Moderate cash business surfaced in the North Thursday (i.e., $137 to $138 live, $217 to $221 dressed), probably enough to satisfy most trading needs for the week. The South did pretty much what it had to do on Thursday. We could see a few clean-up deals here and there, but for the most part, look for the country to slip into the weekend. Unsold cattle still on showlists are probably priced around $140 live and $225 plus dressed. Live and feeder futures should open on a mixed basis thanks to a combination of follow-through selling and late-week short-covering.
Look for the late-week cash hog trade to open with steady to $1 higher bids. Saturday's kill is expected to total right at 90,000 head. Spot May expires at high noon, leaving board traders to wonder if the premium of new-spot June is too big (or possibly not big enough). Lean futures are likely to open with uneven price action tied to light bull spreading and pre-weekend profit-taking.
| BULL SIDE | BEAR SIDE | ||
| 1) | Oblivious to lower cash sales and struggling cattle futures, beef salesmen continue to have little trouble pushing wholesale beef prices higher. Cutouts jumped another $2 plus on Thursday with box movement described as "moderate." | 1) | Net beef export sales last week fell to 10,800 metric tons, down 35% from the previous week and 41% from the prior four-week average. |
| 2) | For the week April 29, cattle carcass weights continued to trend lower: all cattle averaged 798 pounds, 2 lbs. below the prior week and 17 lbs. smaller than 2016; steers averaged 847 lbs., 2 lbs. lighter than the week before and 21 lbs. below last year; heifers averaged 785 lbs., 6 lbs. short of the previous week and 18 lbs. under the prior year. | 2) | Within the private sector, early estimates of April placement activity in cattle feeding country range from 8% to 12% above the level of 2016. |
| 3) |
The U.S. and China seem to be making real progress in expanding opportunities for trade (see article below), an encouraging omen that China will in fact soon accept U.S. beef.
| 3) | Summer lean hog futures closed 15 to 25 lower. The further erosion on those three months suggests the market does not yet believe additional significant upside potential for June, especially given the essential price flatness across successive three contracts. |
| 4) | The pork carcass value closed solidly higher on Thursday with all primals contributing except the loin and ham. | 4) | As the cost of live inventory increases faster than carcass value, pork processing margins are steadily tightening. This trend is expected to continue, making it tougher for finishing floor managers to remain strictly current. |
OTHER MARKET SENSITIVE NEWS
CATTLE: (Dow Jones) -- The U.S. and China have agreed on broad terms to grant U.S. natural gas exporters and certain other industries easier access to Chinese markets, according to people familiar with the matter.
The governments will release a joint diplomatic communiqu sometime this month aimed at rebalancing and increasing trade between the two countries, the people said. The document is the first product to come out of an agreement in April to increase U.S. exports to China, which has a large trade surplus with the U.S.
The communiqu will outline several areas in which Beijing and Washington hope to encourage U.S. trade to China, including supplies of liquefied natural gas, a key energy source used to generate power and heat homes, the people said. It will also focus on other areas of trade, including agriculture, but the exact details of the agreement are unclear.
U.S. companies have long sought better access to China, including its financial and agricultural markets. China currently has a ban on imports of U.S. beef.
President Donald Trump made the U.S. trade imbalance with China a hallmark of his campaign, threatening at times to place steep tariffs on Chinese goods and label China a currency manipulator. Mr. Trump has eased that rhetoric since taking office and said in April he offered President Xi Jinping more favorable trade terms for Beijing in exchange for help on confronting North Korea.
After Mr. Xi's visit to President Trump's Mar-a-Lago estate in April, the two leaders agreed to a strategic 100-day review of the U.S.-China trade balance.
The U.S. gas export industry is in its early stages, but could be a boon to the economy. Only one U.S. company, Cheniere Energy Inc., has shipped cargoes of liquefied gas from the lower 48 states for about a year. But dozens of companies are seeking permits for new, billion dollar facilities, setting the U.S. to become a net exporter of gas by 2018 for the first time since the 1950s.
