Written Commentary
CATTLE
The market remains in a steady uptrend with the April cattle closing at the highest level since February 25, and June cattle into new contract highs. Demand factors are about as good as it gets with surging consumer spendable income, increased beef exports, lower beef imports and recent beef production coming in below expectations. The expanding beef pipeline, as more and more restaurants and food service companies reopen, remains a bullish force as well. The USDA boxed beef cutout was up $4.84 at mid-session yesterday and closed $5.82 higher at $258.67. This was up from $239.53 the previous week and was the highest the cutout had been since June 5th! No cash live cattle trades were reported as of Monday afternoon. The five-area weighted live steer price last week was 118.08, up from 115.59 the previous week and 111.08 a year ago.
June cattle opened higher and closed sharply higher on the session yesterday and the buying pushed the market into new contract highs for the second session in a row. The strong uptrend in beef prices opens the door for even higher cash cattle traded this week. As the economy reopens, the market is seeing an expanding beef pipeline and that adds to the positive tone. The USDA estimated cattle slaughter came in at 108,000 head yesterday. This was down from 119,000 last week but up from 107,000 a year ago. Beef production for the week ending March 20th was down 4.3% from last year. Beef production for last week was down 2.6% from last year.
LEAN HOGS
There have been more and more news stories of outbreaks of African swine fever for parts of China and this has helped to support the uptrend. There is a perception that this could spark increasing pork imports ahead if China pig supply begins to dwindle. However, pig prices in China remain in a downtrend, China continues to be an aggressive importer of feed grain on the world market and China is even using strategic government stocks of wheat and rice to feed livestock. It is possible that China can quickly control the swine fever problems and that the China pig heard continues to expand. Eventually, China looks to import less pork and continues to see expanded production of all meat and fish in China. China’s national average spot pig price as of April 06 was down 3.94% from the previous day. For the month, prices are down 5.98% and down 33.38% year to date.
June hogs experienced a key reversal yesterday which is a technical sign that a near-term peak is in place. The tightening supply situation which is seasonally expected has been enhanced by the expanding pork pipeline due to re-openings, and by continued strong export demand for US pork. The CME Lean Hog Index as of April 1 was 99.38 up from 98.97 the previous session and up from 95.97 the previous week. The USDA pork cutout, released after the close yesterday, came in at $108.01, down 43 cents from $108.44 Friday but up from $106.51 the previous week. The USDA estimated hog slaughter came in at 331,000 head yesterday. This was down from 483,000 last week and down from 475,000 a year ago.
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