Friday Morning Livestock Market Summary

GENERAL COMMENTS:

The cash cattle trade turned light to moderate on Thursday at significantly lower prices. The best market test developed in the South at $134, roughly $3.50-4 lower than last week, In fact, we suspect business in Kansas and Texas is done for the week. On the other hand, trade in the North seemed more limited (i.e., $133-135 live; $212-213 dressed), and we could see more action in this region today before buyers and sellers call it a week. Live and feeder futures seem set to open some higher, supported by spillover buying and the premium of feedlot sales.

Expect hog buyers to wrap up procurement chores this morning by bidding basically steady. Saturday's kill is now estimated to be around 82,000 head. Lean futures are likely to open on both sides of unchanged, lightly scrambled by bull spreading and long liquidation. 

	BULL SIDE		BEAR SIDE
1)	For the week ending May 6, cattle carcass weights collapsed: all cattle averaged 786 pounds, 12 pounds lighter than the prior week and 27 pounds below 2016; steers averaged 832 pounds, 15 pounds smaller than the week before and 30 pounds short of last year; heifers averaged 769 pounds, 16 pounds lighter than the previous week and 32 pounds smaller than a year earlier.	1)	Dressed cattle sales in the North broke hard again at midweek (i.e., $210 to $215, $6 to $11 lower than last week's weighted average basis Nebraska), reflecting a panicky psychology in feedlot country that may be building.
2)	Actual beef exports last week increased to 14,000 MT, up 9 percent from the previous week and 6 percent from the prior 4-week average. The primary destinations were Japan (4,700 MT), South Korea (3,200 MT), Mexico (1,900 MT), Hong Kong (1,600 MT), and Canada (900 MT).	2)	For the first time in weeks, beef cutouts closed sharply lower with relatively sluggish midweek box movement.
3)	The spread between spot June lean hogs and the cash index has narrowed significantly this month with the latter gaining much on the former. That could mean that the board has a shot at greater blue sky if the country trade continues to run higher over the next 30 days.	3)	The cash hog market has definitely turned generally flat this week, enough to wonder if slaughter numbers are staged to tighten as much as bulls imagine.
4)	Export pork business for March was confirmed at a record large level and weekly shipments are holding up very well so the combination of good domestic demand and record export shipments has meant market supplies remain quite manageable.	4)	This week's hog slaughter is on track to total 2.24 million head, down from last week by less than a full percent and higher than last year by almost six percent. While much has been made of the recent strength domestic and foreign demand, the fact is that if demand was just average, cash and product prices would be substantially lower,

 

OTHER MARKET SENSITIVE NEWS

CATTLE: (foodmarket.com) -- Beef features account for 30% of total protein ad volume this week. This is up from 27% the previous week, and beats out seafood at 26% for the top spot. Pork features account for 19% of protein ads, while chicken claims 16%.

At the end of May, all eyes are on Memorial Day. This unofficial kick-off to the summer grilling season marks the first big blowout event to get shoppers through the door and to the meat case. Though notoriously a burger and hot dog holiday, Memorial Day grillers will have plenty of competitively priced options at retail in 2017.

In fact, the recent uptick in wholesale beef prices could have an effect on feature volume and/or price levels at retail this holiday, making pork and chicken attractive alternatives. The Choice beef cutout advanced 20% from early April to mid-May, largely driven by middle meats. This could affect grocers ability to aggressively feature some beef items over Memorial Day, since orders may have been secured during the surge in the market.

Weekly steak feature prices at retail have been lower than the 3-year average 15 out of 20 weeks so far this year. The previous week saw steak prices down 15% on feature, and 8% the week before that. This week however, steak features average 7% higher than year ago levels.

Looking at ground beef, the weekly average feature price for 80% lean has, on average, been lower than a year ago every single week so far in 2017—that is, until the current week. Ground beef, for the first time this year, is above year ago feature levels by 10 cents per lb. While this may not be an indication of higher feature prices for Memorial Day, since grocers tend to more aggressively feature around this holiday to grab a share of the swell in consumer spending, it could be an indication that grocers are feeling the pinch of the recent surge in wholesale beef prices.

Looking ahead, it seems that for now, the beef market is at or close to a near term top, with the last few days seeing a weaker closing cutout. Consumer demand for beef has grown as prices have come down from all time highs, and the outlook for summer purchasing is still fairly positive—given that prices level out following the recent uptick.

HOGS: (Inside U.S. Trade) -- Robert Lighthizer, slated to be sworn in as U.S. Trade Representative on Monday afternoon, will have a busy first week in office, meeting with congressional committees of jurisdiction to discuss the administration's negotiating objectives for NAFTA and traveling to the two-day APEC trade ministers meeting in Vietnam, sources told Inside U.S. Trade.

Lighthizer is expected to discuss a second draft of the administration's notice to Congress on the renegotiation of the North American Free Trade Agreement in meetings with the House Ways & Means and Senate Finance committees, as well as with the House Advisory Group on Negotiations and the Senate Advisory Group on Negotiations, these sources said.

After Congress and the administration agree to a final version, the president will officially notify lawmakers of his intent to begin talks with Ottawa and Mexico City 90 days after the date of the notice. That notice, sources said, is expected to be sent the week of May 22 -- meaning negotiations with the two NAFTA partners will not begin until late August.

A first draft of the notice was sent to lawmakers in late March after acting U.S. Trade Representative Stephen Vaughn, Commerce Secretary Wilbur Ross and other administration officials met with the Ways & Means Committee and the House Advisory Group on Negotiations, or HAGON. Those meetings -- as well as meetings with Senate counterparts -- are required under Section 105(a)(1)(B) of the Trade Promotion Authority law.

The Senate meetings have not yet been held because senators have demanded that such consultations, in accordance with TPA, be conducted by a Senate-confirmed USTR. After both chambers passed a statutory waiver for Lighthizer to lawfully serve as USTR, the Senate confirmed him on May 1, with broad bipartisan support -- 128 days after his nomination was announced.