Exporters hope to capitalize on vast gas reserves unlocked by hydraulic fracturing. The U.S. now has one of the world's five largest supplies of natural gas, with more than 300 trillion cubic feet of proven reserves, according to U.S. government data.
Gary Cohn, director of the White House's National Economic Council, has said U.S. gas exports are a priority for the administration, promising to streamline regulatory approval for new projects.
The exact provisions on gas exports in the communiqu are unclear, but will call for opening Chinese gas markets and joint investment in costly infrastructure projects in China needed to process and import the commodity, one person familiar with the matter said.
China is attempting to wean itself of coal burning as it pursues a five-year plan to reduce air pollution and is increasingly turning to gas, a cleaner power source. China imported more than 28 million tons of liquid gas in 2016, a 33% increase from the previous year, and is now the world's third largest importer of the fuel.
But, to date, China has received a handful of spot cargoes of U.S. gas, all from Cheniere, and hasn't signed any long-term commitments to offtake U.S. gas.
Chinese state-owned oil-and-gas companies have been reluctant to source a key energy supply from the U.S. due to concerns over political tensions between the two countries, the untested nature of the U.S. export market, and higher prices for U.S. gas, according to a person familiar with the matter.
A blessing from the Chinese government to import U.S. gas could open one of the world's largest markets to the nascent U.S. export industry.
HOGS: (VIETNAMNET Bridge) -- China consumes 144,000 tons of pork a day, according to FAO, but Vietnamese farmers cant sell their pork to the country because of demands made by Chinese traders. This comes at a time when there is a pork oversupply in Vietnam, with prices plummeting.
Dat Viet quoted a FAO's report as showing that China needs 53 million tons of pork a year. At the time when China began reform in 1979, pork accounted for 92.1 percent of the 'meat basket' of China. The figure has fallen in recent years, but still accounts for 65.1 percent of the total demand for meat.
According to USDA, in 2012-2016, China's pork consumption increased by 6.1 percent, while beef consumption increased by 11.5 percent. Regarding the selling price, FAO reported that pork is sold at $4.96 per kilo, or VND110,000 in cities.
China is the world's biggest pork importer. In 2010, the country imported 200,000 tons, while the figure increased by twofold in 2011 and reached a record high of 778,000 tons in 2015.
In 2016, it imported approximately 1 million tons, or 2 percent of the domestic pork output.
Vietnam's pork exports through official channels remain modest, while the exports across the border gates are much higher. Live pork is exported mostly through the Chi Ma and That Khe border gates in Lang Son province, and Bac Phong Sinh -- Mong Cai in Quang Ninh province.
China has high demand for pork, while Vietnam has big supply of pork. However, Vietnam now still suffers from a pork oversupply.
Dan Viet newspaper reported that in late April, two Chinese businessmen came to Binh Duong province and said they wanted to buy 2,000 pigs a day at the price of VND30,000 per kilo, which was nearly twice as much as the current price in the domestic market.
However, Vietnamese farmers said they could not satisfy the order. The problem was that the Chinese businessmen wanted the slaughtered and cut meat to be delivered in frozen containers.
The director of a livestock company in the south said after hearing about the demand from Chinese partners, he contacted slaughterhouses in Tay Ninh province for cooperation.
One of the slaughterhouses has the capacity of 2,000 pigs a day and has a HACCP certificate. However, it has only the slaughter line and nothing more. Meanwhile, Chinese clients require other utilities as well, from meat cutting, coiling, freezing to storage units.
The other slaughterhouse in Cu Chi district in HCMC was even worse. Though it had higher capacity of 4,000 pigs a day, all the work there was done manually.
Meanwhile, the Ministry of Agriculture and Rural Development (MARD) warns that the Chinese market is unstable. Sometimes it imports meat in large quantities, but it suddenly stops imports later.
No comments:
Post a Comment