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Monday, April 5, 2021

Monday Morning Livestock Market Update - Strength Expected to Continue

GENERAL COMMENTS:

The attitude of traders might be mixed Monday. Cash cattle traded higher, as expected, and maybe even a little better than expected. But the market already had premium in futures. The April contract may want to remain close to cash and may not be too anxious to push much higher as it waits for cash to catch up. However, the strength of cash last week may provide the confidence needed by traders to buy back into the market after the slight dip Thursday. Boxed beef increased significantly, indicating seasonal demand is increasing. Packers are expected to be somewhat aggressive this week as they cannot afford not to purchase cattle to meet strong demand. Restaurant traffic is again increasing. The National Restaurant Association reported about 59% of the population was eating out once per week prior to COVID-19. After the pandemic hit that number dropped to 16%. Their latest survey done in March, indicated 37% of the population is eating out once per week. This is a factor in overall beef demand. Feedlots will be looking for higher prices this week and may hold for such, knowing packers will need to be aggressive.

Hogs continue to see amazing strength. The April contract now has four price gaps left in the chart from 1 to 1 1/2 weeks ago and a long-standing one from March 16. Chart gaps are generally filled, but this contract may run out of time to accomplish that task as it has 1 1/2 weeks remaining. May has two gaps from March 25 and 26. These have a better chance of being filled at some point. The bullish export sales report will continue to underpin the market, especially in light of the fact that China accounted for nearly half of those sales. It appears they will continue to be a strong buyer for the foreseeable future. Strong consumer demand will keep packers aggressive.

BULL SIDE BEAR SIDE
1)

Boxed beef has been on fire with prices increasing as demand increases. The grilling season is underway.

1)

Beef export sales were not very good, possibly indicating current prices have met with resistance from international buyers.

2)

New contract highs were made in some months, indicating traders remain willing to buy into the market. Increasing cash and strong demand supports higher prices.

2)

Feedlots may want to keep current with cattle and move them as quickly as possible due to higher feed prices. This could limit the increase in cash prices.

3)

New contract highs continue to develop in hog futures as strong fundamentals keep buyers aggressive.

3)

Hog futures have price gaps that need to be backfilled. This may be accomplished sooner rather than later.

4)

Consumers just cannot seem to get their fill of pork and prices have not yet reached resistance. Packers will continue to bid higher as they need to satisfy that demand.

4)

The market remains in a perpetual overbought condition and could retrace at any time. Any sign of weakness could trigger profit-taking.




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