Friday Morning Livestock Market Summary - Mixed Trade Expected

General Comments:

Cash cattle activity continues to trickle into the market with another round of light activity on Thursday, but in the same price range as earlier in the week. Live deals are at $115 to $120 per cwt, while dressed sales are reported at $180 to $190 per cwt. This underlying support in the market follows the focus on packers slowly increasing daily and weekly slaughter levels as the industry tries to move back to a more normal status. There is still a backlog of market-ready cattle due to the previous production losses during the month of April, but traders are closely focusing on Friday afternoon's Cattle on Feed report, and weight breakdown summaries in order to get a better idea of the overall feedlot situation through the early summer months. The monthly Livestock Slaughter report posted total beef production falling 25% from March levels and 20% from year-ago production. Total numbers of cattle slaughtered in April fell 21% from year-ago levels, as overall weights increased 2%. The focus through most of the futures trade will be to confirm the production losses in April, while looking forward to the upcoming Cattle on Feed report. Because of the holiday Monday, traders will not be able to trade Cattle on Feed report data until Tuesday morning, potentially creating more than usual anticipated adjustments through the Friday session. Friday slaughter is expected at 101,000 head.

Movement in the lean hog complex has been a mixed bag through the week with prices moving in a choppy and generally inconsistent pattern due to traders trying to adjust to current supplies while anticipating future demand. Strong triple-digit gains in nearby lean hog futures continues to focus on the underlying need for packers to gain access to daily supplies that are slowly growing. But this could limit additional direction during the next few days. Pork slaughter production in April was significantly reduced, which anyone with any knowledge of the pork industry already knows due to plant closures because of COVID-19. But April production levels were interesting as they fell 21% from March levels and were down 10% from April 2019 totals. It is still very interesting that even with the April production losses, overall year-to-date production is 104% year-ago levels. Futures are expected to remain mixed with a combination of follow-through, late week buying and end-of-the-week position covering as markets will remain closed Monday due to the holiday. Cash hog bids are expected $1 lower to $1 per cwt higher with most bids steady to 50 cents higher. Slaughter Friday is expected at 402,000 head. Saturday runs are expected near 158,000 head.

	BULL SIDE		BEAR SIDE
1)	Continued strong cash cattle trade is pointing to increased packer buyer support. This may continue to add increased underlying support next week.	1)	Despite the pullback in slaughter numbers and overall beef production in April due to coronavirus issues, beef supplies in cold storage is just 2% lower than March levels, but 14% above year-ago levels. Total year-to-date beef production remains 1% above 2019 levels, despite the 25% reduction from March.
2)	Cattle placements and overall on feed numbers are expected to see significant reductions in the afternoon report. This should help to add additional underlying support to the market going into the report. But report levels will likely need to be in the lower end of the estimated range in order to get a strong market reaction to the report due to much of this reduction already being factored into the market.	2)	The lack of consistency in trade estimated going into the Cattle on Feed report, may create some additional uncertainty as the wide range could leave little confidence of just how much lower numbers will be once the report is released.
3)	Cash hog values posted strong gains Thursday focusing on the need for packers to quickly and aggressively regain access to hogs as they continue to push for higher production levels over the upcoming days and weeks.	3)	Even with strong production losses in the pork processing segment in April, overall year-to-date pork output is 4% above 2019 levels. This creates a somber picture of just how much pork is available to the market, knowing that growing numbers of market-ready hogs are being backed up through the system, which could keep overall pork supplies burdensome through most of the year.
4)	Pork slaughter in April fell sharply from March levels and year-ago totals. Total pork production of 2 billion pounds is a 21% reduction from March levels. This will continue to tighten the supply levels through most of the summer.	4)	Total pork in cold storage remained stable with March levels. This is after overall pork production from packing plants fell 21% in the same time period, pointing to the significant reduction in overall pork demand through the month of April.

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