Following a week of wide cash price movements that took place as the week progressed, it is expected that cash market activity will remain sluggish early in the week. Overwhelming consumer demand the last two weeks has made it hard for retail locations to keep meat on the shelves, resulting in rising wholesale beef values, and causing a wide spread between wholesale beef prices and futures trade. This is likely to delay most cash bids and offers until later in the week with cattle feeders likely holding out for additional underlying support. The rally in futures prices late last week helped to bring some perspective to a market that seemed only to move lower earlier in the week. But in order to spark renewed interest, follow-through gains are needed over the next couple of days. The Cattle on Feed report released Friday afternoon will likely gain some attention through morning trade. Although the report remained nearly identical to pre-report estimates, the focus on significantly lower cattle placements and higher marketing's from year-ago levels is likely spark some underlying interest if traders are able to break away from outside market shifts. Monday slaughter is expected near 121,000 head.
The strong underlying end of the week support early Friday that held cattle futures higher was unable to maintain buyer interest through most lean hog trade late Friday. This is expected to lead to additional wide market volatility Monday morning as a combination of follow-through selling and short-covering is likely to develop as traders step back into the complex following the weekend break. Growing concerns of where export pork trade with China will head over the upcoming weeks and months will create additional concerns in the pork complex. This will likely spark additional deferred contract losses as nearby trade still remains focused and energized by the surge in wholesale pork values the last several days. The lean hog complex appears to be taking a longer-term approach to the market than the cattle trade at this point with traders concerned about the impact of shuttered or reduced food service and restaurants through the recent restrictions in order to curb COVID-19. These price moves are likely to continue to have the greatest impact on summer and fall contracts. Cash hog prices are called $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Monday is expected at 496,000 head.
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| 1) | Significant dips in feeder cattle placements through the month of February from year-ago levels and increased marketing's despite reports mirroring pre-report estimates is expected to create support in the complex Monday morning. | 1) | Strong pressure is developing in stock prices once again during overnight trade, as focused as the live cattle futures complex market is on outside money, this further weakness in financials could limit early week buyer support in most cattle contracts. |
| 2) | The sharp rally in boxed beef prices last week still leaves cash and futures prices at an extreme discount despite strong end of the week gains. This is expected to spark follow-through momentum as the cash and futures market tries to keep up with meat values. | 2) | Food service and institution buying of meat has essentially halted over the last week due to coronavirus concerns and restrictions put into place on gathering sizes. The additions of "stay put" orders across a few states is likely creating additional uncertainty through the entire complex. |
| 3) | Strong underlying support moving into wholesale pork values is sparking some underlying activity in the complex. This is expected to bring about firm follow-through support during early week trade. | 3) | Growing concerns surrounding the future trade relationship with China and how this will impact pork values is adding even more market pressure in deferred futures. This will bring about potential wide market spreads between spring and summer lean hog contracts. |
| 4) | Renewed overnight buyer support is evident in outside ag commodity markets, creating the potential that hog futures will defy the building pressure in stock prices based on growing consumer demand for meat. | 4) | Pork production in the U.S. continues to remain strong. This is expected to put additional focus on long-term domestic and export demand of pork in order to clear product from freezers, despite the inability for packers to keep up with immediate demand. |
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