The cash cattle trade is essentially done for the week, so feedlot country will be very quiet right before the weekend break. We might see a few clean-up deals here and there, but that's about it. Look for live and feeder futures to open moderately higher Friday, supported by short-covering/profit-taking and technical buying (i.e., tied to the correction of oversold charts).
The big news in the hog trade Friday concerns China's move to retaliate against higher tariffs imposed by the Trump Administration. All of a sudden, U.S. pork is less competitive in the Chinese market than just 24 hours ago. Lean futures imploded on Thursday in part, because traders anticipated some kind of reaction from China. Now that higher tariffs are a reality, we look for further board selling Friday. The cash trade is expected to open steady to $1 lower with large offerings and defensive product demand still lending hog buyers plenty of leverage. A Saturday kill of around 110,000 head is expected to push the weekly slaughter over 2.4 million once again.
| BULL SIDE | BEAR SIDE | ||
| 1) | For the week ending March 10, carcass weights continue to drop seasonally: all cattle averaged 822 pounds, 2 lbs. less than the prior week; steers averaged 881 lbs., 2 lbs. smaller than the week before; heifers averaged 823 lbs., 5 lbs. less than the previous week. | 1) | The sharp rally in cattle futures that surfaced on Thursday represented absolutely nothing in terms of technical significance. The trend remains lower following nothing more than a dead cat bounce. |
| 2) |
Frozen beef stocks as of the end of February fell from the previous month (off 8.3%) and a year earlier (off 8.4%).
| 2) |
For the first time this month, the cash cattle market shows signs of breaking down, finally tilting toward the deep discounts of spring and summer live futures.
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| 3) |
Despite the sobering performance of lean hog futures Thursday, the next seasonal swing in prices will definitely be higher. Furthermore, specs and commercials are likely to react sooner rather than later to oversold charts as the uncertainty tied to the March 1 Hogs & Pigs report rises higher and higher on the horizon.
| 3) | China plans to slap tariffs on $3 billion worth of imports of U.S. goods in the latest move to increase trade tensions between the two countries. China's Commerce Ministry said Friday that the trade sanctions would target U.S.-made products ranging from pork to steel pipes (see article below). |
| 4) | Higher Chinese tariffs on U.S. pork may not hurt total export business all that much if the situation opens up alternative markets (e.g., greater demand from Canada, if Canada assumes greater market share in China). | 4) | The monthly Cold Storage report released Thursday indicated that stocks of pork in commercial freezers rose to 614.9 million lbs. in February, up 6% from the previous month and up 8% from a year earlier. Stocks of frozen pork bellies rose 188% from the same time last year. |
CATTLE: (NCBA) -- On Wednesday, Colin Woodall, Senior Vice President of Government Affairs for the National Cattlemen's Beef Association (NCBA), released the following statement:
"The omnibus spending bill includes a number of positive developments for cattlemen and women, including language that would prevent 200,000 farms and ranches from being regulated like toxic waste sites, delay the implementation of electronic logging devices for livestock haulers for another six months, and provide a critical fix for wildfire funding that also provides expedited authority to implement much-needed vegetation management on federal lands. We are also glad to see refinements to the tax code that address the 199A issue. NCBA and our affiliates have been working closely with Congress to ensure the spending bill addresses issues of concern for U.S. ranchers and beef producers, and we are glad to see our policy priorities reflected in the legislation. We urge Congress to take the next step and vote 'Yes' when the bill comes up for a vote."
•CERCLA Reporting: A provision would relieve livestock producers of the emissions reporting requirements under CERCLA, protecting 200,000 farms and ranches around the country. NCBA has been urging affiliates and members to support stand-alone legislation in the House and Senate that would also exempt agricultural producers from CERCLA reporting requirements. Passage of the omnibus spending bill would achieve the same goal.
•Electronic Logging Devices: The bill includes a provision that would grant livestock haulers an exemption from ELDs until September 30, 2018. A further delay will provide the Federal Motor Carrier Safety Administration (FMCSA) more time to educate our livestock haulers on the ELDs while industry works on solutions to the current Hours of Service rules that do not currently work for those truckers driving livestock across this great nation.
HOGS:(CNBC) -- The world's second-largest economy has responded to President Donald Trump's controversial trade tariffs. China's commerce ministry proposed a list of 128 U.S. products as potential retaliation targets, according to a statement on its website posted Friday morning.
The U.S. goods, which had an import value of $3 billion in 2017, include wine, fresh fruit, dried fruit and nuts, steel pipes, modified ethanol, and ginseng, the ministry said. Those products could see a 15 percent duty, while a 25 percent tariff could be imposed on U.S. pork and recycled aluminum goods, according to the statement.
The statement did not go into greater detail. U.S. agricultural products, particularly soybeans, have been flagged as the biggest area of potential retaliation by Chinese President Xi Jinping's administration.
President Donald Trump and China's President Xi Jinping leave after an opera performance at the Forbidden City in Beijing, China, November 8, 2017.
Beijing will take measures against the 128 U.S. goods in two stages if it cannot reach an agreement with Washington, the ministry said, adding that it could take legal action under World Trade Organization rules.
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