Limit gains in all livestock markets Tuesday will allow for expanded trading limits to develop midweek. Although firming support is building through the complex, demand uncertainty may create mixed early activity.
Cattle: Steady to Lower Futures: Mixed Live Equiv $149.00 -0.23*
Hogs: Lower Futures: Higher Lean Equiv $ 59.65 -2.96**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Cash cattle remained sluggish most of Tuesday but by the end of the day limited light trade developed in several areas at $105 per cwt live basis. This is generally $4 per cwt lower than last week’s live price levels and indicates a limited interest by packers with general plant slowdowns through the week and the upcoming lighter kill schedules surrounding the holiday weekend.
Easter weekend traditionally is the one holiday where overall processing levels are significantly reduced on both sides of the holiday with holiday-related reductions planned both Friday and Monday. This adds to the already slowing pace of moving cattle due to two small-to-medium plants suspending production already, and increased absenteeism at most other facilities, limiting the amount of cattle packers can move through the system.
More active cash trade is expected over the next two days, but the firmness in the futures market may not spark significant cash market gains given, but instead weaken basis levels from the current large levels currently. Futures trade is expected mixed to mostly higher early Wednesday morning.
The limited volume on Tuesday due to contracts locked in limit gains is likely to create follow-through buying as well as attempts to cover positions as markets move higher. The thought that the coronavirus pandemic may be close to peaking has spurred strong buyer support through most markets, potentially establishing a well-defined market bottom early in the week. There still remains a lot of concern of how overall meat demand will rebound over the coming weeks and months based on the damage to the economy through the pandemic. This could add even more wide market swings through the rest of a potentially lightly traded week. Wednesday slaughter is expected at 110,000 head.