General Comments:
Limited activity is expected early in the week as traders continue to look for additional direction of last week's cash cattle average prices once summaries are released Monday morning. Although cash cattle trade continued to develop at or near the high levels of the previous week, the wide trading range is creating uncertainty about what the overall price average for the week is. The wide ranges the last few weeks have skewed the overall movement of cash market prices given that there has been little consistency across the market as to what prices have been. Asking prices and bids are not likely early Monday with the focus on inventory-taking and showlist distribution during early June, but the trend of limited trade trickling in every day of the week the past couple of weeks, does create the potential for some cattle to be sold on Monday. Futures trade is expected to remain mixed. June futures posted a $13.77 per cwt rally in May, expecting to have established long-term support levels and testing short-term resistance levels. A wide gap between cattle prices in cash and futures trade and beef prices continues with the concern that the elevated retail beef values will quickly crush demand in both the food service industry and retail store outlets. Monday slaughter is expected at 114,000 head.
Despite the uncertainty through the market, societal and global political structure, lean hog futures enter the month of June with the hope and expectation that things are returning back to a sense of normal. Increased packing plant production levels are likely to continue on a daily and weekly basis, helping to reduce the backed up levels of market-ready hogs, but the concern of still weak overall domestic and export demand continues to cause some uncertainty through the complex. Food service demand for pork continues to be a large segment of the overall domestic demand levels. Even though some restaurants are reopening or expanding services to dine-in service once again over the last couple of weeks, there still remains a significant reduction in overall consumer demand. The recent surge in overall retail price levels of pork is likely to create some additional demand concerns given the overall economic issues seen through the spring months. Traders appear to be looking for increased price stability during early June, which has the potential to bring commercial and investment buyer support back to the market during the early summer months. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids steady to weak. Slaughter Monday is expected at 432,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Cattle slaughter numbers continue to see steady growth the past couple of weeks. Although there is still a backlog of market-ready cattle in some areas, the expectations that beef output will be able to meet consumer demand is helping to limit price pressure going into the month of June.
| 1) |
Surging retail price levels of beef have started to create "sticker shock" for many consumers at both the meat counters and local restaurants as people return to a more normal routine. The higher prices could quickly curb beef demand growth that may last for weeks or months after price levels return to more normal levels.
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| 2) |
The expectation that cash cattle prices continue to ratchet higher even though the final overall price averages from last week have yet to be released is likely to set the bar even higher for cash prices during the first week in June.
| 2) |
Recent protests and curfews put into place in many cities is expected to limit overall consumer buying activity in the near future. This will likely keep many businesses closing early, limiting buying opportunities as consumers have started to return to a more normal pattern over the last couple of weeks.
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| 3) |
Growing demand expectations for pork through the early summer months is expected to help bring some much needed stability to the market. This may not be seen as much in price support as overall product movement through domestic and export channels.
| 3) | Continued uncertainty with China over the Hong Kong issues is creating significant concern about the ability to continue gains in pork export to the country. This could significantly derail the ability to actively move additional pork product from the market, limiting upside price potential for prices during the summer and fall months. |
| 4) |
Continued strong gains in daily and weekly pork production is likely to be seen during the first week in June. This could help to put many of the recent fears of virus-focused production shutdowns and limited meat supplies in the rearview mirror as the industry looks forward to early summer support.
| 4) |
Significantly higher pork price levels at retail and food service locations may continue to damage overall demand for pork, especially given the limited economic spending power of many consumers due to surging unemployment levels.
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| #completecalfcare |
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