Cattle market watchers should expect a typically quiet Tuesday with bids and asking pricing remaining poorly defined. We assume that feedlot managers will price steers and heifers several dollars higher than last week $e.g., $122 plus in the South, $192 plus in the North. And yet much will depend upon the ability of cut-outs and futures to stabilize. Cash business will no doubt be delayed until at least Wednesday or Thursday. Live and feeders futures are staged to open some higher, boosted by short covering and the premium status of recent feedlot sales.
The cash hog trade should open with generally steady bids. Monday's cash market was some lower, but negotiated sales volume seemed no better than moderate. Lean issues seem gear to open modestly higher as well, supported by short covering and bull spreading interest.
| BULL SIDE | BEAR SIDE | ||
| 1) | Out-front sales (i.e., with delivery of 22 days or more) of boxed beef soared last week to 1,342 loads, the largest round of such biz seen since mid April. Lower prices appear to be rekindling demand. | 1) | The July 1 on feed report scheduled for release Friday afternoon is expected to confirm another round of substantial placement activity. Most private analysts believe June placement probably exceeded 2016 by 5-10 percent. |
| 2) | Showlists appear to be no larger than last week when feedlots employed sufficient leverage to force packer bids to jump as much as $2. | 2) | For the week ended July 11, noncommercials continued liquidating long positions while adding to shorts, with their net long position in live cattle futures declining by 5200 to 114,800 contracts. |
| 3) | The discount in lean hog futures from August to October is wider than normal, reflecting trader's expectation of a larger than seasonal decline in hog prices between now and into late summer and fall. So if third quarter pork demand turns out to be stronger than expected AND actual production falls below these worse fears, the late summer board could suddenly explode. | 3) | The relative strength of wholesale pork prices is probably working to slow the summer pace of exports. The export trade though the second half of the year is expected to be considerably sower than the robust business seen through the first two quarters of the year. |
| 4) | Hog carcass weights trended lower last week, as expected coming away from a holiday week. Hog weights are expected to decrease seasonally into the first or second week of August. | 4) | Both record price level and the calendar strongly suggests we are very close a top in the belly trade, the major engine in pork carcass value for this time of year. |
CATTLE: (Feedstuffs) -- JBS S.A. announced July 14 that its indirect subsidiary JBS Food Canada Inc. (JBS Canada) has reached an agreement to sell its 75,000 head capacity beef cattle feedyard Lakeside Feeders and adjacent farmland in Brooks, Alberta, Canada, to MCF Holdings Ltd. (MCF), a subsidiary of livestock-base agricultural business Nilsson Bros. Inc., for $50 million CAD (approximately US$40 million).
Under terms of the agreement, MCF will continue to supply cattle to the JBS Food Canada beef processing facility in Brooks. MCF anticipates offering employment to current feed yard and farm employees upon closing.Completion of the transaction is subject to regulatory review and approval.
JBS Food Canada was formed in 2013 and JBS Five Rivers was tasked with managing the Lakeside Feeders yard in Brooks. However, JBS S.A., reeling from several scandals, announced last month that it would be selling Five Rivers Cattle Feeding as part of a divestment program to raise approximately 6 billion reals ($1.8 billion) to reduce debt and leverage. Five Rivers, the world's largest cattle feeding company, operates 12 feedyards in Colorado, Kansas, Oklahoma, Texas, Arizona, Idaho and Alberta and markets more than 1.5 million head of cattle per year.
Upon completion of the transaction, one beef packing plant in Brooks, Alberta, and a corporate headquarters in Calgary, Alberta will remain under JBS Food Canada Inc.
MCF Holdings owns a diverse group of agricultural businesses that operate across all the Western provinces, including auction markets, livestock insurance and finance, and feed yards. Nilsson Bros. also has ranches and livestock production facilities in B.C., Alberta, Saskatchewan and Manitoba.
Corporate offices are located in Edmonton, Alberta. HOGS: (wallacesfarmer.com) -- Now that we have reached the last half of 2017, it is time to look at 2018 prospects for the pork industry. On my [Dr. Christ Hurt] first evaluation for next year, it looks like profit margins could narrow. That may be driven by somewhat lower hog prices and higher costs of production related to increased corn costs.
First, let's take a look at the past few years. Farrow-to-finish hog producers made a lot of money back in 2014. Or rather, we should say producers who were not affected by the porcine epidemic diarrhea virus made a lot of money. If you remember, PEDV cut pork production by 8% to 10%, and hog prices soared. High prices provided record profits for those without major losses from the disease.
The industry returned to reality beginning in 2015, and has been traveling more of a breakeven path. Breakeven is a sustainable return since all costs of production are included for the average hog producer.
The years 2015 to 2018 show some consistencies. First, there is seasonality, with the best margins in the second and the third quarters. Warm weather months tend to see higher hog prices. The lowest margins come in the first and the fourth quarters, with cool weather months and lower hog prices. Secondly, quarterly margins have bounced up and down from breakeven, but generally have not been extremely high or low. Perhaps the fourth quarter of 2016 was an exception.
Lean hog prices this summer have been strong, with an expected third-quarter average in the low $70s. Prices for the fourth quarter are expected to drop to the lower $60s. In the first and second quarters next year, prices are expected to recover into the mid- to upper $60s. Prices for 2017 may average from $64 to $67, but fall to an average between $62 and $66 in 2018.
Right now it looks like 2018 corn costs will be about 40 cents per bushel higher than for the calendar year of 2017. Soybean meal prices are expected to be similar for the calendar years of 2017 and 2018. Prices may average about $315 per ton for high-protein meal at Decatur, Ill. Final yields for our current crops will still be important in determining crop size and prices.
The bottom line is that it is still early to make accurate estimates for 2018. We can expect at least 3% more pork in 2018 from a modest expansion of the sow herd, more pigs per litter and higher market weights. Feed costs may rise in 2018 due to higher corn prices.
Margins in 2018 are now estimated to result in about a $7-per-head loss, compared with around $4 per head of profit in 2017. This would mean margins will tighten. Producers will need to work on cost control, maintain high productivity and be cautious about further expansion.
No comments:
Post a Comment