Cattle market watchers are probably set to bet on a typically slow Tuesday with neither bids nor asking prices well defined. Monday's bullish reaction in live cattle futures should further stoke the recent fire of bullish momentum, encouraging feedlot managers to confidently price showlists another $2 to $3 higher on a live basis (e.g., $126 plus). Having said that, feedlot managers may not be in a hurry to suggest asking prices, choosing instead to monitor the board's bullish potential for several days. Our guess is that significant cash business may not surface until Thursday or Friday.
Look for the cash hog trade to kick off the morning with steady/firm bids. Depending on how quickly the winter storm rolls through the Corn Belt, it's possible that country movement and/or chain speed could once again be somewhat checked. Whatever, it will be interesting to see whether processors plan a more aggressive Saturday kill in order to make up for lost time. They really didn't do that last week, but there are signs that packer margins are back on the mend (i.e., the cost of live inventory has flattened somewhat and carcass value is appreciating). Lean futures seem likely to open on a mixed basis tied to follow-through selling and short-covering.
| BULL SIDE | BEAR SIDE | ||
| 1) | New showlists distributed by cattle feeders on Monday look mostly smaller with only Texas yards offering more ready steers and heifers. | 1) | With the jump in cattle costs and the weakness in cutout values, packers already are talking about cutting slaughter levels to stabilize or improve beef prices and try to put some pressure on the cattle market. |
| 2) | According to the weekly comprehensive beef cutout report, out-front box sales (i.e., with delivery of 22 days or more) last week surged to 1,250 loads. Such evidence supports ideas that solid beef demand will at least strengthen through the end of the first quarter. | 2) | The longer-term trend in the live cattle continuous chart continues to point downward. |
| 3) |
The pork carcass value closed solidly higher, significantly lifted by a $5.49 surge in the belly primal.
| 3) | Despite the fact that the expiration of February lean futures is only three weeks or so away, the spot's discount to the cash index is growing. Not exactly a vote of confidence in country vigor. |
| 4) | The U.S. dollar took a beating in 2017, falling nearly 10%, its worst annual performance since 2003. The currency is still reeling this year. Good news for U.S. meat export potential. | 4) | Tough winter weather forced hog slaughter to get off to another slow start (i.e., 405,000 herd). If slaughter numbers have become backed up this month (a debatable point), the situation just got a bit worse. |
CATTLE: (AHDB) -- Manufacturing beef from the UK can now be exported to the lucrative Canadian market after approval was given by inspectors.
Work involving the Agriculture & Horticulture Development Board (AHDB), Defra, the FSA, UK Export Certification Partnership (UKECP), Quality Meat Scotland and HCC Meat Promotion Wales, had been ongoing for a number of years before initial agreement was reached in 2015.
The agreement covered both primal cuts and manufacturing beef, but since then UK officials have been working to ensure manufacturing beef could be tested to the required microbiological standards required by the Canadian authorities.
This regime is now in place and has been robustly evaluated to UKAS standards, allowing shipments to begin immediately.
Dr Phil Hadley, AHDB International Market Development Director, said: "This is fantastic news and comes after a lot of hard work by all parties involved. "We already have market access for sheepmeat into Canada and beef primals have been going over since 2015. To have reached a stage where we have all the testing in place to satisfy inspectors with regards to ecoli is brilliant.
"This is a great opportunity for processors and producers in the UK and is another outlet for our product, which in turn helps underpin farmgate prices." In 2016, Canada imported 147,000 tonnes of fresh and frozen beef. Of this, 55 per cent came from the US. The UK sent 412 tonnes of primal cuts.
HOGS: (porkmagazine.com) -- Dermot Hayes, Distinguished Professor at Iowa State University shared his views on U.S. exports in the January-February issue of Farm Journal's PORK. He has followed, influenced and visited growing export markets during his 31 years at Iowa State University. In this final excerpt, he discusses expanding markets, and shares his most rewarding moments of working with the U.S. pork industry.
In terms of emerging markets, Hayes says "we're only tapping the potential in Central America. "That region will go through the same boom Mexico went through, and their production costs are higher than in Mexico [which means exports from the U.S. will be in demand]. They have the same developing country increase in pork consumption," Hayes says.
"Peru and Columbia are big markets now, but they're going to be much, much bigger. Columbia is in the process of switching from chicken to pork. Pork consumption went from 4 kg per person up to 10 kg!"
Hayes gives credit to the U.S. National Pork Board for creative thinking and implementation of a recent marketing effort.
"Instead of fighting over market share, they [NPB] developed a cooperative generic pork campaign that was highly effective," Hayes says. "Consumers just see that pork is healthy, there are no food safety issues, and that it's coming from modern units. Consumers don't know if that pork is from a production unit in Columbia or in the U.S., and it doesn't matter. It's an example of two industries working together to grow consumption and the model worked."
Vietnam is another country that has excellent potential for U.S. exports, Hayes says. "Vietnam is about 10 years behind China economically, but their policies are not that far behind," he adds. "They're just as pro-market as the Chinese." He notes there are about 100 million undernourished people in Vietnam eating a lot of rice and wheat right now, but they're ready to switch if they can get access to inexpensive protein.
"The economy is booming and they have pro-trade policies and that's creating economic opportunity," Hayes says. "The first thing you do when you get money is buy your kids some decent quality protein."
When asked what has been the most satisfying part of being involved in the pork industry, Hayes is proud of the fact that the U.S. has succeeded from being a net importer to a huge, huge exporter.
"You see it in parts of Iowa where livestock production has expanded, like Eagle Grove or Clarion or Webster City," he says. "Those towns had lost their industrial base and were in decline. You go to their main streets now and they have restaurants opening and businesses growing. Many of them would not have survived if it hadn't been for expansion in livestock production.
"I'm a free-market economist, so to have made predictions about what would happen if we let the markets work and then to see that happen has been gratifying," Hayes says. "One of the first research projects I did when I came to Iowa State was to evaluate whether it was cheaper to ship the meat or the feed grains, and the answer was resoundingly in favor of meat. Now that we have access, to see it happen exactly as any economist could have predicted has been gratifying."
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