Although trade volume totals are not that large, it's possible that the cash cattle market is done for the week. If more scattered are yet to shake out, it seems more likely to happen in parts of the North and at prices steady with those seen on Thursday (i.e., $208-210 dressed/$132-132.50 live). The May 1 on feed report is scheduled to be released this afternoon at 11:00 CDT. Average guesses look like this: on feed, 101 percent; placed in Aoril, 106.5 percent; marketed in April, 101 percent. Look for live and feeder futures to open on a mixed basis as traders position ahead of on feed news and the long weekend.
Expect the cash hog trade to open this morning with basically steady. While seasonal bulls generally feel like they're in the groove, the big question as we stare into the birth of early summer concern how much further weekly kills can be expected to tighten over the next 30-45 days. Lean futures seem ready to open with uneven prices thanks to a slow combination of light bull spreading and late week profit taking.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle traders seemed to relight the bullish torch on Thursday, stoking a rally in live and feeder futures to the tune of triple digits, pushing contracts back into the upper end of the lateral trade range of the last two weeks. | 1) | For the week ending May 13, steer and heifer carcasses averaged 836 and 772 pounds, both 2 pounds heavier than the prior week. |
| 2) | Given the fact that spot June live remains $8-9 below feedlot cash suggests that the board still has ample bearishness built it to accommodate potential country price pressure over the next month. | 2) | Despite yesterday's rally in live cattle futures, charts seemed locked in lateral trading ranges and going no place fast. For example, formidable resistance between 125 and 126 continues to restrain spot spot June in a straitjacket. |
| 3) | Lean hog futures moved solidly higher yesterday with June and August setting new contract highs. Summer issues still seem eager to anticipate more constructive fundamentals through the first half of the summer. | 3) | The weather outlook for Memorial Day weekend isn't looking ideal in many areas (i.e., cool temps and rainy forecasts), including the central part of the country and much of the Northeast. |
| 4) | The national lean hog base jumped more than a dollar on Thursday, generating significant trade volume in the process. Both price strength and volume could be signs of significantly tighter market hog supplies just around the next corner or two. | 4) | Actual pork exports last week declined to 21,900 MT, down 2 percent from the previous week and 3 percent from the prior 4-week average. |
CATTLE: (foodmarket.com) -- For Memorial Day weekend, beef features make up 27% of total protein ad volume, while seafood claims 23%. Chicken features account for 22% of the mix, while pork comes in with 18%.
In the beef complex, steaks have 48% of feature volume, while ground beef ads hold 32%. The steak complex averages $7.29 per lb., down 38 cents per lb. from a year ago. Porterhouse, bone-in strip, and top sirloin steaks are all featured below year ago levels, while bone-in rib and boneless shell steaks are priced higher. Ground beef prices are up slightly over a year ago this week, at $3.71 per lb. for 80% lean. Memorial Day is a notorious burger holiday at retail as an easy, cost-effective way to feed large gatherings from the grill. Looking at pork, bacon ad volume takes the lead with over 30% of features. Brand label bacon ads average $5.33 this week, up about 30 cents per lb. from a year ago.
Coming in second with 26% of ad volume is pork chops, while ribs claim 24%. Chops average $3.10 per lb. on feature, up 6% from a year ago. Back ribs run about $3.38 per lb., down nearly 12% from year ago levels. Spareribs average $2.17 per lb., down from $2.44 per lb. a year ago. Pork shoulder roasts average $1.95 per lb. and will be ideal for pulled pork applications this holiday weekend.
Boneless skinless chicken breast features make up the bulk of ads in the chicken complex. Currently averaging $3.86 per lb., chicken breasts will be solid alternatives to higher priced steaks this holiday. In addition, items in the dark meat complex ranging from $1.09 to $1.38 per lb. are sure to turn some heads.
HOGS: (Star Tribune) — An oversupply of turkey in the marketplace continues to be a drag on Hormel Foods Corp.'s financial results, the company reported Thursday.
The Austin-based company reported a weaker than expected second quarter, ending April 30, with a profit of $211 million. This marks a 2 percent drop over the same period in 2016.
Earnings per share was also down a penny from a year ago to 39 cents.
Jennie-O Turkey Store, the company's third-largest business unit, saw its operating profit plunge 29 percent in the second quarter as Hormel reacted to lcompetition and pricing pressure. Its turkey volume was down 6 percent and its sales down 8 percent.
"Despite ongoing challenges in the turkey industry, our balanced model allowed us to deliver earnings within 2 percent of last year's results," said Jim Snee, Hormel's president and chief executive, in a release. "Three segments delivered earnings growth, margin expansion, and adjusted volume and sales growth this quarter."
Refrigerated foods, the company's largest unit accounting for nearly half of its sales, posted relatively flat operating profit. This segment includes products like Hormel bacon and Natural Choice deli meats,
Grocery products, Hormel's second-largest unit with 20 percent of the overall business, was a bright spot this past quarter with an operating profit up 15 percent. Some of the company's newest and least conventional brands, like Justin's peanut butter and Wholly Guacamole, and its signature product, Spam, compose this segment.
International sales were up 19 percent, leading to an operating profit increase of 38 percent compared to 2016, while its specialty foods segment saw an operating profit drop of 16 percent.
The company maintained its 2017 full-year guidance range of $1.65 to $1.71 per share, but expects a the challenging commodity environment to push it toward the lower end.
"We expect the pressure on Jennie-O Turkey Store to continue for the remainder of the fiscal year given the oversupply in the turkey industry," Snee said in a release. "Even in this challenging commodity environment, our team is working hard to generate earnings growth by providing customers, consumers, and operators with on-trend, innovative value-added products."
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