Light to moderate cattle trade develop in the North at midweek, and volume may have been large enough to essentially complete procurement needs. We'll have a better handle on what may remain on showlists when summaries are released later Thursday morning. Asking prices on steers and heifer still unsold are probably priced around $128 in the South and $202 in the North. Live and feeders should open moderately lower, checked by residual selling interest and further long liquidation.
The cash hog market seems to be re-catching some of that early-month magic. The national base jumped nearly 75 cents higher on Wednesday, and we expect to see further strength Thursday morning. The spread between the cash index and carcass value continues to imply decent packer margins. Look for lean futures to open on a mixed basis with spot February gaining on deferreds.
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| 1) | Northern feedlots were successful in selling dressed cattle at fully steady money (i.e., $200) at midweek despite the slumping board. Selling cattle as much as $2 over nearby futures speaks well of currentness and country leverage. | 1) |
The inability of live futures to move above the November highs has worked to reemphasize overhead chart resistance. Additionally, the structure of the futures market points to expectations of little in the way of further advances on cattle prices heading into late winter and spring, with potential for significant downward moves.
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| 2) |
The next beef "holiday" on the books is Valentine's Day (i.e., February 14), with active interest coming from retail and foodservice stores, alike.
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For the week ending Jan. 27, U.S. hatcheries set 225 million eggs in incubators, up 2% from a year ago. At the same time, chicks placed in the United States totaled 181 million chicks, up 1% from 2017.
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| 3) | Wednesday's combination of higher hog bids and larger negotiated sales gave credence to talk that several packers remain short bought, needing more inventory for late-week slaughter plans. | 3) |
Though slumping over the last several weeks, summer lean hog futures continue to hold well above 100-day moving averages, keeping the long-term uptrend intact.
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| 4) |
The pork cutout is expected to gradually firm over the next several weeks. At the very least it seems firmly supported from moving lower for the short term unless the export trade suddenly cools off from its recent pace.
| 4) |
For the week ending Jan. 27, Iowa barrels and gilts averaged 285.5 pounds, .6 lbs. heavier than the week before and 3.4 lbs. bigger than 2017.
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CATTLE: (CARGILL) -- Cargill Protein is investing $4.2 million at its Columbia, S.C. plant to expand grinding capabilities for beef customers across the eastern U.S. The investment includes precision grinding equipment that assures consistent, high-quality ground beef products for customers. Once installed in May 2018, the equipment expands the plant's production by 15 percent, allowing the plant to produce enough ground beef to meet customer growth.
"Cargill purchased the Columbia facility in 2016 and Thursday we have more than 200 Columbia employees delivering high-quality beef to our U.S. customers. This investment shows our commitment to the beef industry in the Eastern U.S. and allows us to deliver on the increasing needs of beef customers in the region, through the installation of higher performance production technologies," said John Keating, president, business operations and supply chain, Cargill Protein.
The investment is one more way Cargill is growing to meet the needs of its North American meat customers. Cargill Protein has invested approximately $850 million over the past two years across the U.S. and Canada, including a $111 million cooked meats plant conversion in Nebraska, $27 million egg processing facility expansion in Michigan, $50 million distribution center at its Kansas beef plant, $146 million expansion of a cooked meats facility in Tennessee, and acquisitions of meat processing facilities in Texas, South Carolina and
HOGS: (RABOBANK) -- In Q1 2018, global pork supply is forecast to increase further, mainly driven by the US, Canada, and Brazil. China's pork imports have been slowing down lately, but are expected to pick up again over the rest of the year, according to RaboResearch's latest global Pork Quarterly.
"The most significant story in global pork markets has been the slowing imports into China, which creates a risk of oversupplied global markets," according to Chenjun Pan, RaboResearch Senior Analyst -- Animal Protein. "However, we do expect China's imports to pick up somewhat over the rest of the year, leading the EU, the US, and Canada to continue their battle for China's pork market in 2018."
China's pork prices have been steady, due to a tight supply. This drop in availability follows capacity reductions triggered by stricter environmental policy enforcement in 2017. Despite the expected supply volatility in Q1, we maintain our forecast that production will continue to increase in 2018. While local prices will be volatile, pork imports are expected to rebound after a sharp decline in 2017.
"Expanding production in most regions means exports become more important in 2018. We expect competition in key importing markets, particularly in China, to intensify." says Justin Sherrard, RaboResearch Global Strategist -- Animal Protein. The feature article of this quarterly looks at several uncertainties that will challenge pork trade in 2018, most importantly the intensifying competition in key importing markets, particularly in China.
After a relatively short period of strong profitability, EU pig producers have reinvested for growth. As a result, we expect increased production to reach the market beginning in 2018. The additional supply is expected to pressure pig prices and cutout values. This price decline could stimulate consumption and exports. The latter is concentrated on Asian markets, in which China plays a key role.
Faster growth in US pork production, of 4.3%, will necessitate the free flow of exports and healthy domestic demand. Strong exports to start the year have intensified the competition for market hogs, to the detriment of packer returns. This increase has already provided an opportunity for producers to secure very good margins for much of 2018.
Local Brazilian pork demand is expected to increase, along with the improving economic conditions. The expected stabilisation of feed costs will continue to support good profitability for hog producers for much of 2018. Pork exports to China in 2018 are expected to rebound strongly. Russia's ban on Brazilian pork remains a wild card for 2018.
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