The cash cattle market seems all played out for
the week thanks to the bullish explosion on Wednesday. We could see a
few clean-up deals here and there, but market watchers shouldn't hold
their breath. It seems safe to assume that bullish minded feedlot
managers are already planning to price showlists significantly higher
again next week. Live and feeder futures seem likely to open moderately
higher this morning, supported by short covering and the premium status
of feedlot cash.
The cash hog market has been building throughout
the week, and there's no reason to thinks buyers will go for the brakes
this morning. Look for country bids to start out with bids steady to $1
higher. The pork carcass value has been appreciating this week, but
quite slowly. Packers will soon require better wholesale action in order
to further stoke country spending. Lean futures are expected to open
mixed with nearby issues continuing to gain on deferred.
| BULL SIDE | BEAR SIDE | ||
| 1) | Given the way wholesale beef prices are trucking higher this week (e.g., cut-out closed sharply higher again on Thursday with box demand called "moderate to good"), seasonal demand and featuring plans seem to be firing right on schedule. | 1) | Despite aggressive progress in the beef carcass value through the week, packers margins have taken a nosedive. Cattle buyers may soon become very defensive in terms of country spending and chain speed. |
| 2) | Although spot processing margins may look discouraging on paper, beef packers have big orders to fill through the month of May, necessitating fairly aggressive chain speed going forward. | 2) | Feeder futures reversed from early high on Thursday and closed sharply lower. Such extreme volatility suggest how nervous trader are concerning the market's ability of defend recent highs. |
| 3) | Actual pork exports last week jumped to 25,100 MT (a marketing-year high), up 23 percent from the previous week and 22 percent from the prior 4-week average. | 3) | Net pork export sales last week slowed to 13,800 MT, down 40 percent from the previous week and 48 percent from the prior 4-week average. |
| 4) | The closing national lean hog report yesterday was encouraging both in terms of sharply higher bids and decent negotiated volume. Clearly, packers are finding it necessary to work harder in terms of procurement. | 4) | While summer lean futures are firming nicely, the burden of proof on the late spring/early summer cash market grows.It will be increasingly difficult for board premiums to build if the country trade stays lackluster. |
OTHER MARKET SENSITIVE NEWS
CATTLE: (Promedia Publishing Ltd.) — McDonald's
is changing kitchen procedures to cook and assemble its flagship Quarter
Pounders when they are ordered -- rather than in advance -- according
to reports in the US.
The fast food chain is said to be switching
exclusively to fresh beef for its Quarter Pounders and will tweak its
kitchen practices to deliver the world-famous burger as the order is
placed.
The efforts to deliver a fresher version of one
of its landmark products are being widely hailed as one of the more
ambitious moves the chain has made in its rejuvenation efforts, said
trade journal Restaurant Business.
The changes in sourcing and procedures won't be
fully in place until the middle of next year and even then it won't be
employed in all US stores, it noted.
It has not been revealed if and when the changeover would be extended to other markets.
"Over the last two years, we have accelerated
the pace of change around how we source and serve our food," McDonald's
US president Chris Kempczinski told the publication.
"Delivering fresh beef that's prepared when our customers order their
food is just another example of how we are raising the bar. We're just
getting started, and can't wait to show you what's next."
The report said the decision to drop frozen
Quarter Pounder patties for fresh meat came after a test that was
expanded to about 400 restaurants, a "small-scale" trial by McDonald's
usual standards.
HOGS: (National Pork Board) — Pork has been the
fastest-growing protein in foodservice since 2011, according to
Technomic, Inc.'s 2017 Volumetric Assessment of Pork in Foodservice.
Over the past six years, pork use has grown on a pound basis by more
than double chicken, which is the next fastest growing protein. Pork use increased by 1.145 billion pounds, while chicken use grew by 515 million pounds.
On a percentage basis, pork grew three times the
rate of turkey, which is the next fastest growing protein, at 3.6
percent versus 1.2 percent. During this same time period, pork
represents 61 percent of all protein growth in the foodservice industry
(1.145 billion pounds of a total growth of 1.867 billion pounds).
The pork category continues to increase in
foodservice, with a growth rate of 0.8 percent from 2015 to 2017.
Totaling 5.9 billion pounds, the growth reflects a volume increase of
114 million pounds over the 2013 to 2015 period.
Processed pork continues to be a strong
performer in foodservice, making up the majority of total volume. The
five largest categories driving pork category growth are bacon,
processed ham, breakfast sausage, ribs and pepperoni. Collectively, the
categories represent 66 percent of the total volume. The love of bacon
shows no signs of slowing and represents the largest share of volume, at
20 percent, or 1.2 billion pounds, growing 4 percent since 2015.
"We are pleased to see continued growth of pork
use in foodservice," said National Pork Board President Jan Archer,
Goldsboro, North Carolina. "The volumetric study shows that pork
continues to be a strong performer in the foodservice industry,
underscoring pork's popularity specifically in value-added pork products
such as ham, bacon and sausage."
As consumers demand more interesting flavor
profiles and global cuisine, there has been an increase in authentic
fresh pork applications. Since 2015, carnitas showed a compound annual
growth rate of 5 percent and porchetta had a 15 percent increase.
Notable growth in fresh pork also was seen in belly, chops and ground
pork.
"Fresh pork presents a huge opportunity in
foodservice by offering a range of cuts and applications to deliver a
variety of authentic and innovative dishes. Also, fresh pork's value has
never been better," Archer said. "Fresh pork allows the foodservice
industry to deliver what consumers want while turning strong profits.
"Over the past two years, limited-service and
full-service restaurants represented the largest user groups of pork in
foodservice, accounting for 67 percent of all pork volume. The growth in
limited-service restaurants has been mainly driven by the all-day
breakfast additions by major chains.
In categories where both uncooked and pre-cooked
forms exist, pre-cooked pork has grown at a faster rate over the past
two years, respectively growing at 4.7 percent and 0.9 percent. This
growth can be attributed to packer/processor innovation and an ability
to deliver quality pre-cooked products that address the labor challenges
many operators face.
On an overall basis, the usage of pork is evenly
split among the three main dayparts, with snacking representing a small
share of volume, which is consistent with the 2013 and 2015 Volumetric
Study findings.
However, lunch has taken one share point away
from dinner overall since 2015. This can be attributed to the extension
of breakfast menu items to other dayparts, with lunch being the key
beneficiary of all-day breakfast. In addition, slowing traffic in the
dinner daypart, especially among Full Service Restaurants, is a factor.
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