joe teale

Well, to say the least about the last few weeks in the livestock industries, it has been a complete meltdown as prices have plummeted. Fear is the dominate reason that has created the panic selling — all stemming from the spread of the coronavirus. The fear is based upon the idea that worldwide economic slowdown will occur because of this pandemic which will slow export business worldwide.

The futures market has experienced several limit lower moves as selling has overwhelmed the markets as prices have collapsed to weekly or near weekly lows in livestock contracts. At some point, with all the livestock markets well oversold, there will be a low established — whether short term or long term — as the fear begins to subside.

The cattle complex has endured so far the most pressure in the livestock arena. The live cattle futures are near last year’s lows while the feeder futures have new weekly lows and are nearing the 2010 lows.

Cash prices have also fallen — reflecting the negative attitudes toward the prospects of increased sales. The interesting thing about this is that beef is actually moving very well and beef cutouts have been improving. This would suggest the possibility of a bottom in this sell off may be nearing in the weeks ahead.

One interesting observation: as the equity markets go, so goes the livestock markets. This may suggest that a low is closer that we think. Since the futures have not paid attention to the fundamentals in recent days, it might only take a change in the fear factor to change the attitude away from the selling which has occurred.

The hog market has suffered a similar sell off as the cattle; however not nearly as severe. The reason has been the cash trade has been improving through the panic hitting all the other markets. This has simply taken the premium of futures over cash and narrowed that basis.

Pork cutouts have improved over the past weeks as well as improved product movement indicated good demand for pork. The fear which has driven other markets is the same thing that has pressured the hog futures over the past days. As the pressure from those markets subside, so will it subside for the hogs. The fundamentals will then take control of the futures which are currently fairly positive. This will all depend on whether attitudes do change; and if fear subsides will the hog market return to a premium to the hog index?