The meat market has a lot to consider at present, as all markets do. The Covid has taken its toll on demand and is a consideration. The cattle weights remain high and this is an issue. The March demand story that had consumers buying to stock the freezer to get through a couple weeks has turned into a consumer that is stocked up. The govt now has extended the lock down which potentially pushes demand out. The April market needs to show demand. The slaughter for the week was 120 t, compared to 116 t last week, and 115 t last year. The trend is not helping. Dressed weights 832 compare to 805 a year ago, overall production is approx 11% higher than a year ago. These will be difficult facts to overcome. To be considered is the fact the market has fallen considerably. In addition, the tech action showed a move on the board basis April on 3/25 to 110. This was a 14 day high. Currently the live board sits at the 14,21 day MA approx 102. This could potentially be setting up a sideways trade waiting for friendly news. In addition, the futures remain a discount to cash. Expect a choppy trade.
The hogs have fallen considerably since the beginning of the year. The closing of restaurants, especially for the next 30 days has the market spooked. The real concern of pork backing up in the country is felt in the price. This is a situation that may take some time to sort through. The difficult aspect is that the meat market in general, but certainly pork, was expanding due to thoughts that China would be a major importer. There pork issues expanded hope, only to fall short. At present the slaughter is 491 t wk, this compares to 471 t year ago. The trend here, as in the beef market, unfortunately is moving in the wrong direction. Looking at the technicals offers little optimism. The market has fallen quickly below the 14,21, MA. The nearby would need a close at present at 59.84 to reach the 14 MA. The current fundamentals will impact future production. This is what will need to happen to clear some of the overproduction. We are not there yet in my opinion although this market will get volatile. Exercise caution. Move away from betting on the come, lock in profit immediately if it presents itself.
John J. Walsh
President, Walsh Trading, Inc.
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