Cattle trade volume turned moderate plus in several feeding areas yesterday as nervous feedlot managers moved to accept sharply lower packer bids ($121 in the South; $190 in the North). Assuming that both buyers and sellers would like to complete business by today, we look for another round of light to moderate trade by the end of the day with prices probably no better than those seen on Wednesday. Look for live and feeder futures to open mixed thanks to a combination of follow-through buying and long liquidation.
Hog buyers shoukd resume procurement chores this morning with bids steady to $1 lower. Processors are moving toward slower chain speed surrounding the Easter holiday with Saturday and Monday slaughter estimated at 108,000 and 20,000 respectively. The March 1 H&P report is set to be unveiled this afternoon (i.e., 2:00 CST) with totals expected to confirm further herd expansion: all hogs, up 3-3.5 percent; kept for breeding, up 1-2 percent; kept for market, up 3-3.5 percent. Lean futures will probably open on a mixed basis as traders and producers position before the release of the new quarterly inventory.
| BULL SIDE | BEAR SIDE | ||
| 1) | If live cattle futures can find a way to keep extending Wednesday's rally (e.g.., spot April did seem to find support under 115), a weakening basis trend could help fortify country leverage and asking price resolve. | 1) | The cash cattle trade broke hard on Wednesday with live sales in the South marked as much as $4 lower than last week. Northern dressed business crashed as much as $11 below the prior week. |
| 2) | The expanded trade agreement with South Korea just announced essentially removed previous threats to the U.S. meat trade in that part of the world, ensuring that strong South Korean demand for beef and pork will continue to support our export business (see article below). | 2) | For the week ending March 24, U.S. hatcheries set 227 million eggs in incubators, up 2 percent from a year ago. At the same time, broiler growers placed 183 million chicks, up 1 percent from 2017. |
| 3) | The pork carcass value closed moderately higher at midweek, supported by new life in the belly primal, perhaps launching a seasonal strength in bacon demand that will last through midsummer. | 3) | The Trump adminstration continues to threaten NAFTA success with a possible resumption of steel and aluminum tariffs, recently saying Mexico and Canada will face steel and aluminum tariffs if the North American Free Trade Agreement talks don't progress to U.S. likings by May 1. How does such bully talk grease the wheels of renegotiation? |
| 4) | Summer lean hog contracts spiked sharply higher from early session lows yesterday. The board may be getting ready to anticipate the seasonal tigtening of market hog supplies through the second quarter and into the early third. | 4) | For the week ending March 24, Iowa barrows and gilts averaged 286.3 pounds, 1.3 pounds heavier than the prior week and 3.9 pounds greater than 2017. |
CATTLE: (USMEF) -- Amendments and modifications to the Korea-U.S. Free Trade Agreement (KORUS) were announced Wednesday through a U.S.-Korea joint statement and a KORUS fact sheet issued by the Office of the U.S. Trade Representative (USTR).
U.S. Meat Export Federation (USMEF) President and CEO Dan Halstrom issued the following statement:
The announcement of a successfully revised KORUS trade agreement comes as excellent news for the U.S. beef and pork industries because it helps ensure that we will continue to be able serve the growing South Korean market and a critically important customer base. The United States is the largest supplier of beef to Korea and trails only the European Union as the second-largest pork supplier. U.S. red meat exports to Korea set a record last year of $1.7 billion, up 19 percent year-over-year and up 69 percent from 2012.
Under KORUS, most U.S. pork products now enter Korea duty free. The duty on U.S. beef has been reduced from 40 percent to 21.3 percent and will continue to decline each year until it is eliminated by 2026. It is especially important that these tariff rate reductions are maintained, because the other major pork and beef suppliers to Korea also have free trade agreements with similar market access terms.
HOGS: (agrimoney.com) -- The March 1 all hogs and pigs number in the US Department of Agriculture's quarterly report scheduled for release Thursday afternoon is expected to show an increase of 3.1% from a year ago, according to the average of analysts' estimates in the Urner Barry survey.
The average of the estimates for all hogs and pigs would project 72.893m head, compared with 70.701m a year ago. The all hogs and pigs number is expected to be the largest ever for that date along with the kept for marketing figure.
The survey showed on average the number of females kept for breeding at 1.5% above a year ago.
The rise in the breeding herd from last year would put the March 1 figure at 6.189m, versus 6.098m a year ago.
The number of pigs saved per litter in the December-February period was expected to be up about 1.1% from a year ago. That would put the projected figure at 10.54 pigs per litter.
The estimates for spring and summer farrowing intentions show additional growth at 2.1% and 1.7%, respectively.
The December-February pig crop is projected to be up 3.7% at nearly 33m head, a record high for that period and the fifth time in the past seven quarters to be above 32m, according to Bob Brown, private analyst in Edmond, Oklahoma.
The increase in production is expected to be absorbed by the additional processing capacity that is coming on board this summer and fall.
By year's end, the added processing capacity for this year is projected to be nearly 20,000 head, an increase of about 4%.
By the end of the first quarter 2019, daily slaughters could approach 500,000 head but may fall just short of that mark.
The kept-for-marketing estimates were at 103.4% of a year ago for the heaviest category, or 180 pounds and over, as of March 1.
For the 120-179 pound group, the kept-for-marketing figure was estimated at 103% of the year-ago figure, while readings for the 50-119 pound and under-50 pound categories were both expected to come in at 103.1%.
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