U.S. red meat production rebounds significantly

Beef slaughter reaches second-largest levels of 2020 in week ending June 27.

U.S. beef and pork production encountered significant challenges in April and May as COVID-19 outbreaks slowed or halted production. Further, many plants endured slowdowns as they implemented worker safety measures. This eventually led to some short-term meat shortages, raising concerns about available supplies. However, as U.S. Meat Export Federation (USMEF) president and chief executive officer Dan Halstrom explained, production has rebounded significantly in recent weeks, underscoring the U.S. industry's ability to serve both domestic and international customers.

“There has been a lot of work within the supply chain on enhancements and improvements in response to COVID-19 at the live production level, the slaughter plant level and the logistical infrastructure,” Halstrom said. “Consequently, we are seeing dramatic rebounds in our ability to supply our customers both in the U.S. and globally.”

Halstrom reported that U.S. cattle slaughter for the week ending June 27 was at 680,000 head, up 4% from the previous week and 1.5% above a year ago. Live cattle weights averaged 1,369 lb., up 50 lb. from last year.

“This is the second-largest weekly kill in 2020 for the beef side,” he noted. “So, you can see from a production standpoint, we’re seeing dramatic improvement.”

Hog slaughter was estimated at 2.64 million head, up 11% year over year and the fourth consecutive week above year-ago levels, with live weights up 8 lb. from a year ago to 291 lb.

From a product mix standpoint, Halstrom explained that domestic demand is different from export demand, with international customers often purchasing cuts and products that U.S. consumers typically don’t.

“An ideal scenario in a livestock production chain is to maximize the value in such a way that we leverage the robust domestic demand, complemented by the export markets. Consequently, this rebound underscores our ability to service reliably not only our domestic customers but our international customers as well,” he said.

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Wednesday Morning Livestock Market Summary - Grain Market Rally Adds to Livestock Uncertainty

General Comments:

It is hard to get a good handle on the cash cattle market going into Wednesday's trade with the development of wide trading ranges appearing as both sides gear up for the long holiday weekend. Northern dressed trade developed Tuesday in a much wider range than last week with prices from $148 to $155 per cwt. This is generally steady to $7 per cwt lower than last week's average, but the concern is whether further weakness in beef values and futures prices through midweek will add increased softness to cash trade during early July, which is creating some additional pressure. Moderate trade is expected to develop over the next couple of days with both sides wanting to wrap up any needed deals before Friday. Futures trade is expected mixed to mostly lower. The early support Tuesday was quickly eroded following surging grain market values following the USDA acreage report. The surprise pullback in corn acres was most obvious to not only the corn market, but also has significant impacts on overall feed and production costs through the end of the year. This will not only heavily impact overall live cattle trade, but the ability for feeder cattle to hold recent support, quickly sparked selling pressure through the entire complex. With further grain market support developing in overnight trade, the focus on adjusting overall cost of gain formulas is likely to limit any early-month support that may have otherwise moved into the cattle complex. Wednesday's slaughter is expected at 120,000 head.

Firm gains developing in lean hog futures trade is expected to carry light-to-moderate spillover buyer support as traders enter the month of July. The lean hog futures complex was able to quickly look past higher grain and feed prices during the day with traders more focused on end-of-the-month and quarter positioning. Even though August futures posted light-to-moderate support, the main support was seen in October through April contract months. Given the current structure of hog numbers and backlog of market-ready hogs through the rest of the summer, this price support correlates with a more stable supply level that could help to bring follow-through support through the upcoming days and weeks. Traders remain cautious, although at current price levels, there is a growing sentiment that prices are at or near market lows. Cash hog prices are expected $1 lower to 50 cents higher with most bids expected steady. Slaughter Wednesday is expected at 470,000 head. Friday slaughter is expected at 200,000 head. No Saturday runs are expected due to the Fourth of July holiday.

