Friday Morning Livestock Market Summary

GENERAL COMMENTS:

While some clean-up activity in cattle feeding country is certainly possible Friday, our guess is that cash business is essentially done for the week.It's been a week with the highest live bids seen since May of 2016. Furthermore, many closeouts show per head profits of $350 or better. What's not to like? The April 1 Cattle on feed report will be released Friday afternoon at 2 p.m. CDT. Average guesses call for March placement to be 7% to 8% larger, and March marketing to be 9% to 10% greater. Total on feed is expected to come in virtually unchanged from 2016. Live and feeder futures seem staged for a mixed opening thanks to profit-taking and pre-report positioning.

The cash hog trade is expected to finish the week pretty much as it started (i.e., on the defensive and without much tone. This week's total slaughter is set to be slightly higher than last week's by nearly 2%. Seasonally, next week could be the largest harvest level, then trend down from there in choppy fashion while still remaining larger than the prior season by more than 4%. Lean futures should open mixed, linked to a combination of residual selling interest and late-week short-covering. 

	BULL SIDE		BEAR SIDE
1)	Cattle carcass weights continue to implode. For the week ending April 8, all cattle averaged 802 pounds, 8 lbs below the week before and 20 lbs smaller than 2016; steers averaged 852 lbs, 10 lbs lighter than the prior week and 28 lbs below the prior year; heifers averaged 792 lbs, 13 lbs less of the week before and 26 lbs less than last year.	1)	Despite the bullish fireworks lit in feedlot country at midweek, the board's reaction on Thursday was essentially limited to spot April live. It was very disappointing to see the June discount actually increased (June closed 100 points below its session high). Additionally, another large index roll looms in early May, which likely will continue to dampen buyer interest in June.
2)	Net beef export sales last week jumped to 19,700 metric tons, up 26% from the previous week and 30% from the prior four-week average. Increases were reported for South Korea (10,500 MT, including decreases of 200 MT), Japan (3,200 MT, including decreases of 2,200 MT), Hong Kong (1,800 MT, including decreases of 100 MT), Mexico (1,700 MT, including decreases of 100 MT), and Taiwan (1,100 MT, including decreases of 400 MT).	2)	Not only are analysts expecting a major increase in March placement, they are fully aware that placement in March of 2016 was historically large. The total confirmed Friday afternoon could be the largest seen for the month in nearly 15 years.
3)	Net pork export sales last week surged to 36,200 MT, up 48% from the previous week and 49% from the prior four-week average. Increases were reported for China (23,900 MT), Japan (2,900 MT), Mexico (2,500 MT), Hong Kong (1,900 MT), and South Korea (1,000 MT).	3)	Lean hog futures were hit hard again on Thursday with summer contracts socked by triple-digit losses. The board seems increasingly defensive relative to the reality of hog supplies and pork production.
4)	Lean hog futures now measure technically oversold with most RSI readings well under 30. Given the decent odds of tighter hog number and better pork demand developing in early May, the well of further spec selling interest should be drying up.	4)	For the week ending April 8, Iowa barrows and gilts averaged 283.8 lbs, .6 lbs heavier than the prior week on only .3 lbs lighter than 2016.

 
OTHER MARKET SENSITIVE NEWS

CATTLE: (foodmarket.com) -- Now that Easter is past, the retail complex finds itself in a sort of holding pattern as anticipation builds over the next few rather uneventful weeks for the summer kickoff.

Over the next month, retail will be treading water while a combination of factors fall into place that will hopefully boost buying activity. Increasingly favorable, warming weather will start to boost grilling demand, culminating of course Memorial Day weekend. Grocers are presently securing orders for holiday needs next month, planning aggressive ads in order to kick off the summer season with a bang.

In addition, we'll see a shift occur in store circular themes, reflecting the change in season and leveraging renewed consumer enthusiasm at the meat case. Roasts and cold weather items will fall off the front page as steaks, ribs, and other items conducive to grilling take center stage. Ground beef features transition from meatloaf and meatballs to burger and taco applications.

And speaking of tacos, the next, albeit smaller retail occasion is Cinco de Mayo. This festive holiday should result in some measureable store traffic as shoppers celebrate with pork, steak and chicken for tacos, burritos, fajitas, taquitos, enchiladas, and more. This will likely help facilitate the changeover to the more seasonal foods and promotions to come. After all, for many that first sip of Corona really makes it feel like summer has begun.

Grocers will forge ahead in the coming weeks building inventories for the peak demand period that follows Memorial Day. In the meantime, we have spring weather, baseball season, and Cinco de Mayo to fill the gaps in retail occasions and see us through to the next big holiday.

What we know going forward is that protein prices remain competitive, and consumers should see lower priced features, and more of them, at retail. Weekly retail beef and pork prices have largely been at three-year lows in 2017, while chicken is mostly on par with year ago levels. Lower prices combined with improving weather should help to support consumer purchases in the near term.

HOGS: (thepigsite.com) -- Pork retail value for the month of March was pegged at $3.78 per pound, 3.8 per cent higher than the previous month and 0.5 per cent higher than the previous year.

Bacon prices at retail have reset rather sharply and help explain what is now happening with belly prices at wholesale.

It was a scenario that we considered back in February when belly pries spiked (remember the belly shortage brouhaha).

What is unfortunate is that pork prices are above a year ago at a time when pork production is up +6 percent and pork exports are about flat with last year (this is based on our forecast for April exports not exports in Jan/Feb). The result is continued weakness in the pork cutout, most of it due to the sharp deflation in the wholesale value of bellies.

In the past we also have seen belly prices continue to decline through April but eventually the low price becomes attractive enough to get retailers to start featuring bacon again for the summer months.

Right now futures are pricing a fairly bearish outlook for pork prices in June, July and August, with implied cutout values at around $80/cwt (hogs at 72.9 for July). This would indicate a belly value around $125, a very small premium to current market.