GENERAL COMMENTS:
Feedlots decided to accept the bids established by packers rather than wait until later in the week in the hopes that those bids might be raised. With slower slaughter speeds, packers may have a limit of how many they would purchase, and feedlots did not want to miss being able to sell some cattle and then feed them again another week only to potentially see still lower cash. This will be an issue for some weeks to come as it will take time to increase processing ability and bring marketings current again. Boxed beef closed higher with choice up $1.71 and select up $2.35. There are again reports of store shelves being depleted or empty of items due to current supply chain issues with meat being one of them. That is the reason boxed beef continues to increase. Weekly export sales will need to make up for last week and then some to provide market support.
Hog futures uncovered buying interest after testing trendline support. Traders did not find support from cash as the National Direct afternoon report was down $0.92. The rally was purely technical and was then supported by cutouts gaining $2.84. Slower slaughter pace is not going to change anytime soon. Plants are having huge issues with labor and breakdowns. It takes longer to fix the breakdowns due to shortages. The slow pace will begin to back up hogs into the market. Saturday slaughter is estimated at 225,000. This may change significantly by Friday. Strong weekly exports sales will be needed to support the market.
| BULL SIDE | BEAR SIDE | ||
| 1) | China, South Korea and the Philippines have temporarily suspended beef import from Canada due to the discovery of BSE in mid-December. This should increase demand for U.S. beef. |
1) | Cash weakness is the result of lower processing ability. Packers are able to purchase for immediate needs as well as for deferred slaughter without difficulty. |
| 2) | Boxed beef prices continue to increase on a daily basis as demand remains strong. |
2) | Corn prices are expected to remain high as the WASDE report yesterday was neutral. This will keep feedlots wanting to move cattle as quickly as possible. |
| 3) | Hog futures corrected after the sharp sell-off. Buying interest should follow through. |
3) | Hog futures strength was not supported by cash Wednesday as packers are not purchasing their usual amount of hogs due to reduced slaughter. |
| 4) | Weekly export sales are expected to be strong, which will keep product moving. |
4) | Hogs may begin to back up in the market if slaughter levels do not improve soon. |
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