Cattle futures drifted lower before the holiday weekend. The seasonal potential for slower demand will be weighing on the market unless strong demand continues, requiring packers to aggressively purchase cattle. Hog futures ended the week and month very strong and this should continue as the trend is up as traders remain aggressive. However, the cyberattack on JBS, the world’s largest meat packer may have some impact, but the impact is unclear.
Cattle: Steady Futures: Mixed Live Equiv: $239.40 -0.19*
Hogs: Higher Futures: Higher Lean Equiv: $133.32 +0.26**
* based on formula estimating live cattle equivalent of gross packer revenue.
(The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)
** based on formula estimating lean hog equivalent of gross packer revenue
Traders just do not seem to believe there is much or will be much upside for cattle prices. Cash has not changed much over the past few weeks and now that the seasonal peak of demand generally takes place around Memorial Day, packers may not be willing, or need to be, aggressive. Packers already have cattle committed ahead, which continues to leave them in the driver’s seat.
Live cattle futures tried to trend higher for a week or so, but the gains have nearly been eliminated. The June contract holds a discount to cash in anticipation of yet weaker cash during the month of June. However, it is a futures market and will change according to what takes place in the cash market. With packers’ margins very good and demand very strong, one has to wonder if weakness of boxed beef will even have much of a bearish impact on cash.
Packers are in a sweet spot, and if they can continue to purchase cash at current prices, why rock that boat even if there is weakness of boxed beef due to slower demand. If there is one thing we have seen in numerous markets over the past year, is that many of the technical and seasonal aspects of the market have been thrown out of the window.