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. |
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| #completeherdhealth |
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