Now that the knee-jerk reaction to the resumption of slaughter at JBS plants has been digested, traders will turn back to assessing the impact of the disruption and the potential backlog of cattle. This may limit upside potential. Hogs weathered the storm well and may continue to see support. However, reduced slaughter pace and lower cash could result in futures weakness.
Cattle: Steady Futures: Lower Live Equiv: $246.26 +3.91*
Hogs: Lower Futures: Mixed Lean Equiv: $136.32 +2.47**
* 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
It was a banner day Thursday for the cattle complex. The news of JBS being back online had traders buying futures aggressively. The crisis was averted, and consumers were buying beef. Boxed beef prices went through the roof with choice up $5.60 and select up $5.43.
The expectation is that overall supplies might be tighter for a period of time as slaughter levels will take some time to get back up to full speed again. As expected, packers are not aggressive in the cash market with some trading activity Wednesday in the South at $120, which is about steady to $1.00 higher than last week and steady at $191 in the North.
This is likely not to change as cattle will back up to some extent in feedlots as it will take a little while to process through the market-ready cattle. Packers know the cattle are out there. With steady cash, futures might have a difficult time following through.