Once again, cattle buyers have been successful in securing light-to-moderate numbers early in the week, helped by another break in live and feeder futures. Most live sales looked about $1 lower with dressed deals tagged close to $2 lower. While cash sales have done a decent job this month in stabilizing past midweek, it will be interesting to see if feedlot managers can keep resisting lower bids going forward (e.g., some Northern buyers had dropped bids to $202 late Tuesday). On the other hand, we know of several deals priced Tuesday at $203 to $204 to be delivered in mid-April. Needless to say, it would help a great deal if we could find a pulse at the CME. Asking prices are now around $127 in the South and $205 in the North. Live and feeder futures should open on a mixed basis thanks to a combination of residual selling and short-covering.
Look for the cash hog trade at midweek to open with bids steady to $1 lower. Processing margins have improved this week with carcass value holding up better than the live trade. Yet packers seem skeptical about the ability of product demand to hold through the balance of the week. At this time, the Saturday kill should total close to 108,000 head. Lean futures should also start out with uneven price action with the front-end gaining on deferreds.
| BULL SIDE | BEAR SIDE | ||
| 1) | The extremely discounted scorecard of cattle futures should soon encourage buyers instead of additional sellers in terms of risk/reward. Not only is spot April now trading nearly $8 below last week's cash cattle market, the April/June live spread is nearing the widest levels seen in the last five years. | 1) | Cattle buyers successfully bought a light-to-moderate number of steers and heifers in the South on Tuesday at $126, $1 lower than last week. Further business was reported in parts of the North with most dressed deals at $203, roughly $2 lower than last week's weighted average basis Nebraska. |
| 2) | While daily boxed beef movement has been quite slow (i.e., 50 to 60 loads on a spot basis) that should soon change. Seasonally, late March to early April beef sales tend to increase from spring into summer, with average spot load counts in the 110 to 120 area seen as seasonally typical. | 2) |
Nearby April live has broken through the bottom side of the key support area of $121 to $122 and could soon challenge the January lows near $118.
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| 3) |
Despite recent declines in both cash and futures, the large majority of hog traders are still expecting the cash market to increase over the next 90 days.
| 3) | Ongoing concerns regarding domestic and foreign pork demand in the weeks ahead applied additional pressure to lean hog futures. After reaching a new life of contract low of $62.83 during the session, the April contract finished the session firmer at $63.25, a 105-point discount to Tuesday's CME two-day settlement index value. |
| 4) | Last week's hog slaughter (2.417 million) could easily be the seasonal peak with this week expected to come in just below (2.4 million). Harvest levels should begin to trend lower from here for the remainder of the first half of 2018. | 4) | But it's not just the pressure on the front of lean hog futures. A bearish sentiment seems to be building for the forward curve, as traders begin to wonder if demand will be strong enough to clear all the coming hogs (i.e., seasonally smaller but still 3% plus above 2017) and produce at last year's prices. |
CATTLE: (Drovers) -- The Mexican cattle and beef industry has evolved rapidly in the past decade. Most notable is the expansion of beef exports from Mexico after 2009. Mexican beef exports ranked tenth in the world by 2015 although recent growth in Argentinian beef exports in 2018 may push Mexico slightly out of the top ten list of exporting countries. Growth in Mexican beef exports has been the result of expanded feedlot production, increased federally-inspected slaughter and, most importantly, adoption of boxed beef fabricating technology. Beef carcass weights in Mexico have increased steadily over the past decade.
The U.S. is the biggest market for Mexican beef exports, accounting for 89 percent of total exports in 2017. Mexico is attempting to develop a more diverse set of exports markets, partly the result of natural market growth and partly the result of uncertainty surrounding U.S. trade policy and NAFTA. Mexico is attempting to regain access to Russia and to expand beef exports to China as well as expanded exports to Muslim markets with Halal certification. Mexico was the third largest source of U.S. beef imports in 2017, accounting for 19.2 percent of imports behind Australia (23.2 percent) and Canada (24.7 percent) and just ahead of New Zealand (18.6 percent).
