Look for a typically quiet Tuesday in cattle country with both bids and asking prices poorly defined. Having said that, we expect that short-bought packers will have to shop earlier given last week's smaller trade volume totals and the need to fund relatedly large beef orders booked late month. Live and feeder futures opened moderately higher, supported by follow-through buying and further short-covering.
Look for hog buyers to stick with their defensive strategy of procurement. Need to say, the country's generous flow of ready hogs so far this spring makes the chore of covering short-term slaughter needs relatively easy. This week's total kill will be somewhat smaller (e.g., around 2.25 million head) but only because of the Easter holiday. Look for lean futures to open moderately higher thanks to spillover buying and further profit-taking.
| BULL SIDE | BEAR SIDE | ||
| 1) | Though nothing has been officially inked, the recent summit between Donald Trump and Xi Jinping may have paved the way for the resumption of U.S. beef exports to China later this summer (see article below). | 1) | Cattle feeders distributed new showlists on Monday that were generally larger than last week, especially in Texas. |
| 2) | Bullish psychology in cattle futures is becoming reenergized. For example, all feeder contracts managed to set new contract highs on Monday. | 2) |
Beef cutouts were unable to shake their defensive tone over the weekend with Monday's calculations closing no better than mixed.
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| 3) | The pork carcass caught another big jump on Monday, sparked by better demand for ribs, hams and bellies (especially the latter). | 3) | Despite Monday's rally, both the long- and short-term market trends remained negative with specs and commercials still braced to sell rallies. |
| 4) | Current lean hog summer futures could prove to be too low if domestic and export demand remains as strong in the spring as it did during the first quarter. | 4) |
Live hog weights are forecast slightly higher on a seasonal basis possibly for the next three weeks before trending lower. The spread between last year may collapse by May while trending lower, then may not reach seasonal lows of last year's levels.
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OTHER MARKET SENSITIVE NEWS
CATTLE: (Independent) -- President Donald Trump and Xi Jinping, his Chinese counterpart, decided that they needed rushed trade negotiations to produce results within 100 days
China will offer to give American businesses better access to its domestic markets to help avert a trade war with the US.
Citing Chinese and US officials involved in recent talks, the Financial Times reported that Beijing had offered the Trump administration better market access for financial sector investments and US beef exports.
According to the paper, President Donald Trump and Xi Jinping, his Chinese counterpart, decided at a meeting in Florida last week that they needed rushed trade negotiations to produce results within 100 days.
The FT said that the concessions on finance and beef are relatively easy for the Chinese government to make. The US is China's biggest trading partner and it currently has a $347bn annual trade surplus with the country which has proved a source of tension.
A bilateral investment treaty, or BIT, was discussed between China and the US under the Obama administration but Mr Trump has not said if he intends to pursue the treaty.
During his campaign Mr Trump accused China of "raping" the US through its trade policy, telling his supporters the country was responsible for "the greatest theft in the history of the world". He also claimed the country manipulated its currency to make its exports cheaper, damaging American businesses. However, since taking office Mr Trump appear to have moderated his rhetoric.
On Friday, Commerce Secretary Wilbur Ross said the leaders of the world's two largest economies have agreed to a new 100-day plan for trade talks that will boost US exports and reduce the US' trade deficit with China.
"Given the range of issues and the magnitude, that may be ambitious, but it's a very big sea change in the pace of discussion," Mr Ross told reporters after the meeting, according to Reuters.
"I think that's a very important symbolization of the growing rapport between the two countries."
HOGS: (Yibada) -- China's WH Group is preparing to build a second Smithfield-branded sausage plant in China in the next few years to satisfy the country's appetite for foreign pork products.
Smithfield is a U.S. brand of sausages, bacon and other packaged pork products that was brought to China by WH in 2013 for $4.7 billion.
Using U.S. technology, unfreezing blocks of meat with industrial-strength microwaves unfreeze blocks of meat is achieved by WH in 20 minutes, which takes eight to 16 hours at other Chinese pork factories.
WH Group Zhengzhou plant is designed to be 18 degrees colder than other meat plants. Its ceilings are also one-third higher to help control condensation and limit the spread of bacteria.
The plant can manufacture over 90,000 kilograms of sausages, bacon and ham every day.
To help design its Zhengzhou plant, Smithfield sent its engineers, plant managers and food-safety officials from the U.S. to stay in China for months at a time, said Ken Sullivan, Smithfield's chief executive.
The facility utilizes only meat imported from Smithfield Foods Inc. in the U.S.
In January, WH Group's Smithfield unit purchased California-based pork processor Clougherty Packing LLC and two affiliates for $145 million. It was China's largest acquisition of a U.S. company at that period.
Wan Long, chairman of WH, noted that they have also adopted Smithfield's approach to food safety.
China accounts for almost half the world's pork consumption, and imports are surging as China's demand outstrips its supply of pork. In the past decade, U.S. pork exported to China has increased nearly 10-fold to 675,224 metric tons.
Chinese companies, after relying on partnerships with U.S. companies for transfer of technology, are now increasingly buying foreign technology outright as China attempts to transform from being export-dependent into one that is powered by research and innovation.
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