Tuesday, March 31, 2020
|BULL SIDE||BEAR SIDE|
|1)||Cash cattle market basis levels still remain with recent cash market prices listed $30 per cwt over the most active June contract. This remains the largest basis levels in nearly two decades.||1)||Active pressure is starting to slowly but steadily develop in boxed beef prices. This could further weaken the overall futures and cash values as the ability to sell beef following the recent gains may be limited.|
|2)||The ability to spark renewed buyer support in deferred live cattle trade Monday is pointing to a sense of renewed market stability seen through the complex. This could help to limit the recent losses creating a path for buying interest over the coming days.||2)||The potential that packing plant slowdowns, or shutdowns due to increased coronavirus levels could once again bring increased pressure into the market as traders focus on the inability to keep cattle supplies current in the upcoming weeks.|
|3)||Limited bullish market support is seen in the lean hog futures market, but traders continue to focus on longer-term demand for pork. This is putting less pressure on deferred contracts, helping to focus on potential market gains later in the year.||3)||With expanded trading limits in place for the third-consecutive day, it is concerning to think that for the short term, such a weaker trend is becoming a significant pattern through the complex. This could lead to further liquidation in the coming days.|
|4)||The depressed lean hog futures complex remains an excellent buy opportunity for investors wanting to step into a market, which is expected to be at or near the bottom. Buying at these levels with expected long-term demand likely could be an excellent investment opportunity.||4)||Pork cutout values have continued to quickly erode as the ability to move pork product at retail locations is starting to slow. This may add increased underlying pressure to a market with increasing supply levels over the near future.|
Monday, March 30, 2020
|BULL SIDE||BEAR SIDE|
|1)||Sharp gains in cash cattle trade last week will create hope that follow-through support can develop as the volatility in futures trade stabilizes the next couple of days.||1)||Open interest in cattle futures continues to erode through the month of March. Even though strong price support returned the last couple of weeks, continued liquidation in the market has developed. This is causing concern as higher prices typically cause open interest to quickly rebound, but so far this has not been the case.|
|2)||Despite the pullback in futures trade at the end of last week, wholesale beef values have held onto support extremely well. The continued surge in retail demand the last couple of weeks continues to move product off store shelves at a rapid rate.||2)||April live cattle futures have lost $7.50 per cwt over the past two trading sessions with expanded limits creating the potential for additional wide losses to redevelop Monday. The inability to hold midweek highs is causing significant concern about short-term market direction.|
|3)||Strong pork demand continues in late March. It is expected that with more families home and confined from traveling, there will be increased focus on smaller but more Easter celebrations, which is likely to spark additional ham buying activity in the upcoming days.||3)||Sharp losses developed in pork cutout values late last week, causing concern that additional meat value erosion may continue to develop through the end of the month. The inability to continue to actively move pork supplies through early April could significantly damage previous support built the last couple of weeks.|
|4)||Long-term support in nearby lean hog futures is safe for now, despite the strong pressure in futures trade late last week. This could continue to limit further liquidation through early April as noncommercial traders look for investment opportunities.||4)||Expanded trading limits are available in lean hog futures trade for the second consecutive trading session. This may put additional pressure on lightly traded nearby April and May contracts, which continue to trade at a significant discount to the most active June contract.|
Friday, March 27, 2020
Heading into the weekend doesn't leave livestock enthusiasts many warm and fuzzy feelings as the board closed sharply lower and the havoc of the coronavirus doesn't seem to be lessening. Hog prices are lower on the National Direct Afternoon Hog Report, down $0.77 with a weighted average of $58.07. May corn is down 2 3/4 cents per bushel and May soybean meal is up $0.20. The Dow Jones Industrial Average is down 493.99 points and NASDAQ is down 151.46 points.
From Friday to Friday, livestock futures scored the following changes: April live cattle up $2.30, June live cattle down $0.10; April feeder cattle down $0.12, May feeder cattle up $2.68; April lean hogs down $3.13, June lean hogs down $3.70.
The market's swings throughout the whirlwind of the coronavirus have been baffling. Last week boxed beef prices and cash prices couldn't have been anymore of polar opposites as boxed beef prices made historical leaps and the live cattle market closed limit lower multiple times throughout the week. Fast forward to this last week, the board charged into Monday with ambition and a desire to regain lost ground, cash cattle prices jumped $10.00 but then board gave way towards the later part of the week and ultimately fell back below Monday's open. These types of market swings are a cattleman's worse nightmare as they undermine how the market was intended to work.
Live cattle contracts closed the week on a disappointing note as the market fell to prices lower than Monday's initial open. April live cattle closed $4.50 lower at $100.95, June live cattle closed $4.12 lower at $89.42 and August live cattle closed $4.02 at $90.45. Driving support and interest seems to be half of the market's struggles as open interest continues to dwindle and prices follow the vicious, volatile highs and lows.
Friday's cash cattle trade didn't amount to much as most of the week's business was already taken care of. Sales this week in the South traded $116 to $122, $9.00 to $10.00 higher than the previous week. And cattle in the North traded from $180 to $191, roughly $17 higher than last week's weighted average. Friday's slaughter is estimated at 117,000 head, 8,000 head more than a week ago and 10,000 head more than year ago. Saturday's kill is projected to be around 75,000 head.