Mexico is a significant importer of beef as well and is projected to be the eleventh largest beef importing country in 2018, just behind Canada. Mexico is a major market for U.S. beef exports, representing 14.7 percent of total beef exports in 2017, behind Japan (28.9 percent) and South Korea (16.5 percent) and ahead of Canada (10.9 percent). Mexico, in recent years, much like the U.S. and Canada have for many years, has significant bilateral flows of beef exports and imports. These represent flows of different mixes of beef products all moving to higher values in various markets. This is markets doing what they do best with the result of maximizing the value of beef production in each market simultaneously.
Mexico has exported about 1.1 million head of feeder cattle annually to the U.S. for the past 30 years. In 2017, total U.S. imports of Mexican cattle were 1.2 million, close to the long term average but up 23.3 percent from 2016. Current USDA-FAS projections for 2018 include a slight increase in Mexican cattle exports but the preliminary weekly data through early March shows a 13 percent year over year decrease for the year to date. Mexican cattle exports are determined by overall cattle numbers in Mexico, U.S. and Mexican market conditions and drought conditions. Continued growth in beef production in Mexico may ultimately lead to fewer live cattle exports from the country.
I [Dr. Derrell Peel] am writing this from Chihuahua, Mexico and have been traveling the past few days in parts of the northern region of the country. It is typically dry here this time of year but the drought monitor map shows that drought conditions currently seen in the southwest U.S. extend down western Mexico across the states of Sonora and Sinaloa as well as the western parts of Chihuahua and Durango. This includes areas of moderate to extreme drought that go beyond normal conditions of the dry season. Additional dryness is found in central Mexico. In Chihuahua, the rainy season runs from late June into October. Cattle producers typically have to manage through five months of rainy season and seven months of dry season each year.
HOGS: (National Hog Farmer) -- The 2018 World Pork Expo will mark its 30th anniversary by presenting the world's largest pork-specific trade show with more exhibit space and featuring more U.S. and international companies than ever before. Presented by the National Pork Producers Council, the world's largest pork-specific trade show takes place Wednesday, June 6, through Friday, June 8, at the Iowa State Fairgrounds in Des Moines.
"The Expo's 30th anniversary is a great time to look back at all we've accomplished as pork producers," says Jim Heimerl, NPPC president and producer from Johnstown, Ohio, "But more important, it provides us with the perfect place to look forward to the many opportunities and advancements that lie ahead."
Each year, more than 20,000 producers and pork professionals visit the three-day exhibition to attend educational seminars, learn more about the latest industry innovations at the trade show and network with peers.
Record-setting trade show to cover over 360,000 square feet
For the first time, the Jacobson Exhibition Center (JEC) will join the Varied Industries (VI) building and open its doors to Expo exhibitors and attendees.
"This will add 300 prime exhibit spaces in a building that will allow companies to display larger exhibits with more elaborate designs," says Doug Fricke, director of trade show marketing for NPPC. "We will have well over 500 companies at the show this year. If it relates to pork production, you'll find it at the trade show."
With JEC located just south of the VI building, the corridor in between will provide a new outdoor exhibit area, allowing attendees to more easily access all areas of the show. Producers and other pork professionals will find more outdoor exhibits throughout the fairgrounds, including displays around the swine, sheep and cattle barns associated with the Expo's live hog shows. More hospitality tents will give producers the opportunity to connect with exhibitors in a more casual setting.
With its combination of indoor and outdoor exhibit space, Fricke expects this year's trade show to easily exceed 360,000 square feet-- up more than 40,000 square feet from 2017. Expo attendees can visit the trade show from 8 a.m. to 5 p.m. on Wednesday, June 6, and Thursday, June 7, and 8 a.m. to 1 p.m. on Friday, June 8.
Whether your priority is to visit the trade show, network with fellow pork professionals or gather the latest information, now is the time to start planning your trip to the 2018 World Pork Expo, June 6-8.
World Pork Expo, the world's largest pork-specific trade show, is brought to you by NPPC. On behalf of its members, NPPC develops and defends export markets, fights for reasonable legislation and regulation, and informs and educates legislators. For more information, visit nppc.org.
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