General Comments:
Cash cattle activity remains generally undeveloped going into midweek with limited interest from packers or feeders as bids and asking prices are generally hard to pin down through all areas of cattle country. Some limited activity is expected during late morning or afternoon Wednesday, but most activity will likely be pushed off until Thursday or Friday. The focus on steady to higher cash prices given continued support in beef values and recent moves higher in futures trade is likely to keep feeders from taking the first offer given them through the week. The cash target seems to be around $115 per cwt live basis or higher, although this is well above last week's average prices. The strong pullback in beef supplies in Tuesday's WASDE report confirmed the overall struggle to get beef to the consumer given packer slowdowns over the last month. It is important to remember this is a measure of meat provided to the market, not the amount of market ready cattle in the production system. Futures are expected to focus once again on the underlying support in beef prices combined with continued aggressive discounts that futures markets are seeing to cash trade. Cash basis levels have continued extremely high over the last couple of months and, for now, traders are focused on narrowing this price spread as long as strong boxed beef values continue. Wednesday slaughter is expected at 89,000 head.
Spillover support in lean hog futures Tuesday following the aggressive market in cattle futures is expected to create mixed market movement early Wednesday. The focus on market firmness as trade volumes increase could spark some underlying longer-term support. The sharp pullback in pork cutout values Tuesday may actually bring some uncertainty in the complex during the last half of the week as traders focus on limited upward potential given the amount of hogs available for market as packing plants slowly increase the pace of hogs moving through the plant and ultimately the amount of pork to the consumer. Cash hog bids are expected $1 lower to 50 cents per cwt higher with most bids steady to weak. Slaughter Wednesday is expected at 341,000 head. Saturday runs are expected near 189,000 head.
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| 1) |
Expanded limit gains Tuesday in nearby live cattle futures refocused on the potential for increased buyer support and technical support holding through nearby contracts. This moves nearby contracts to six-week highs, allowing expanded trading limits once again Wednesday.
| 1) |
The continued surging boxed beef values continues to widen the disconnect between cattle prices and retail markets. These recent gains in wholesale values are unsustainable, leaving many wondering and just how prices will adjust back to a normal level. This could create widespread volatility through the entire cattle and meat complex in the near future.
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| 2) |
Continued price support in choice beef cutout values through the week is pointing to additional upward market support as slow but steady gains are seen in processing speeds at plants. This could add underlying support to cash and futures trade through the end of the week.
| 2) |
Sharp limit gains in nearby live cattle trade are sparking a pendulum motion that may continue to swing in wide and unpredictable levels over the near future. The concern that markets may end on a low swing, rather than a high swing becomes a strong possibility the longer these wide swings continue.
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| 3) |
Firm futures gains developed Tuesday, setting up the potential to move toward short-term resistance levels in nearby contracts through the end of the week. This could quickly establish prices at or above the $60 per cwt price level, creating additional support through the entire complex.
| 3) |
Sharp losses in pork cutout values Tuesday created uncertainty in the ability to sustain current pork price levels even though food service demand is expected to start gaining ground in the near future.
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| 4) |
Cash hog values have continued to gain ground as the week progresses as packers continue to slowly increase plant output. This is causing increased need to find additional hogs that had been taken off of schedules over the past few weeks.
| 4) |
Growing concerns surrounding the ability to keep up with recent week's export pace, especially to China, could further limit overall demand for pork through early summer months.
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