Written Commentary
LIVE CATTLE
The USDA boxed beef cutout closed $1.26 higher at $293.76. This was up from $282.31 the previous week and was the highest the cutout had been since June 3. Beef is up $20.85 or 7.6% since April 15th and the rally, combined with lower cash markets has helped to drive packer margins to historically high levels. The beef price rally continues to drive packer profit margins, but packers do not see the need to bid up cattle, as sellers are active.
Cash live cattle traded in light volume on Thursday at similar levels to where they have been this week.
LEAN HOGS
In order to expect another leg higher, the market may need to see better exports as the seasonal decline in production may be already “priced” with the April 12 high, and the market experienced a successful test of that high this week. While the outlook for a seasonal decline in production into the early summer has helped support the rally, traders are nervous with the weak trend in the pork cutout market. The USDA pork cutout, released after the close yesterday, came in at $106.56, down from 106.62 on Wednesday and $113.28 the previous week. This was the lowest the cutout had been since March 30. Traders are also concerned that China’s import demand is slowing. China was the fourth largest buyer in the weekly export sales report, which was a disappointment for the bulls.
In addition, a steady decline in hog prices in China suggests they are on pace for strong expansion in their pork sector.
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