General Comments:
Following another week of wide trading ranges in the North last week, and scattered trade trickling through the end of the week, overall average price levels for last week will continue to be a mystery until price and sales numbers are released Monday morning. Showlist distribution and inventory taking will likely remain the main focus through the morning, although some limited trade may be seen by afternoon as seen in weeks past. With slaughter numbers back to year-ago levels and boxed beef prices back to pre-covid levels, the focus will continue to be centered on the backlog of cattle in the countryside and uncertain beef demand through the end of the summer. There will be increased focus to measure the amount of "Father's Day" beef clearance, as traditionally this is the last surge in steak demand through the summer months. Futures trade is expected lower in early trade. Although cattle on feed numbers were slightly below year-ago levels, a total of 11.7 million head still remain in feedlots. The main focus from the report was the significant drop in cattle marketings through May. Although this shouldn't be a surprise as packing plants have slowly increased production, the sluggish marketing levels over the last two months still leaves significant volume to work through during the summer months. Monday slaughter is expected at 120,000 head.
Continued weakness seen late last week is likely to spark some underlying follow through pressure Monday based on continued concerns of overall pork movement in domestic and export markets. With plant production increasing slaughter rates on a daily basis over the last few weeks, the focus has moved away from a supply issue and back to demand uncertainty as overall food service demand still remains sluggish as the country reopens the economy. Most of the building pressure has been focused on nearby July and August futures with both contracts trading at contract lows with concern of further support levels being challenged over the coming days. Traders are closely focusing on the upcoming hogs and pigs report. This will give the best indication of overall hog supply levels through the coronavirus slowdowns, but still will leave growing uncertainty surrounding the ability to rebuild pork demand to previous levels. Cash hog bids are expected $1 lower to 50 cents higher per cwt higher with most bids steady to weak. Slaughter Monday is expected at 464,000 head.
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Limited cattle placements during May seen in Friday's cattle on feed report will continue to focus on the tight supply levels expected through the end of the year. This is expected to spark renewed long-term support through the complex, most evident in December contracts.
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Cattle marketed in May was at the lowest level on record for the month of May, just 72.5% of year ago levels. This is below the average estimate and below the low end of estimated ranges. This continues to confirm the backed up levels of cattle needing to be processed through the summer months.
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Steady increases in daily cattle slaughter numbers is expected to help to further limit concerns about tight supplies of beef to the market. This should help to stabilize overall demand, bringing consumer prices lower in the next several weeks.
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Even though wholesale beef values have moved to pre-covid levels, the growing concern of sluggish demand growth through the summer could put further pressure on price levels, heavily impacting cash cattle values through most of the summer months.
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Steady increases in pork processing levels will continue to move additional hogs out of production barns, helping to narrow the backlog of market ready hogs in the upcoming weeks.
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Nearby lean hog futures have broken through long-term support levels with July and August futures trading at contract lows. This may continue to weaken buyer support given the available pork on the market through the upcoming weeks.
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Price stability in cash hog and pork cutout values at the end of last week is likely to help bring renewed buyer interest and potential price stability through the end of June.
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Continued focus on the growing tension between the U.S and China is likely to add even more concern about sustaining or growing pork exports to the country through the upcoming summer months.
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