Monday Morning Livestock Market Update

GENERAL COMMENTS:

Market activity on the day before a major national holiday will be quite light and probablyinsignificant. Cattle feeders will start distributing new showlists but supply assessment may not be entirely completed until Wednesday. Bids and asking prices will remain poorly defined until Wednesday or Thursday. Live and feeder futures are likely to open mixed with nearbys better supported than deferreds. The CME is scheduled to close an hour earlier than normal in observation of the July Fourth celebration.

Hog buyers are expected to open Monday with bids steady to $1 higher. Monday's slaughter will be limited because of the holiday with full production not expected to surface until Wednesday. We expect Saturday's kill to be quite large as well-margined packers move to make up for lost time. Lean futures seem stated to open moderately higher thanks to follow-through buying and cash premiums.

	BULL SIDE		BEAR SIDE
1)	While the early-week holiday may mean that it takes extra time to sort things out, the combination of first-of-the-month paychecks and July Fourth meat clearance could leave the beef trade in much better shape.	1)	The wholesale beef trade capped a very bearish week on Friday with another round of sharply lower cutouts. Late-week box supplies were described as "moderate to heavy." Finally, beef demand tends to struggle through the month of July.
2)	While the recovery jury remains out, cattle futures seemed to stabilize last week by attracting decent buying/short covering near the lows of mid-June.	2)	Last week's cattle kill was estimated at 638,000 head, the largest initial weekly guess in July 2013. Also not that actual slaughter has been besting initial estimates by 10,000 or more since Memorial Day.
3)	Given the impressive way lean hog futures rallied in the immediate wake of the bearish report (i.e., essentially predicting record pork production through the balance of the year), many traders must feel confident regarding the ongoing strength of exports and the substantial hunger of new plants set to come on line this fall.	3)	Planting and stocks reports released Friday both seem to support ideas that livestock feeders will continue to enjoy relatively cheap corn for a long time to come. Such assurance should work to steel herd expansion plans and increase the prospects for heavier carcass weights.
4)	The pork carcass value closed moderately higher on Friday with all major primals reflecting better demand except the rib and picnic.	4)	For the week ending June 27, noncommercial traders were net sellers of lean hog futures, decreasing their net long an additional 800 contracts to 50,800. At the same time, commercials increased their net position by 900 contracts to 67,300.

OTHER MARKET SENSITIVE NEWS

CATTLE: (USMEF) -- On June 30 in Beijing, the U.S. Meat Export Federation (USMEF) participated in a media reception marking the return of U.S. beef to China. U.S. Agriculture Secretary Sonny Perdue and U.S. Ambassador to China Terry Branstad addressed attendees, along with National Cattlemen's Beef Association (NCBA) President Craig Uden, a cattle feeder and rancher from Elwood, Nebraska. Other U.S. guests included Greg Ibach, director of the Nebraska Department of Agriculture, and NCBA President-elect Kevin Kester, a rancher from Parkfield, California. The reception was funded through support from the Nebraska Beef Council.

Joel Haggard, USMEF senior vice president for the Asia Pacific, emceed the event. He thanked Secretary Perdue and his USDA team for negotiating the final agreement that restored access for U.S. beef, which had been absent from the Chinese market since the December 2003 BSE case. The market officially reopened June 12.

Perdue said it was a great source of pride to be on hand for the official reintroduction of U.S. beef into China, and expressed his commitment to providing consumers with a high-quality product.

"On behalf of President Trump and the people of America, we want to say thank you to our great customers here in China," Perdue said. "We want to respect your market and assure you that these products coming in are safe, wholesome and very delicious."

Perdue also paid tribute to U.S. cattle producers, who are excited to finally be able to supply the Chinese market.

"To those men and women who go out in the cold and birth those calves, we want to thank you for what you do to make this day possible. I am convinced that when our Chinese friends taste this tasty, wholesome, healthy and safe U.S. beef, they're going to want more of it. So you all better get some more cows," he said.

Branstad, who was confirmed as U.S. ambassador to China on May 22, said the return of U.S. beef to China is an important step forward in expanding U.S. agricultural exports.

