GENERAL COMMENTS:
Cattle market watchers could start to see more evidence of buying interest and definite bids. But if feedlot managers are determined to dig in with highest asking prices (i.e., $132 to $133 in the South; around $215 in the North), significant trade volume could easily be delayed until sometime Friday. Live and feeder futures seem likely to open with a mixed basis thanks to a combination of follow-through buying and long liquidation.
Look for cash hog bids to remain on the defensive Thursday with opening bids ranging from steady to $1 lower. The March 1 Hogs & Pigs will be released Thursday afternoon at 2 p.m. CDT. Generally speaking, private analysts are expecting to see official confirmation of fairly aggressive herd expansion: all hogs, up 4% to 5%; kept for breeding, up 1% to 2%; kept for market, up 4% to 5%. Lean futures seem ready to open on a mixed basis as bulls and bears, specs and commercials position ahead of the quarterly inventory.
| BULL SIDE | BEAR SIDE | ||
| 1) | Though not proving much definitely, cattle futures closed solidly higher at midday and remain within striking distance of last week's high water mark. | 1) | Beef cutouts plunged sharply lower at midweek with both the choice and select box scoring the worse one-day loss since Jan. 11. Over the last six business days, the choice box has lost a bit over $8. |
| 2) | Between last week's large kill, limited trade volume totals generated last week, and this week's only slightly slower chain speed, cattle buyers should be moving into the tail end of the procurement week still short bought and needing live inventory. | 2) | For the week ending March 25, U.S. hatcheries set 221 million broiler eggs in incubators, up 3% from a year ago. At the same time, chicks placed in the United States totaled 182 million chicks; up 2% from 2016. |
| 3) | The seasonal trend for April lean hog futures is neutral to positive from now into expiration the middle of next month. | 3) | For the week ending March 25, Iowa barrows and gilts averaged 282.4 pounds, .8 pounds heavier than the previous week and 1.1 lbs. lighter than 2016. Seasonally, weights could trend higher for another 30 days before turning lower from late spring to midsummer. |
| 4) | Hog carcass weights for last week were slightly above the prior week, but the next major, prolonged trend will involve multiple months of smaller carcasses. | 4) | The pork carcass value was hit hard again Wednesday, pressured by all major primals except the belly. |
OTHER MARKET SENSITIVE NEWS
CATTLE: (Nebraska Rural Radio Association) -- The National Cattlemen's Beef Association sent a coalition letter to President Donald Trump, urging him to raise the restoration of U.S. beef access to China when he meets with Chinese President Xi Jinping in April. Leaders from the U.S. Meat Export Federation and the North American Meat Institute also signed the letter.
American beef producers have been denied access to China -- a $2.6 billion import market — since 2003. Last fall China announced that it had lifted its ban on imports of U.S. beef, but attempts since then to negotiate the technical terms of access have been unsuccessful.
"We believe that access to the large and growing Chinese beef market is essential to the future health of the U.S. beef industry," read the letter, which was signed by NCBA's CEO, Kendal Frazier. "We understand that you have many important issues to discuss with President Xi, but we strongly encourage you to take this important opportunity to convey the urgent need for China to reopen its market to U.S. beef."
In 2016, American beef producers sold $6.3 billion worth of U.S. beef to customers around the world, with three of the industry's top foreign markets located in Asia.
HOGS: (Bloomberg News) -- After 11 days of arrests, bribery allegations and a full-blown international food-safety scare, the worst may finally be over for Brazil's embattled meat industry.
Having been shut out of some of its most important markets, Brazilian meat companies have regained access to most of them in recent days. Hong Kong, the largest destination for Brazilian beef, was the latest to ease restrictions.
"It brings relief for the industry," said Francisco Turra, a former minister of agriculture who now heads the Brazilian Animal Protein Association. The move also "reduces the possibility of supply glut in domestic market."
Federal police in Curitiba in Brazil's Parana state announced their so-called Carna Fraca ("Weak Flesh") investigation on March 17. They said 21 companies were involved in the bribing of federal meat inspectors, and provided lurid details of contaminated and adulterated meat. The intense domestic attention garnered by the revelations was soon followed by a massive media campaign mounted by Brazil's meat sector and a government push to reassure the public. The overall impact on domestic demand for beef and chicken is seen as limited so far.
Brazil's Agriculture Minister Blairo Maggi, who's been on a diplomatic offensive since the meat scandal broke, announced Tuesday that none of the 174 samples collected in 22 states since the scandal emerged provide evidence of meat that's unfit for human consumption.
That's good news for what is one of Brazil's most important industries, at a time when the country is still struggling to emerge from its worst recession. Brazil accounts for 20 percent of the world's red-meat exports and 40 percent of its chicken. Domestic demand is also vital for Brazilian meat companies, with low-cost beef a staple of lunch and dinner.
A total of 45 nations implemented some kind of restrictions on imports from Brazil at some point, from increased checks to an outright ban, according to Agriculture Ministry data compiled by Bloomberg. Trade figures released Monday showed a 19 percent plunge in weekly meat-product shipments.
But as of Tuesday, only 13 markets remain closed, among them Mexico and Qatar. Altogether those nations accounted for just about 5 percent of Brazil's meat exports last year, the government data show. Hong Kong said Tuesday that it had narrowed the scope of its import suspension to 21 plants under investigation. Brazil's Agriculture Ministry had said that Hong Kong reopened the market.
The European Union wants more information from Brazil about its investigations and their is strong pressure from European nations for stricter measures, Agriculture Minister Maggi said on Wednesday after a meeting with the European Commissioner for Health and Food Safety Vytenis Andriukaitis in Brasilia. There is a further meeting planned for Thursday.
Brazil's biggest meat companies, JBS SA and BRF SA, appear to have largely weathered the storm, despite being implicated in the police probe (both deny any wrongdoing). While its shares are down 12 percent since the crisis began, JBS, the world's biggest meat company, said Monday it may now restore production at its shuttered slaughterhouses.
BRF, Brazil's largest poultry supplier, closed 4.2 percent higher on Tuesday, its biggest gain since July, helping to make up for the most of the losses since March 17. The company is setting up a group to conduct an audit.
As concerns ease over the impact on Brazil's meat exports and its producers, attention has turned back to the police and their investigation. Investigators have tried to shift the focus toward the alleged corruption and away from the sanitary aspects amid growing criticism from the government, meat companies and even from within the police. While Weak Flesh is an important probe, the way it was announced was "jumbled" and exaggerated, Louis Boudens, the head of the national federal police association, said in a March 25 note posted on the group's website.
"That is when the operation stopped to be a service for society to become a threat to the economy and the country's institutional relations," Boudens said.
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