GENERAL COMMENTS:
Cattle contracts took the brunt of Wednesday's hardships, but the biggest market change was the drop in boxed beef prices. Hog prices closed lower on the National Direct Afternoon Hog Report, down $0.34 with a weighted average of $36.87 on 8,590 head sold. July corn is down 4 cents per bushel and July soybean meal is down $1.50. The Dow Jones Industrial Average is down 516.81 points and NASDAQ is down 139.38 points.
LIVE CATTLE:
We knew this day was coming -- the day boxed beef prices would crater lower. But in order to get the market back to some sense of normalcy, prices will need to drop substantially lower, back to a sustainable price range where they traded before COVID-19.
The heartbreak comes knowing that, as packers start to see their margins dwindle from unprecedented, never seen before levels, cash cattle prices will dwindle and with the built-up supply of fat cattle pressuring the market as well. Sadly, there's not going to be much holding a bottom in this short-term market.
It's truly maddening where the market is right now and alarming to know what it could become. To work through the hell that COVID-19 has created, boxed beef prices need to stabilize, the backlog of cattle needs processed and feeders have to regain some profits. Getting to that point is going to be a long, enduring process, but seeing slaughter slowly rise and now seeing a top in boxed beef prices ensures that some progress is being made -- even though painful.
Live cattle contracts closed sharply lower in nearby contracts and moderately lower in deferred. June live cattle closed $3.30 lower at $93.87, August live cattle closed $3.27 lower at $98.42 and October live cattle closed $2.67 lower at $101.50. A light to moderate trade developed in the North with dressed cattle selling for $168 to $185, and some Southern cattle sold live for $110 to $115. Wednesday's slaughter is estimated at 91,000 head, 9,000 head more than a week ago and 31,000 head less than a year ago.
Boxed beef prices close the day with the biggest drop ever recorded: choice down $9.40 ($465.99) and select down $13.73 ($437.24) with a movement of 132 loads (54.01 loads of choice, 20.22 loads of select, 22.49 loads of trim and 35.50 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: Steady. The week will probably wrap up how its already decided to trade, but next week will most likely be lower as boxed beef prices head lower.
FEEDER CATTLE:
Feeder cattle contracts closed anywhere from $1.87 lower to $2.80 lower throughout the whole complex. May feeders closed $2.00 lower at $125.30, August feeders closed $2.67 lower at $133.07 and September feeders closed $2.72 lower at $134.37. At Bassett Livestock Auction in Bassett, Nebraska, compared to two weeks ago, 550 to 650 pound steers traded $5.00 to $9.00 higher and heifers weren't comparable. Demand was phenomenal and the amount of internet bidding was surprising. The CME feeder cattle index for 5/12/2020: up $0.41, $123.52.
LEAN HOGS:
The lean hog market fared like the rest of the livestock complex -- it tipped lower and not much movement surrounded the day. June lean hogs closed $3.45 lower at $57.87, July lean hogs closed $2.35 lower at $59.12 and August lean hogs closed $1.87 lower at $58.25. Pork cutouts totaled 374.72 loads with 334.23 loads of pork cuts and 40.49 loads of trim. Pork cutout prices: down $4.39, $117.21. Wednesday's slaughter is estimated at 373,000 head, 61,000 head more than a week ago and 84,000 head less than a year ago. The CME lean hog index 5/11/2020: up $0.06, $65.81.
THURSDAY'S CASH HOG CALL: Lower. As packers continue to work through supply, the need to bid higher for hogs is simply not a conversation being had as the built up supply stresses the market.
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