Written Commentary
CATTLE
February cattle closed lower for the fourth session in a row as traders see the collapse in the beef market as evidence that there will not be consumer hoarding of beef due to the virus spike. In the spring, consumers hoarded beef as virus cases surged but this has not been the case as beef prices have collapsed over the past week, and this leaves a bearish tilt for the cash market outlook. The USDA boxed beef cutout was down $3.88 at mid-session yesterday and closed $5.78 lower at $225.02. This was down from $243.40 the previous week and was the lowest the cutout had been since November 11. February cattle closed lower on the session and the selling pushed the market down to the lowest level since November 20th.
Some traders believe the recent selloff has been too far, too fast and that help spark some short covering. The USDA estimated cattle slaughter came in at 115,000 head yesterday. This brings the total for the week so far to 234,000 head, down from 241,000 last week and down from 245,000 a year ago. Cash live cattle prices have continued to soften into this week. In Kansas on Tuesday, 7,386 head traded at 107-108 and an average price of 107.99, down from an average of 110.01 last week. In Texas/Oklahoma 3,330 head traded at 108, down from an average of 110.88 last week.
LEAN HOGS
After a collapse last week, ham prices have recovered all the way back up to near the highs of a week ago. This helped the market experience a hook reversal yesterday and the market may be in position for a short-term bounce. Once a seasonal peak is in place, and the market sees declining export demand, cash markets could continue to push lower into later this month. February hogs closed higher on the session as short-covering and some new buying helped to support. The higher close after a 210 point range is a positive technical development. Sellers were active early and drove the market down to the lowest level since November 20th before the bounce. Traders expect to see a recovery bounce in pork values and that helped to support buying.
The USDA pork cutout, released after the close yesterday, came in at $77.45, up 69 cents from $76.76 on Monday and up from $76.05 the previous week. The CME Lean Hog Index as of December 4 was 65.79 down from 66.26 the previous session and down from 66.81 the previous week. This leaves February hogs trading near the cash. The USDA estimated hog slaughter came in at 496,000 head yesterday. This brings the total for the week so far to 983,000 head, down from 985,000 last week at this time but unchanged from a year ago.
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