	BULL SIDE		BEAR SIDE
1)	The upcoming Fourth of July holiday weekend is expected to bring about increased beef demand. A strong boost in retail and food service movement over the weekend could not only help clear growing inventory levels but could become a springboard for buying through the upcoming weeks, potentially defying the traditional demand slump seen in late summer.	1)	Firm pressure developing in cash cattle trade through the week is starting to erode fundamental support with the current weaker trend moving cash values to a discount to nearby futures trade for the first time since the COVID-19 pandemic has disrupted the market. This could limit short-term support in cash and futures trade.
2)	With June live cattle futures expired, the focus on August contracts and the ability to sustain the sideways market trend in live cattle futures will likely spark renewed interest from commercial and noncommercial traders during early July.	2)	Concerns of further food service demand pressure is starting to develop, which will continue to heavily impact the beef market. Some states have reversed reopening procedures as COVID-19 cases are spiking over the last few days. This could quickly disrupt the growth in demand that has started to build.
3)	Strong triple-digit gains in deferred lean hog futures as traders roll out of the month of June, and third quarter gives an indication that traders expect further market support to develop in the near future.	3)	Sharp triple-digit losses in pork cutout values Tuesday adds to the overall softness in the pork market. Concern that pork demand will continue to be more sensitive to added restrictions in several states as coronavirus cases are spiking once again.
4)	Cash hog trade started to stabilize despite the reduced processing levels this week. This could help to establish more market negotiations for market-ready hogs during the upcoming weeks.	4)	Limited packer activity expected over the holiday weekend with no Saturday slaughter expected, and Friday and Monday schedules expected to be reduced. This will greatly reduce the overall number of hogs slaughtered this week.

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Tuesday Closing Livestock Market Summary - Cattle Regress, Lean Hogs Stronger

GENERAL COMMENTS:

Cattle contracts trended higher through most of the day, but near closing the complex sank lower. Meanwhile, the lean hog complex didn't bat an eye at how the cattle contracts were trading as cash prices remained elevated through closing and the board held onto its strength through the end of the day. Hog prices closed $0.14 higher with a weighted average of $28.45 on 10,406 head. September corn is up 12 3/4 cents per bushel and July soybean meal is up $5.80. The Dow Jones Industrial Average is up 217.08 points and NASDAQ is up 184.62 points.

LIVE CATTLE:

As the June contract expired and attention completely rolls to August and October for nearby contracts, it's painful yet again to see where fat cattle are trading. Earlier Tuesday, the board couldn't seem to care less what the bearish fundamentals were and traded significantly higher. As time progressed, reality sunk in and contracts closed modestly lower. August live cattle closed $0.20 lower at $96.27, October live cattle closed $0.32 lower at $99.72 and December live cattle closed $0.12 lower at $103.65. There was another round of light trade in the North with cattle selling from $148 to $155, already $7.00 lower than last week's weighted average in Nebraska, all while the South has yet to trade cattle. Tuesday's slaughter is estimated at 121,000 head, 1,000 head above a week ago and 2,000 head less than a year ago.

Boxed beef prices closed lower: choice down $1.39 ($206.97) and select down $0.81 ($199.90) with a movement of 174 loads (94.26 loads of choice, 26.20 loads of select, 7.28 loads of trim and 45.95 loads of ground beef).

WEDNESDAY'S CASH CATTLE CALL: Steady to lower. Seeing cash prices weaken upwards of $7.00 in only the first two trading days of the week is brutally painful for the cash market. The rest of the week will trade either steady to lower keeping in the same trend.

FEEDER CATTLE:

Feeder cattle contracts were ambitious early in the day, but as time progressed, the complex lost its momentum and closed lower alongside the live cattle contracts. August feeders closed $0.65 at $132.85, September feeders closed $0.90 lower at $133.37 and October feeders closed $1.02 lower at $134.10. At Joplin Regional Stockyards in Carthage, Missouri, compared to last week, steer calves sold steady, while heifer calves sold steady to $3.00 higher. Meanwhile, yearling steers sold steady to $3.00 strong and yearling heifers were considered steady. Demand was good especially given the big run, upwards of 10,786 head sold. Come this Thursday, July 2, the auction barn will host the Big Bang Sale, which is anticipated to display another phenomenal offering, and feeder cattle prices could be as good as last week's specialty sales were. The CME feeder cattle index 6/29/2020: down $0.26, $129.42.

