Preliminary cattle buying bids could start to surface Wednesday, but it seems quite doubtful that significant trade volume will develop before Thursday or Friday. Our guess is that asking prices will be around $130 plus in the South and $210 to $212 plus in the North. Live and feeder futures are geared to open on a mixed basis thanks to follow-through buying on one hand and profit-taking on the other.
We're still waiting for pork fundamentals to shift to support a more positive price trend. While the product market may be showing a bit more life in that regard, hog numbers remain formidable. Look for opening bids Wednesday to range from steady to $1 lower. Lean futures are staged for a mixed opening thanks to follow-through selling and short-covering.
| BULL SIDE | BEAR SIDE | ||
| 1) | The beef carcass value once again surged higher on Tuesday, reflecting seasonally, strong product demand. Furthermore, box movement was once again described as "moderate to fairly good." | 1) | Given the way cattle futures struggled to close just mixed on Tuesday and substantially below early session highs, the board may be running out of gas. Sustained strength in futures remains doubtful amid prospects for renewed cash weakness and overbought momentum. |
| 2) |
The weekly review of the national comprehensive cutout once again confirmed an aggressive willingness last week to purchase large quantities of boxed beef for three weeks plus delivery. Seasonally, such a constructive appetite should last until Memorial Day and beyond.
| 2) | The historically large net-long position by noncommercial in live cattle futures has increased with total open interest moving to a new record, adding to longer-term market vulnerability when the appropriate "sell" trigger develops. |
| 3) | The pork cutout closed moderately higher Tuesday with all primals throwing wood on the fire except the belly and picnic. | 3) | Summer lean hog futures continue to sag into absolutely critical support above $70; a break into the high $60's could trigger a new wave of long liquidation and commercial selling. |
| 4) | This week's hog kill could be on par with last week's. But seasonally, next week could be the largest kill level, then trend down from there in choppy fashion, yet still remain larger than the prior season. | 4) | Large daily offerings of market hogs and aggressive chain speed continued to limit the voice of would-be supplies with predictions that numbers will "tighten any day now." |
CATTLE: (Williston Herald) -- When Sen. Steven Daines, R-Mont., traveled to China last week, he took with him a special gift from northeastern Montana. That gift was four steaks from the ranch of Fred Wacker of Miles City, Montana, packed inside a cooler, hand-carried by the senator.
These were ultimately presented to Chinese Premier Li Keqiang as part of efforts to seal a deal to open Chinese markets to American beef. China closed its markets to U.S. beef after a Washington dairy cow was identified in 2003 with bovine spongiform encephalopathy, more commonly referred to as mad cow disease, and they have been closed ever since.
China had announced in September that it would lift the 13-year ban on U.S. beef, but there are many technical issues to sort through, the country has said, and the ban is still in place.
Daines said he believes the meetings with China went positively and that the issues and the slow-walking can soon be resolved — though he did not have a timetable on when American beef could begin to ship overseas.
"They are convinced we have a safe, reliable supply of beef," he said. "There are some final, technical issues related to traceability that we are sorting out with the Chinese. I am confident we can get it resolved. One of the last remaining issues is getting the Secretary of Agriculture approved, and that will happen Monday."
China has been waiting on the appointment to release plans for lifting the ban, Daines said he was told. With that out of the way, he is confident things can begin to proceed more quickly.
Opening the market is about more than a short-term fix for a fall in commodity prices, Daines added. China has one of the largest markets for beef in the world, and with an emerging middle class, that is growing rapidly.
"They have 1.4 billion customers there," he said. "It's not just about Wednesday, but long-term. Kids in Montana growing up on farms and ranches — who are they going to be selling to? We are laying the groundwork for the future of Montana agriculture." Daines presented Keqiang with a photograph of Fred Wacker when he gave China's No. 2 official the cooler of beef. Keqiang then wanted to know if Wacker is a cowboy.
"So we are going to continue to work to finalize the agreement to get U.S. beef into China," Daines said. "It is part of a 100 days action plan President Xi Jinping and President Donald Trump agreed to in Mar-a-Lago."