"This is an exciting day -- we've been waiting nearly 14 years for this," Branstad said. "I want to express my excitement that one of my first official duties as ambassador from the United States to the People's Republic of China is to be here with my friend, Secretary of Agriculture Sonny Perdue, to welcome American beef back to China. I want to reiterate our commitment to expanding trade and increasing American exports, and we believe beef is a great beginning for this process."

Uden echoed these sentiments, noting the excellent potential China holds for U.S. beef exports.

"I'm honored to be here Monday to celebrate this important milestone in the relationship between the United States and China," Uden said. "This is a great day for U.S. beef producers, and we look forward to supplying U.S. beef to many Chinese consumers in the years to come."

Perdue and Uden were joined by importer Luan Richeng, vice president of COFCO Group, for a ceremonial carving of U.S. prime rib -- part of the first shipment of U.S. beef to arrive in China.

On July 1 in Shanghai, Perdue will help launch U.S. beef's return to China's commercial channels with a U.S. beef promotion at a City Super supermarket. He will be joined by USDA Foreign Agricultural Service representatives, Ibach (representing the state of Nebraska), USMEF staff and U.S. beef exporters. The group will distribute samples of U.S. steak cuts and chuck eye roll to City Super customers and speak to the unique attributes of U.S. beef. Funding support for this event was also provided by the Nebraska Beef Council.

"It has been a long road back for U.S. beef in China, and USMEF is extremely pleased to see such great enthusiasm for its return," Haggard said. "Buyer interest is very strong, and we are excited about the opportunity to work with U.S. exporters and future customers in China to build a solid foundation for U.S. beef in this dynamic market."

HOGS: (National Hog Farmer) -- The U.S. swine business is in a seismic shift as the magnitude of change over the next several years will define its future. "The next 5-10 years will be the biggest dynamic changes in the pork industry," says Mark Greenwood, AgStar Financial Services senior vice president.

Speaking at Iowa Swine Day, Greenwood confirms the industry financial strength has led to capital spending or reinvestment into production. "It is really a combo platter between production and packing plants," he notes.

Healthy packer margins over several years stimulate growth in pork processing capacity as five new plants are set to be operational by 2018. Meanwhile, processors will add shifts or expand current facilities to handle the additional market hogs so long as they are making money.

For the most part, U.S. hog farmers are also showing solid balance sheets despite the narrow margins last year and the rough start to 2017. Input costs remain affordable as feed prices are at a lower level. Also, many producers, learning from previous tough financial years, paid down operation and real estate debt. The financial strength of the industry is real. Greenwood says the majority of hog farmers can lose $20 per head for two straight years without touching their operating money except to pay taxes.

Financial strength gives hog farmers the sureness to expand. "When you have a strong balance sheet, you tell your lender what you are going to do," explains Greenwood.

However, he warns not to get overconfident. He encourages U.S. pork producers to strive for continuous improvement in productivity and financial strength. Despite the record amount of pork being produced, prices are better than anticipated on January 1, 2017. Still, Greenwood asks "As we increase pork supplies this fall, can we keep our value?"

One area all pig farmers and lenders can work on is negotiating more hogs on the open market. It needs to be a more coordinated effort. Currently, only 2.5% of hogs are negotiated. Greenwood recommends 5-10% is more comfortable level for the industry. He understands it takes more work for producers. However, Greenwood further explains producers selling on the open market have a better handle on the future markets. "Yes, it does take work, but the best of the best are doing it," stresses Greenwood.

(USMEF) -- On June 30 in Beijing, the U.S. Meat Export Federation (USMEF) participated in a media reception marking the return of U.S. beef to China. U.S. Agriculture Secretary Sonny Perdue and U.S. Ambassador to China Terry Branstad addressed attendees, along with National Cattlemen's Beef Association (NCBA) President Craig Uden, a cattle feeder and rancher from Elwood, Nebraska. Other U.S. guests included Greg Ibach, director of the Nebraska Department of Agriculture, and NCBA President-elect Kevin Kester, a rancher from Parkfield, California. The reception was funded through support from the Nebraska Beef Council.

