Is the spring rally in fed cattle just warming up or ready to run out of gas? That will be a big question as buyers and sellers move into the last week of April. Needless to say, activity in the cash cattle trade will be typically limited to the collection of new showlsts. The new offering is expected to be steady to larger than last week. While ready steers and heifers will probably remain unpriced until later in the week, our guess is that bullish producers will be thinking around $135 plus in the South and $215 to $217 in the North. Live and feeder futures should open on a mixed basis with nearby supported by recent feedlot sales and deferred pressured by the larger-than- expected March placement announced on Friday.
Hog buyers are expected to resume procurement chore Monday with bids steady to $1 lower. Some believe we are very close to the start of a downturn in ready numbers. If true, a firming in carcass value should soon follow. Lean futures are likely to open with uneven price action thanks to an early-week combination of residual selling and short-covering.
| BULL SIDE | BEAR SIDE | ||
| 1) | Given the fact that cattle buyers didn't collect much inventory past Wednesday of last week, it's a good bet they will soon show themselves to be short bought again over the next few days. | 1) | The April 1 Cattle on Feed report proved to be somewhat bearish thanks to larger-than-expected March placement activity. Indeed, at 2.2 million head, last month's in-movement represented the largest since that data series began in 1996. |
| 2) |
During the week ending April 18, noncommercial traders in live cattle futures extended their buying spree, boosting their net-long commitment to 129,800 contracts, up 7,800 from a week earlier and historically large
| 2) | The cost of live cattle is accelerating at a faster rate than the beef carcass value. Gross packer margins will start out the week around $153, the smallest since late March. Further narrowing may necessitate the slowing of chain speed. |
| 3) | With June lean hog futures now trading below the low point of trading over the past five years, new buyers may have higher statistical odds for success than new sellers. | 3) | June lean hog futures are now 1,200 points below their contract high set back in February as the cash market has declined about $17. The trend in the market is decidedly negative as are most of the other market factors. |
| 4) | Live hog weights should be very close to a seasonal top as producers anticipate a price top in late April or early May. Once the top is in, weight should consistently drop from late spring through mid-August. | 4) | For the ninth consecutive time, the belly primal averaged lower last week. Since topping in mid-February, the belly primals have lost no less than $64.88. Until someone puts the belly powerhouse back together, the pork carcass value is going nowhere. |
CATTLE:(goldrushcam.com) -- Record rainfall this season has brought abundant grasses for grazing cattle, but some California ranchers say they remain cautious about increasing their herds, awaiting better market prices and another healthy water year.
"Sometimes you don't want to get in too big of a hurry to do these things," said Butte County rancher Myron Openshaw. "One year doesn't make a whole."
Many ranchers were forced to reduce their herds during the drought, as pastures went dry and hay prices soared.
Openshaw said even though the North State received ample rain and snow this year, with good feed to show for it, "we're still not out of the woods yet," noting that some southern portions of the state remain abnormally dry and ranchers there may be reluctant to add cattle.
But for now, he said there appears to be "more activity" in the market, which he described as "upbeat and looking stronger all the time -- better than six months ago."
"There's a shortage of numbers, so I think it's going to be positive for this spring," he added.
After attending the Western Video Market in Visalia last week, Joe Dolieslager, a livestock broker for Tulare County Stockyard, characterized the market as "substantially better" than last fall, now that "there's not as many cattle on the market."
Battered by the drought and a lack of grass the last several years, many California ranchers have empty pastures that now have feed on them and they are coming back to the market to purchase cattle, he said. That has put pressure on prices, making it "a seller's market for the last few months," he added.
"We are seeing people restock. They are rebuilding," Dolieslager said. "The future is bright due to the rebuilding because we now have rain and grass."
It will take some time for ranchers in the western United States to rebuild, he said, because their herds were depleted during the drought. As they rebuild, they will retain their heifer crop instead of selling it, and that means fewer cattle available, which will help keep the market more stable for the time being, he said.
But beyond building back what they had before the drought, Dolieslager said he doesn't think too many producers are looking to expand, even with the current improved water outlook and a stabilizing market.
"Expansion is when you have a terrific export market and everybody wants your product," he said. "Nobody is going to expand until we can get our exports balanced out and the imports to stop coming in at a discounted rate."
Through February, U.S. beef exports were up 13 percent in volume above year-ago levels, with strong growth in key Asian markets such as Japan, South Korea and Taiwan, according to the U.S. Meat Export Federation.
There is also new hope that China would allow re-entry of U.S. beef, which has been banned since 2003 after a case of bovine spongiform encephalopathy. This comes after a new deal was announced last week between President Trump and Chinese President Xi Jinping. A $2.6 billion export market for American beef, China agreed last fall to lift its ban, but technical barriers have blocked any real trade, according to the USMEF, National Cattlemen's Beef Association and the North American Meat Institute.
After reducing his herd more than 50 percent during the drought, rancher Dan DeWees said "we're building back up a little bit, but still very cautious about keeping replacements." He runs cattle in Calaveras County during the winter and on irrigated pasture in Merced County during the summer.
He said beef prices so far have not recovered as much as he had hoped, but with the generous rainfall this year, "we're going to have plenty of water for our irrigated pasture," adding that the cost of water also has dropped.
But too much rain has saturated the hill grounds, weakening the feed, he said, noting that his cattle looked "better and bigger" this time last year and he's expecting lighter weights on all his calves.
Sacramento County rancher Jim Vietheer said grasses were slow to come earlier in the season because fields were too wet, but that late-season rains will "make a big difference" for ranchers who rely only on native feed.
"I know the calves that are born in the fall are going to come off bigger because they'll be left on (winter pasture) longer and the feed is so much better," he said. "Certainly, we're going to leave a lot of residual feed for next fall to go into."
As a seed stock producer, Vietheer said he's set on his herd numbers and is not planning to expand. A big portion of his business is selling heifers to junior producers and selling bulls. Unlike the commercial beef market, which has seen major price dips in recent years, Vietheer said his market has improved, with more people buying heifers and quality bulls bringing "good money."
"People are starting to rebuild," he said. "Even at the sale barn, the bred heifers are bringing in a little more money. More buyers are going to be buying some more bulls. But I think it's going to take another year's cycle of good weather to really get people excited."
Although strength of the market will play a key role in ranchers' decisions to grow their herds, San Joaquin County rancher Bill Sanguinetti said another hurdle for them is availability of land needed to expand, noting the conversion of previous grazing ground to more-profitable ventures such as trees and vines.
"The problem is the loss of rangeland -- just finding the feed," he said.
HOGS: (Farm Journal, Inc) -- The Indiana House quickly passed a hog farm protection bill. HB 467 will protect hog farmers from lawsuits filed by their neighbors and shield operations from myriad legal claims and cap the amount of damages property owners could collect at approximately $7,000.
The bill also would have applied to pending lawsuits against Smithfield Foods' subsidiary Murphy-Brown.
However, that portion of the bill was debated and representative John Blust proposed a last-minute amendment to eliminate that section of the bill.
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