LEAN HOGS:

The lean hog complex was aggressive in its rally throughout the day, and with cash prices even trading higher, the market saw an opportunity to catch a jump forward. August lean hogs closed $0.57 higher at $49.02, October lean hogs closed $1.92 higher at $49.35 and December lean hogs closed $1.82 higher at $51.72. Pork cutouts total 439.50 loads with 388.03 loads of pork cuts and 51.46 loads of trim. Pork cutout values: down $2.09, $63.12. Tuesday's slaughter is estimated at 469,000 head, 12,000 head more than a week ago and 11,000 head less than a year ago. The CME lean hog index 6/26/2020: unchanged, $45.23.

WEDNESDAY'S CASH HOG CALL: Steady. Packers could pay the same price that they did Tuesday for hogs later in the week, given that it wasn't an astronomical jump. With the shortened week, they may need to buy a little more aggressively to cover for the weekend.

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Tuesday Midday Livestock Market Summary - Livestock Contracts Push Upwards

General Comments

Pushing forward into the noon hour, livestock contracts keep their vigorous pace and trend higher in all three markets. Cash hogs are trading slightly higher, but the cash cattle market is undecided how where exactly prices should land for the week. Heading into the afternoon it wouldn't be surprising to see more interest arise. September corn is up 11 1/2 cents per bushel and July soybean meal is up $4.30. The Dow Jones Industrial Average is up 52.27 points and NASDAQ is up 136.79 points.

LIVE CATTLE

Live cattle contracts have jumped on the bandwagon of trading higher even though cash cattle trade is bound to develop lower again this week. August live cattle are up $0.37 at $96.85, October live cattle are up $0.42 at $100.45 and December live cattle are up $0.55 at $104.35. Some cattle have been bid on in Iowa for $96 live and $152 dressed, and in Nebraska for $153 to $155. Trade has been sparse thus far through the week, but more trade could develop through the afternoon.

Boxed beef prices are mixed: choice down $0.23 ($208.13) and select up $0.76 ($201.47) with a movement of 99 loads (41.42 loads of choice, 12.45 loads of select, 6.76 loads of trim and 38.33 loads of ground beef).

FEEDER CATTLE

Feeder cattle contracts played hard ball all throughout Monday but have came around to trading higher through part of Tuesday's early hours. August feeders are up $0.17 at $133.67, September feeders are up $0.45 at $134.65 and October feeders are up $0.22 at $135.35. Upon chatting with some country feeder cattle buyers, most are apprehensive about sticking their necks out there too far on calves right now despite cheap corn and last week's stronger sale averages.

LEAN HOGS

Lean hog contracts are taking Tuesday's debut with stride as the entire complex trades higher and the nearby contracts are seeing over $1.00 gains through the months of October 2020 to February 2021. The spot July contract is facing some pressure but with the contract set to expire in fifteen days, traders are more interested in seeing what's happening in the upcoming months. July lean hogs are down $0.22 at $45.10, August lean hogs are up $0.37 at $48.82 and October lean hogs are up $1.25 at $48.70.

The projected lean hog index for 6/29/2020 is up $0.01 at $45.24, and the actual index for 6/26/2020 is steady at $45.23. Hog prices are higher on the National Direct Morning Hog Report, up $0.03 with a weighted average of $28.34, ranging from $24.00 to $30.13 on 5,191 head and a five-day rolling average of $28.61. Pork cutouts total 234.70 loads with 214.95 loads of pork cuts and 19.75 loads of trim. Pork cutout values: down $1.61, $63.60.

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