Joel Haggard, USMEF senior vice president for the Asia Pacific, emceed the event. He thanked Secretary Perdue and his USDA team for negotiating the final agreement that restored access for U.S. beef, which had been absent from the Chinese market since the December 2003 BSE case. The market officially reopened June 12.

Perdue said it was a great source of pride to be on hand for the official reintroduction of U.S. beef into China, and expressed his commitment to providing consumers with a high-quality product.

"On behalf of President Trump and the people of America, we want to say thank you to our great customers here in China," Perdue said. "We want to respect your market and assure you that these products coming in are safe, wholesome and very delicious."

Perdue also paid tribute to U.S. cattle producers, who are excited to finally be able to supply the Chinese market.

"To those men and women who go out in the cold and birth those calves, we want to thank you for what you do to make this day possible. I am convinced that when our Chinese friends taste this tasty, wholesome, healthy and safe U.S. beef, they're going to want more of it. So you all better get some more cows," he said.

Branstad, who was confirmed as U.S. ambassador to China on May 22, said the return of U.S. beef to China is an important step forward in expanding U.S. agricultural exports.

"This is an exciting day -- we've been waiting nearly 14 years for this," Branstad said. "I want to express my excitement that one of my first official duties as ambassador from the United States to the People's Republic of China is to be here with my friend, Secretary of Agriculture Sonny Perdue, to welcome American beef back to China. I want to reiterate our commitment to expanding trade and increasing American exports, and we believe beef is a great beginning for this process."

Uden echoed these sentiments, noting the excellent potential China holds for U.S. beef exports.

"I'm honored to be here Monday to celebrate this important milestone in the relationship between the United States and China," Uden said. "This is a great day for U.S. beef producers, and we look forward to supplying U.S. beef to many Chinese consumers in the years to come."

Perdue and Uden were joined by importer Luan Richeng, vice president of COFCO Group, for a ceremonial carving of U.S. prime rib -- part of the first shipment of U.S. beef to arrive in China.

On July 1 in Shanghai, Perdue will help launch U.S. beef's return to China's commercial channels with a U.S. beef promotion at a City Super supermarket. He will be joined by USDA Foreign Agricultural Service representatives, Ibach (representing the state of Nebraska), USMEF staff and U.S. beef exporters. The group will distribute samples of U.S. steak cuts and chuck eye roll to City Super customers and speak to the unique attributes of U.S. beef. Funding support for this event was also provided by the Nebraska Beef Council.

"It has been a long road back for U.S. beef in China, and USMEF is extremely pleased to see such great enthusiasm for its return," Haggard said. "Buyer interest is very strong, and we are excited about the opportunity to work with U.S. exporters and future customers in China to build a solid foundation for U.S. beef in this dynamic market."

The U.S. pork industry is adventuring into unfamiliar territory. Robust export market and product innovation are driving demand. Pork bellies featured on menus from fast food to fine dining is good news for the swine business.

Consumers' preference and shopping habits are also evolving. Busy family schedules are embracing online shopping and pre-packaged meals. It will require an adjustment for the entire industry and a coordinated effort for marketing pork and telling the real pig farming story.

Only time will tell if hog prices sustain as production rises. Any disruption to the export market can be a game changer.

Be that as it may, looking ahead Greenwood foresees more integration. Pork processing must take a broader approach and capture a true value through brands. More alignment between producer and processor is anticipated, but the industry needs to find a balance with some pigs negotiated in open market space.

Overall, Greenwoods advises all hog farmers to think long term, utilize data to drive decisions and continue investing in new technology and employees' talent. He stresses, "The single biggest risk to this industry is people."

Successful pork producers share similar qualities. Greenwood suggests the following tactics for fruitful pig farming.

Embrace data management and the use the information to make sound decisions that add to your financial bottom line.

Benchmark against your peers to better understand where you stack up.

Be willing to change the current practices for overall improvement. Avoid the status quo.

On the whole, all pig farmers need to look at the whole picture. Don't become too isolated. Understanding the entire fundamentals of the global pork industry will keep hog farmers in the swine business long term.