Has the cattle market established a seasonal top? If so, are we now set to watch the country trade steadily slide lower in the weeks ahead? Are current futures excessively anticipating such a slide? All of these questions and more stand to rock the market one way or the other through the balance of May. It stands to be an interesting late spring (to say the least).
Early-week activity in the cash cattle market will be typically limited to the distribution of new showlists. We assume the new offering will be generally larger than last week. Live and feeder futures should open moderately higher, girded by residual buying and cash premiums.
Cash hog buyers seemed to be in a groove, facing the realities of tightening supplies in the country and improving pork demand. Expect opening bids to range from steady to $1 higher. Lean contracts are staged to open with a firm undertone, supported by tightening supplies on one hand and strengthening demand on the other.
| BULL SIDE | BEAR SIDE | ||
| 1) | Inspired in part by news of real progress in the reintroduction of U.S. beef exports to China, live and feeder futures successfully stabilized late last week (e.g., spot June closed well above 50 retracement of the spring rally). | 1) | The big window on beef buying for the Memorial Day weekend is starting to close as retailers and food managers now have most of their holiday featuring needs in hand. |
| 2) | Between last week's sharp drop in the cost of live inventory and another surging round of cutouts (i.e., from Friday to Friday, the choice and select box advanced by $8.82 and $5.94, respectively), beef processing margins have dramatically reversed. Decent Mother's Day clearance could work further to underpin wholesale prices at midmonth. | 2) | Weekly cattle slaughter is now scheduled to steadily increase over the next two months or so, necessitating healthy domestic and foreign demand in order to minimize price pressure on expanding tonnage. |
| 3) |
The pork carcass value jumped significantly higher on Friday, boosted by better demand for all primals except the picnic. The cutout has moved to its highest level seen since Feb. 21.
| 3) | For the week ending May 9, even though noncommercial traders were net buyers of lean hog futures, few new longs were put in place. Most of the increase in the net was due to short-covering while commercial merchants were active sellers of the market adding new short hedges against future hog sales. |
| 4) | Lean hog futures are attracting more buying interest as fundamentals come together to justify seasonal strength through late spring and early summer. Spot June closed on Friday at its highest level since March 16. | 4) | Pork processors gave up more than 14% of their margin last week, trending lower. Packers will be forced to give up more margin in the coming weeks. |
CATTLE: (USMEF) -- Thursday the U.S. Senate, on a vote of 82-14, confirmed Robert Lighthizer to head the Office of the U.S. Trade Representative (USTR). U.S. Meat Export Federation (USMEF) President and CEO Philip Seng issued the following statement:
USMEF congratulates Ambassador Lighthizer on his confirmation to serve as U.S. trade representative. Red meat exports continue to face import barriers in dozens of markets around the world. One of the keys to ensuring continued growth of beef, pork and lamb exports will be dismantling these barriers so our industry is able to compete on a level playing field. USMEF looks forward to continuing its strong partnership with USTR under Ambassador Lighthizer's leadership, as we work together to open these markets.
HOGS: (areadevelopment.com) -- Kraft Heinz Company opened its $250 million expanded facility, 165 miles northeast of Kansas City, in Kirksville, Missouri.
In June 2016, Kraft Heinz announced it was bringing more product lines for Oscar Mayer meats to its Kirksville location as part of a $250 million expansion project. Kraft Heinz is also adding 200 jobs and seven new production lines for Oscar Mayer meats.
The investment enabled a massive renovation of the existing facility, nearly tripling its square footage from 188,000 to over 450,000 and ushering in state-of-the-art food processing equipment.
The Kraft Heinz facility has been in Kirksville since 1985, where it currently processes ham products. As part of the Kirksville expansion, Kraft Heinz will begin producing bologna, cotto salami and round white turkey, along with current square-cut ham manufacturing.
Kirksville Regional Economic Development, Inc's (K-REDI) Executive Director, Carolyn Chrisman, stated, "This has been more than a year-long process of expansion, but well worth it. The capital investment, jobs, and additional taxes have added and will continue to give a boom to our community."
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