The cash cattle market is likely to remain in neutral Tuesday with both bids and asking prices pretty much unspoken. Our guess is that buying interest won't get too excited until Wednesday or Thursday at the earliest. While we can understand how sellers will remain bullish given the amazing strength of the stop trade in recent weeks, we can also imagine a certain country nervousness in the face of the record June discount. Live and feeder futures should open with decent strength, boosted by appreciating carcass value and the towering status of the feedlot cash trade.
Hog buyers are expected to resume procurement chores Tuesday with bids ranging from steady to $1 higher. Early ideas about the week's kill total is around 2.28 million head, about a half percent below last week but nearly 3% over a year ago. Weather and maintenance issues may play a better role in explaining this week's slow chain and any meaningful seasonal shift. Lean futures seem likely to open moderately higher, supported by short-covering and ideas of firming seasonal fundamentals ahead.
| BULL SIDE | BEAR SIDE | ||
| 1) | Beef cutouts exploded higher on Monday with box movement described as "moderate to good." At $226.47, the choice product closed at its highest level since mid-June 2016. | 1) | Noncommercials traders continue adding to their large net-long position in live cattle futures. While such a build-up remains near-term supportive, it elevates longer-term market vulnerability when the cash market falters. Furthermore, a historically large index roll commences at the end of the week. |
| 2) |
For the eighth consecutive week, retailers and food managers have booked more than a 1,000 loads of boxed beef with delivery specs of 22 days or more.
| 2) | While the other shoe hasn't dropped quite yet, fed cattle supplies are expected to trend higher into the summer with weekly average steer and heifer slaughter expected reach into the 520,000 to 530,000 range during June through August, up from around 480,000 in April, about 7% to 8% larger than last year. |
| 3) | The pork carcass value rolled higher Monday, supported by all primals except the loin. Better demand for belly cuts was particularly helpful. | 3) | The basis is rather weak currently and while the futures market is reflecting a positive board structure, the cash hog market will need to prove that the premium reflected in the market is warranted. |
| 4) | The Trump Administration has cooled its anti-NAFTA rhetoric, pledging to renegotiate the critical trade agreement with Canada and Mexico rather than unilaterally pull out of the deal altogether.. | 4) | On the other hand, President Trump gave U.S. meat exporters something new to worry about when he recently suggested that the free trade agreement between the U.S. and South Korea may be terminated. |
CATTLE:(GlobalMeatNews) -- The U.S. government plans to cut taxes for big and small businesses in the largest reform since the Reagan era -- and the meat industry is pleased that the death tax will be repealed.
Donald Trump dropped a bombshell Monday -- not an actual one, but figuratively speaking, it was explosive. Top officials in the Trump administration published proposals for a comprehensive tax reform, dubbed the 'biggest tax cut in U.S. history'.
Among a huge host of changes designed to simplify the tax system, are plans to repeal the estate tax, known to opponents as the death tax.
"Permanent repeal of the death tax has been a priority for cattlemen and women for decades," said Danielle Beck, National Cattlemen's Beef Association (NCBA) director of government affairs.
"Since the death tax was implemented nearly a century ago, it has not only failed to meet the misguided goals set by Congress, but has threatened the existence of many multi-generational farms and ranches."
The estate tax is a tax on the right of someone to transfer property to another after his or her death. The agriculture industry has argued for years that the taxation unfairly burdens farmers by forcing them to sell assets to keep the business going.
"The death tax is clearly on the administration's radar and for that we are appreciative," said Beck. "NCBA will assist the administration however we can as they work to put together a comprehensive tax reform package."
HOGS: (agriculture.com) -- The hog market is right on track with where it should be.
Cash hogs bottomed back on the 20th and are now 3.62 over that point. Cash pork is still not seen as a major value yet by end users and is only marginally higher than its low posted on Thursday. Supplies are set to decline into the summer.
On the bear side, let's note that these supplies are still historically large.
Weekly kills came to 2.290 million head this week. That was under the 2.300 morning estimate we had. This is a rebound after two weeks of holiday-related slowdowns. This week's kill was 7.2% over last year.
Expect supply to fall moderately into summer. Pork production was estimated at 487.4 million pounds according to USDA's Estimated Slaughter report. That was 6.9% over last year.
We also have Prime Pork out of Windom, Minnesota, finally starting up with some trial processing this week. Expect those numbers to pick up in the coming weeks and a little more of a cash hog pull to be seen.
As noted numerous times before, we don't call the packing plant expansion to be a bullish thing from a producer perspective. We have built up our hog supply to a higher level mainly from cheap feed. With these extra hogs around, and only a moderately higher bump in demand, we are locked into the need for cheap feed (that is currently unprofitable to produce).
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