The delegation also traveled to Japan. There they discussed the Trans Pacific Partnership, which Trump has vowed to back out of.
"Both presidential candidates Hillary Clinton and Donald Trump opposed TPP," Daines said. "There was not a strong appetite for it in the U.S. Congress either. So a message I sent to Japan, which was part of TPP — there were 11 countries — is that it is not going anywhere, so it is now time to focus on the a bilateral agreement."
Daines acknowledged some parts of TPP were good for Montana's agricultural producers. For one, tariffs on U.S. beef in Japan would have been lowered from 30 percent to 9.
Japan was disappointed TPP fell through, Daines said, and has moved forward with ratifying it without the United States among its number. "My message was one, that TPP is not going anywhere, so don't rest any hopes in it," Daines said. "Let's put our hopes in a bilateral agreement."
Daines said U.S. leaders will be talking to Japan's leadership next week about a bilateral trade agreement.
"We were setting the stage for those discussions," Daines said. "There's too much at stake between the U.S. and Japan to stop progress made in the multilateral trade agreements. The relationship between Japan and the U.S. is very strong. It's probably as strong as it has been in many years, according to conversations I've had with the American embassy there and leaders in Japan. They have been pleased to see a more decisive executive branch with President Trump. The firmer stance with North Korea has been received well."
HOGS: (National Hog Farmer) -- Pork exports are a big component in the value of hogs. Last year the United States exported $1.6 billion of pork and pork variety meats. That equaled $50.26 in exports for each hog slaughtered. In 2016 the United States exported 21% of our pork production and an even higher percentage of pork byproducts. Pork imports equaled 4.4% of 2016 production.
Exports are predicted to expand this year and imports are expected to decline. During the first two months of 2017 pork exports were up 18% with Mexico, South Korea, Japan and Colombia taking most of the increase. U.S. pork imports were down 14% in January and February due mostly to less pork coming south from Canada. The combination of more pork exports and fewer pork imports in 2017 is not adequate to match increased production. The U.S. per capita pork supply is expected to be 0.7 pounds more than in 2016.
USDA's Foreign Agricultural Service's semi-annual publication "Livestock and Poultry: World Markets and Trade" predicts 2017 world pork production will be a record 110.196 million metric tons. That is 0.8% more than last year and 0.1% more than the record set in 2014. Over the last five years, world pork production has increased by 3.854 million mt. U.S. pork production has grown the most, up 1.290 million mt. The European Union increased pork production by 924,000 mt and Russia's production was up 825,000 mt compared to five years ago. Vietnam's production increased by 443,000 mt.
During this five-year period Chinese pork production declined by 677,000 mt. Economic prosperity has driven up meat demand in China, and they have increasingly relied on imports to meet the growing demand. China is expected to account for 47.6% of world pork production this year. The United States will produce 10.7% of world pork according to USDA forecasts.
The amount of pork moving in international trade keeps increasing. USDA is forecasting 8.75 million mt of pork will move between countries in 2017. That is up 5.2% from the record set last year, and more than double the level of pork trade in 2003.
From 2005 to 2014, the United States was the world's largest pork exporter. Since then the European Union has been the export leader. Most of the increase in 2016 E.U. pork exports has gone to China. Combined, the European Union, United States, Canada and Brazil account for nearly 92% of world pork exports.
For more than 20 years Japan was the largest pork importing nation. A doubling in imports by China last year has made that country the new No. 1 pork importer. The United States ranks fifth in pork imports after China, Japan, Mexico and South Korea. Russia was a major pork importer until 2013 when their government decided to severely restrict imports from the United States and the European Union. China and Mexico are forecast to take two-thirds of the year-over-year increase in pork imports.
The United States is by far the largest importer of live hogs and Canada is the leading exporter. In 2016, 7.6 million hogs moved between countries (not counting shipments within the European Union). Of these hogs, 5.7 million were exported from Canada and 5.7 million were imported by the United States. In 2016, the United States also imported 63 live hogs from Europe. USDA expects U.S. hog imports to increase 1.7% this year over last.
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