other weights of feeder steers were too lightly tested to trend, however lower undertones were noticed on everything that sold. The CME feeder cattle index 5/4/2020: up $0.68, $119.59.
LEAN HOGS:
Tyson announced that it would be closing the pork processing plant in Madison, Nebraska, to deep clean the facility. The plant can process up to 3,520 head a day. The lean hog market saw the biggest price decrease through Tuesday's close. June lean hogs fell $1.22 at $64.27, July lean hogs fell $2.50 lower at $62.92 and August lean hogs closed $3.17 lower at $62.67. Pork cutouts total 360.43 loads with 337.81 loads of pork cuts and 22.62 loads of trim. Tuesday's slaughter is estimated at 298,000 head, up 20,000 head from a week ago and 172,000 head less than a year ago. The CME lean hog index 5/1/2020: up $2.27, $59.79.
WEDNESDAY'S CASH HOG CALL: Steady. Until something significantly changes within the industry and with the packing plant situation, the market will trend as it has been over the last little while -- steady, somewhat higher, then dipping lower again.
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