Light-to-moderate trade volume surfaced again in the northern tier of cattle-feeding country with dressed and live prices about $2 lower than last week (mostly $203/$126), though close to steady with Tuesday. While clean-up action is possible Thursday and Friday, we suspect the lion's share of cash business is done for the week. The balance of showlists are priced around $125 to $126 in the South and $204 plus in the North. Live and feeder futures should close moderately higher, initially supported by short-covering and interest in correcting oversold charts.
Hog buyers should resume procurement chores Thursday with bids steady to $1 lower. Late winter/early spring numbers have remained ample enough for packers to consistently lower the cost of live inventory. The pork product trade has also remained on the defensive, yet not aggressive enough to seriously jeopardize processing margins. Saturday's kill should total close to 110,000 head. Lean futures are set to open mixed in slow trade volume.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures just keep devolving from oversold to oversold to oversold. That technical status is underscored Thursday by the approaching release of the March 1 Cattle on Feed report to be released on Friday. Pre-report short-covering may make sense to specs and commercials who believe worst case supply scenarios have already been dialed into deferred futures. | 1) | Spot April live cattle dropped hard again on Wednesday, closing at $117.70, the lowest levels since early September of last year. April is roughly $10 below last week's cash cattle market. |
| 2) | Now that there seems to be real signs of breaking cash cattle prices, discounted futures may finally start to stabilize or even recover. | 2) |
For the week ending March 17, U.S. hatcheries set 228 million eggs in incubators; up 2% from a year ago. At the same time, chicks placed totaled 183 million chicks; up 1% from 2017.
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| 3) |
For the week ending March 17, Iowa barrows and gilts averaged 285 pounds, 1.2 lbs. less than the week before and 3.4 lbs. more than 2017.
| 3) | The pork carcass value closed moderately lower at midweek, pressured by sloppy demand for fresh cuts, ribs and picnics. |
| 4) | The Sioux City pork plant has started to put together a second shift (see article below), and demand for live hogs should increase accordingly sometime in the second quarter. | 4) | A boost in China's sow herd means pork from the U.S. is an "easy target" amid escalating trade tensions between the nations. Pork prices in China have dropped after hogs tumbled as much as 30% in the past three months. The timing might be opportune for a ban on pork exports. |
CATTLE: (NET) -- On March 6, the U.S., Canada and Mexico wrapped up the latest round of negotiations over NAFTA, the North American Free Trade Agreement. In the past, President Donald Trump has threatened to terminate the trade pact which he continues to call a bad deal for the U.S.
In the beef industry, NAFTA has become part of a border-blurring, multinational production system. Cattle raised in Nebraska don't stay in Nebraska, or even the United States.
"When you process one of these animals, it doesn't go to the same place. You have pieces that go everywhere," said Craig Uden as he walked down an alley in Darr Feedlot, a cattle feeding operation he co-owns near Cozad in central Nebraska. Hulking feed trucks cruised along concrete troughs, unloading piles of ground up hay and corn.
Uden says meat companies sell cuts of beef where they bring the best prices. Steaks and hamburger do well in the U.S. while other cuts sell better overseas.
"The chuck roll, that could be destined for Asia, and the tongues maybe to go Japan, and the oxtail maybe goes to Europe," Uden said.
NAFTA is part of how this works. Cattle from Mexico and Canada are imported to feedlots and packing plants in the U.S., tariff free. From there they become part of the beef supply parceled out on the export market. Uden says when consumers have more supply of the meat they prefer, it boosts demand for everyone.
"It's a rebalancing," he said. "If they want high quality in Canada, we've got plenty of high quality extra beef that we can ship to Canada. If Mexico takes some of our lower quality product. If it adds value to the bottom line of the beef produced in the United States, you bet."
If NAFTA unravels, though, he fears the U.S. would be saddled with more beef than Americans could eat, causing an oversupply that he says would be felt beyond the beef industry.
"It presses back down to the grain markets and the hay markets and the ethanol production," Uden said. "So it's never been a good idea when you're a state like Nebraska that relies on agriculture as your number one economic driver."
But there are some in the cattle business who believe NAFTA has done more harm than good. On a ranch near Neligh, Nebraska, David Wright and his family raise calves that eventually grow up to go to feedlots.
Wright would like the Trump administration to protect cattle producers from the free trade facilitated by NAFTA. Echoing the recent debates over steel and solar panels, he says cheap cattle from Canada and Mexico undercut his business.
"The cost of living or production in other countries is different than it is here," Wright said. "As long as we're one of the highest economies in the world, I don't see a lot of advantage in us trading for something that we already produce."
Last year, the U.S. exported nearly $2 billion of beef to Canada and Mexico, but also imported millions of cattle from the two countries. Wright says those animals compete for space at feedlots.
"Someone tell me how that's good for the producer here, who's paying the real estate taxes to keep the school open, doing business trying to keep the town open, as opposed to the guy in Canada who's really not," Wright said.
There are fewer farms raising cattle since NAFTA went into effect, according to figures from the Department of Agriculture. The number of cattle feedlots has dropped sharply. Wright says if NAFTA remains unchanged, that trend will continue.
Craig Uden blames concentration in the beef industry on the cost of labor and keeping up with environmental rules. And, he says, Canada recently started buying large numbers of cattle from the U.S.
The direction NAFTA turns under the Trump administration is not the only issue on the minds of cattle producers. Uden says he was glad tax cuts were passed, for instance, but he says NAFTA cuts straight to the bottom line of his business.
"If you don't have profit in your industry, the tax break doesn't do us a lot of good," Uden said. "We have to have both."
David Wright has been encouraged by economic growth and new jobs created so far under Trump. He says putting protections in NAFTA for American workers would reinforce that, and help them buy more steak dinners.
"If we're sending jobs over to other countries, then what are our citizens doing to earn a living?" Wright said. "Because if they don't have revenue to spend on the product that I'm trying to sell, then I guess i don't have a product to sell."
He says that's what's in the balance as the Trump administration continues talks on trade.
HOGS: Copyright 2018 (KTIV): -- Seaboard Triumph Foods has started hiring for a second shift at its Sioux City pork processing plant. The move could mean hundreds of new jobs.
Seaboard Truimph Chief Operating Officer Mark Porter made the announcement at the 24th annual Le Mars Agriculture Luncheon, on Tuesday. The event is meant to educate folks in agriculture-related fields about changes heading into the spring planting season.
Porter told the group that Seaboard Triumph Foods began its first shift for commercial operations, last fall, with as many as 1,100 employees. Porter said the company had begun hiring for their second shift, which will create another 900 jobs. "The next step for us is to continue hiring as we move from staffing our first shift to beginning to staff our second shift and to get those folks on board and get them trained and to continue to ramp up the total schedule for the plant." said Mark Porter, Seaboard Triumph Foods Chief Operating Officer.
Porter also announced they will soon be starting trade with China and Japan They are two major pork export markets.
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