Boxed beef prices closed mixed: choice down $0.73 ($252.84) and select up $0.21 ($242.38) with a movement of 124 loads (72.72 loads of choice, 10.68 loads of select, 19.30 loads of trim and 21.38 loads of ground beef).
MONDAY'S CASH CATTLE CALL: Good guess. Next week is going to be a tough one. Cash cattle prices were higher this week, but if the board continues to trade lower, it wouldn't be surprising to see this week's advancements lost.
Feeder cattle contracts closed the week limit lower throughout the entire complex. April feeders closed $4.50 lower at $120.60, May feeders closed $4.50 lower at $120.92 and August feeders closed $4.50 lower at $127.10. At Blue Grass Stockyards in Stanford, Kentucky, compared to last week, feeder steers sold $10.00 to $15.00 higher with some instances of $20.00 higher. Feeder heifers sold $7.00 to $10.00 higher with some instances of $15.00 higher. Slaughter cattle continue to sell with extremely high demand as slaughter cows sold $3.00 to $5.00 higher and slaughter bulls sold $2.00 to $4.00 higher. The CME feeder cattle index 3/26/2020: up $1.94, $130.44.
Nearby lean hog contracts took full use of the expanded limits while the rest of the deferred contracts closed $2.32 to $3.80 lower. April lean hogs closed $4.45 lower at $58.45, June lean hogs closed $4.50 lower at $64.25 and July lean hogs closed $3.80 lower at $66.80. Pork cutouts total 339.93 loads with 306.22 loads of pork cuts and 33.71 loads of trim. Pork cutout values: down $1.42, $77.61. Friday's kill is estimated at 489,000 head, 1,000 head less than last week but 25,000 head more than a year ago. Saturday's kill is expected to be around 275,000 head. The CME lean hogs index 3/25/2020: up $1.02, $66.17.
MONDAY'S CASH HOG CALL: Steady. With packers needing readily available hogs, the cash market should stay steady with demand as strong as it is.
Upon the noon hour livestock contracts have kept with either earlier pace of slowly trading lower. It's becoming apparent that as the week wraps up, traders aren't interested in jumping into the marketplace until there is some more vision and clarity. May corn is down 4 1/4 cents per bushel and May soybean meal is down $1.10. The Dow Jones Industrial Average is down 737.37 points and NASDAQ is down 241.84 points.
Live cattle prices bear lower into the noon hour as the week is seeming to want to wrap up all aspects of business. April live cattle are down $4.15 at $101.30, June live cattle are down $3.95 at $89.60 and August live cattle are down $3.55 at $90.92. Disappointingly the week has ended up trading lower after Wednesday despite the beginning of the week having significant support. Packer inquiry is sparse heading into the midday and at this point it's safe to say cash cattle business is essentially done as well.
Boxed beef prices are lower: choice down $1.46 ($252.11) and select is down $0.56 ($241.61) with a movement of 99 loads (56.50 loads of choice, 8.22 loads of select, 15.37 loads of trim and 19.37 loads of ground beef).
Feeder cattle contracts dip to limit losses in a slew of nearby contracts and deferred contracts are only roughly 20 cents behind. As the week nears its end traders are checked out for the week and aren't looking to invest while the market is still engulfed in uncertainty. April feeders are down $4.50 at $120.60, May feeders are down $4.50 at $120.92 and August feeders are down $4.50 at $127.10. On the bright side, the country has been blessed with phenomenal weather which is making springtime sales easier than many had planned for, and cattle are converting like crazy with sunny days and cooler nights.
Lean hog contracts follow suit and head substantially lower. Nearby contracts are suffering more than deferred contracts but the entire complex is trading steadily $2.00 to $4.50 lower. April lean hogs are down $3.80 at $59.10, June lean hogs are down $4.50 at $64.25 and July lean hogs are down $4.00 at $66.62.
The projected lean hog index for 3/26/2020 is up $0.26 at $66.46, and the actual index for 3/25/2020 is up $1.05 at $66.17. Morning hog prices are delayed due to packer submission problems. Pork cutouts total 170.60 loads with 149.03 loads of pork cuts and 21.57 loads of trim. Pork cutout values: down $2.85, $74.76.
Cash cattle sales are expected to have wrapped up for the most part, although there could be a few deals trickling into the market Friday as feeders try to take advantage of the market gains from earlier in the week. It will be interesting to see if packers will even float bids Friday, or wait to see what the next few market days have in store before they are back in the market. Given the early-week bullishness in all segments of the market, the focus on sustaining this momentum will be the main priority next week. Futures trade is expected to remain weak with live cattle futures expected to be the main focus early Friday morning following sharp triple-digit losses that flooded the market Thursday. With lightly traded April contracts posting limit losses Thursday afternoon, expanded trading limits are available for all live cattle futures. Feeder cattle futures still have normal trading limits of $4.50 per cwt as nearby contracts did not close limit lower Thursday. But the underlying pressure through the end of the week could spark some significant concerns through all cattle trade as traders look for renewed support in beef values going into the weekend. More focus is being placed on the stability of retail demand in the near future that most of the panic buying by consumers and hoarding seems to have slowed in most areas. This is still expected to keep packers actively killing cattle, but the focus on upcoming demand over the next two to four weeks is likely to have a significant role in cattle futures prices in the near future. Friday slaughter is expected at 120,000 head.
