General Comments:
Cash
cattle trade is still generally quiet for the week with just a few
trades developing in the North. Dressed trade in Nebraska took place at
$152 to $155 per cwt. These prices are near the low end of last week's
trading range, but the limited activity and trend for cash cattle trade
to trickle in through the week is not enough to indicate a reliable
market trend. But given the lack of support in wholesale beef values and
further erosion in futures trade, it is likely that the overall cash
market will remain steady to weak as the week continues. Futures trade
is expected to remain mixed to mostly lower with limited direction
through expected early Tuesday morning, but traders still remaining
extremely cautious. The general pressure in outside markets as increased
media focus is being placed on China and the growing tensions
surrounding around trade deals and potential further export business in
most markets. Wide shifts in beef stocks at the end of May developed as
total beef in freezers fell 13% from April levels, while increasing 2%
from year ago totals. This drop is not surprising given reduced plant
capacity. But it gives a good barometer to measure overall movement of
product through the rest of the summer months. Tuesday slaughter is
expected at 120,000 head.
Sharp triple-digit
losses Monday seen in nearby lean hog futures trade continues to focus
on significant uncertainty through the entire hog complex. The continued
tensions between the U.S. and China when it comes to the direction of
future trade will continue to keep the hog market extremely volatile as
strong exports to China will be needed to continue to move the large
amounts of pork through the system as the country moves back from
economic shutdowns over the last couple of months. With July futures
well below $50 per cwt through late June, and August futures creating
the potential to follow in the same direction with prices currently at
$51.10 per cwt, the focus on defending further market losses could keep
markets generally weak. The strong reduction in pork supplies during May
may help to limit the market bearishness as pork stocks fell 24% from
April levels at the end of May. This continues to focus on moderate to
strong pork movement through the last couple of months as the reduced
slaughter levels have quickly adjusted the availability of pork in the
supply chain through early summer. But the question of future demand
growth not that slaughter numbers have increased will still need to be
answered over the coming weeks. Cash hog bids are expected $1 lower to
50 cents higher per cwt with most bids steady to weak. Slaughter Tuesday
is expected at 462,000 head.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Beef
supplies have fallen significantly during the month of May with 415
million pounds in freezers at the end of the month. This is a 13%
decrease from April levels, further focusing on steady movement of beef
demand during the pandemic.
| 1) |
Cash
cattle trade posted further weakness Monday despite limited amount of
trade developing. This softer trend could further erode cash market
support and put additional pressure on cash basis levels which have been
weakening over the last few weeks.
|
| 2) |
Tighter
cattle supplies are expected through the end of the year and during
early 2021 continues to create long-term market support. This is
focusing on the lighter feeder cattle placements during the spring
months.
| 2) |
August
live cattle futures are slowly eroding lower. A move below $95 per cwt
in August futures would likely spark limited follow through liquidation,
although technically speaking, the live cattle complex remains well
entrenched within a sideways trading range.
|
| 3) |
Wholesale
pork prices have started to stabilize despite the growing increase in
slaughter numbers and availability of fresh pork product to the market.
| 3) |
August
lean hog futures continue to post new contract lows with technical
pressure starting to redevelop in all nearby contract months. The lack
of support in the complex could continue to spark widespread losses
through the end of June.
|
| 4) |
Pork
stocks fell sharply at the end of May. With reduced slaughter numbers
and aggressive consumer buying focusing on meat shortages helped to move
significant amounts of pork from commercial freezers into the hands of
consumers.
| 4) |
Cash
hog values continue to slowly but steadily erode despite the continued
focus on increasing slaughter rates in all plants. This is putting even
more focus on the amount of hogs available to packers disposal, limiting
potential upward market support in the near future.
|
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| #completeherdhealth |
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