General Comments:
Cash
cattle trade has turned into another week of light trade that developed
through the entire week. Although daily price moves seem to have a
slightly narrower trading range than in past weeks, the continued
erosion in prices as the week continues points to steady market losses
and the expectation that further pressure may develop Friday. Cash trade
on Thursday was $103 to $107 live basis and $162 to $165 dressed. The
steady shift lower will continue to leave uncertainty of where the
market average price will land, which will not be seen until early next
week. The recent pullback in wholesale beef values is expected to limit
any upward movement in the cash trade, but it is still uncertain just
how many cattle packers need to gain access to Friday, as most of the
short-term needs may be already met. The shift lower in cash prices,
while futures markets have remained generally stable for the week is
eroding the strong cash basis levels that has held for weeks, but
appears to be moving back to a more normal seasonal relationship.
Futures trade is expected mixed in limited trade Friday morning. With
spot August futures narrowing the recent losses as prices have fallen
just 25 cents for the week, the focus on market stability at current
price levels is gaining momentum and helping to draw light-to-moderate
support back to the complex at the end of the week. Friday slaughter is
expected at 116,000 head.
Growing uncertainty
of pork demand growth over the next couple of months continues to limit
market support through the entire complex. With Thursday's weekly
Export Sales report showing lackluster activity the first week of June,
traders seem to be resigned to the fact that sluggish overall movement,
especially in export markets may be the trend over the summer months.
Continued concerns of limited consumer buying and limited food service
demand even as the economy slowly opens back is adding uncertainty to
how much additional support can or will develop in nearby lean hog
futures over the near future. July futures continue to hold above
long-term lows, with no significant indication that the support levels
in April will be tested. But the focus on growing slaughter rates and
uncertain beef demand could continue to keep prices just slightly above
support levels for an extended period of time. Cash hog bids are
expected $1 lower to 50 cents higher per cwt higher with most bids
steady to weak. Slaughter Friday is expected at 452,000 head. Saturday
runs are expected at 225,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Boxed
beef values have started to stabilize. Although prices continue to show
slight weakness at the end of the week, Thursday's losses were the
lightest market pressure in a month since beef prices have moved from
historic highs.
| 1) |
Sharp
losses of 1,800 points in the Dow Jones Index on Thursday is creating
significant underlying concerns that the recent market recovery may not
be as quick as some have perceived. This could have significant impact
in further buyer support in cattle futures and demand for beef products.
|
| 2) |
Gains
in open interest have developed in the last couple of weeks, creating
the expectation that further buyer interest is slowly moving back into
the cattle complex, looking for long-term market support.
| 2) |
Cash
cattle prices continue to steadily erode each day through the week,
leaving a wide trading range for the week, and establishing a weaker
market structure.
|
| 3) |
Pork
cutout values inched higher Thursday. This break from strong market
pressure over the last couple of weeks is creating indications of
further short-term support developing in the near future.
| 3) |
With
July lean hog futures hovering at $52 per cwt, prices are within $1.40
per cwt of long-term support levels during early April. A move to these
levels would likely spark renewed liquidation based on concerns of pork
demand growth.
|
| 4) |
Active
plant slaughter gains through the week is expected to account for the
largest weekly kill in nearly two months. This continues to focus on the
ability to steadily work through the current backlog of market-ready
hogs in the market.
| 4) |
Even
though packing plant production has made significant progress to
increase slaughter numbers over the last few weeks, it is uncertain just
how many additional gains can be seen over the near future given the
safety precautions put into place. This could cap short-term daily
production levels near 460,000 head for much of the summer, leaving the
industry struggling to regain market currency.
|
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| #completecalfcare |