Lean hog futures posted limit losses in May through August futures contracts, creating significant questions about the ability to maintain market momentum, which quickly developed through the last week. Although lightly traded, the April contract still is holding the majority of weekly gains, which could help to limit further pressure Friday. Growing questions are developing in summer and fall contracts about the ability to maintain underlying support in lean hog futures due to continued strong production and growing questions about domestic and export demand through the upcoming months. Lean hog futures will now have access to expanded trading limits, which may spark underlying concerns with limits moving to $4.50 per cwt during the Friday session. A strong move lower at the end of the week would significantly damage any momentum built in meat markets the last several days. The quarterly Hogs and Pigs report gave us little that we didn't know before. The fact that overall production remains strong and is expected to remain that way through most of the summer and early fall is likely to limit upside movement in lean hog prices based on ample pork supplies available to the market. Cash hog prices are called $1 lower to $1 higher with most bids expected steady. Slaughter Friday is expected at 491,000 head. Saturday runs are expected at 273,000 head.
|BULL SIDE||BEAR SIDE|
|1)||Strong double-digit gains in cash cattle trade earlier in the week is expected to help bring some much needed stability to the cattle complex through the end of the month. The potential to focus on steady-to-firm cash cattle trade during early April may quickly redevelop if futures trade is able to stabilize going into the weekend.||1)||Sharp losses in live cattle and feeder cattle brought the market back to the stark reality that the market volatility, which pushed prices higher over the last week, can quickly turn. Further significant weakness during the Friday session could lead to additional strong liquidation in the market as traders remain concerned about the sustained demand pressure due to growing unemployment levels.|
|2)||Active beef product movements are still seen in most areas of the country as consumers have offset buying previously done at restaurants with home produced meals. The continued strength in meat demand is likely to limit further aggressive selling over the upcoming days and weeks.||2)||Boxed beef values have eroded the last two days, creating uncertainty through the entire market and some to wonder if a major adjustment lower may develop in the near future as meat availability gets back to normal over the days and weeks ahead.|
|3)||Hog expansion is expected to end through the summer months with expected farrowing in the June through August timeframe pegged at 96%. This could slowly but significantly tighten overall supply levels by the end of the year.||3)||Hog production grew 4% over the last year, with 77.6 million hogs as of March 1. This continued strong supply levels will continue to add pressure to lean hog prices over the weeks and months to come.|
|4)||Despite all of the coronavirus issues, strong underlying retail demand for pork continues. This is expected to limit aggressive pressure in pork cutout values in the near future.||4)||Firm pressure once again developed in pork cutout values Thursday. This is causing increased concerns of eroding domestic pork demand at a time when typically strong pork buying is done ahead of the Easter holiday. With large gatherings for Easter on hold due to "social distancing" measures, it is uncertain how significantly pork demand will be impacted.|
Thursday, March 26, 2020
|BULL SIDE||BEAR SIDE|
|1)||April live cattle futures have rallied $16.60 per cwt over the last week, sparked by incredible support in wholesale beef values. The ability to try to catch up with consumer beef demand, which has surged over the last couple of weeks, has regained most of its losses during the month of March.||1)||Boxed beef values shifted lower Wednesday, potentially limiting the incredible run higher over the last week and a half. Further erosion of wholesale beef values will quickly put in question the ability to hold current market values through the complex.|
|2)||Strong double-digit gains are quickly flooding into cash cattle markets with live cattle in the South posting a $10 per cwt rally from last week, while dressed cattle are holding $17 per cwt gains. This underlying support in the market is likely to bring additional support leading into the month of April, as the period of panic liquidation surrounding COVID-19 seems to be ending.||2)||Meat cases at retail locations around the nation are being constantly restocked. It is uncertain just how active daily buying will be over the near future once the surge of market activity passes. It will take additional days and weeks to catch up with the new pattern of buying seen through the nation, which could add increased volatility into wholesale and retail prices.|
|3)||Despite a pullback in futures prices Wednesday, the lean hog futures complex is still trading higher than before the March price tumble, earning back all of early-month losses. This renewed support and expectations that additional meat demand will continue is helping to bring support to the complex.||3)||Strong triple-digit pressure in pork cutout values Wednesday added to overall long-term market support. If prices continue to erode through the end of the week, the recent bullish futures market interest is likely to quickly erode.|
|4)||Traders will be closely watching the morning release of weekly Export Sales reports Thursday morning. New export sales and deliveries to China last week will be the main focus, and a sizable gain could rekindle support through the entire complex.||4)||The afternoon release of the quarterly Hogs and Pigs report is expected to point out strong year-over-year inventory gains as the expansion seen over the last year building up to expected strong China pork demand continues to push more hogs through the system. This is expected to continue through spring and summer months.|