Feedlot country should be typically quiet as players focus on the standard early-week chore of showlist distribution. We expect ready numbers offered to be steady to larger. Not much will be said in terms of preliminary asking prices, but it's a good bet that most producers will be thinking at least $2 higher on a live basis, based on last week's successful round of business. Live and feeder futures should trade mixed in the early rounds with nearbys supported by the rise of packer bids in recent weeks and deferreds somewhat pressured thanks to the supply-heavy implications of the April 1 Cattle on Feed report.
Although the cash hog market was very aggressive last week, the buying fever seemed to cool a bit on Friday. That's why our early call on the country trade Monday is just steady. To be sure, pork processors margins have been narrowing as the cost of live inventory surges ahead of carcass value. On the other hand, we were surprised by last week's large kill of 2.438 million head. The combination of aggressive packer spending and accelerating chain speed typically suggests that somebody likes their business. Perhaps processors are confidently anticipating sharply higher product sales right around the corner. Lean futures are also likely to open on a mixed basis tied to uncertain fundamentals.
| BULL SIDE | BEAR SIDE | ||
| 1) | Beef cutouts finally closed significantly higher on Friday. Warming spring conditions and packers needing to improve margins may mean this marks the beginning of a prolonged upturn in carcass value. | 1) |
The April 1 Cattle on Feed report released on Friday documented the second largest early spring bunk line in big lots since the database began in 1996.
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| 2) | Though still historically large at 9% below 2017, the March placement total should already be fully dialed into the enormous discounts of summer live futures. | 2) | Federally inspected cattle slaughter last week jumped to 624,000 head, the largest kill seen since mid-December 2017. Box movement and demand needs to move just to keep wholesale prices and packer margins on an even keel. |
| 3) | The pork cutout is expected to move with successive gains moving forward into the late spring and early summer, adding $2 to $3 per week for the next couple of months. | 3) | During the week ending April 17, noncommercial traders increased their net-short position in lean hog futures by another 1,000 contracts to 4,600. |
| 4) |
The seasonal trend for June lean hogs tends to chop around until the end of April before trending higher into expiration.
| 4) | Despite the aggressive progress made on the cash hog market over the last several weeks, summer lean futures have remained essentially flat and uninspiring. |
CATTLE: (mexiconewsdaily.com) -- A new NAFTA deal could be reached in two weeks, according to a Mexican trade group, although officials involved in the negotiations have downplayed the notion that an agreement is imminent. The president of the Mexican Business Council for Foreign Trade, Investment and Technology (Comce) said Sunday that he is optimistic that Mexico, the United States and Canada are close to renewing the 24-year-old North American Free Trade Agreement.
"We expect the signing [of an updated agreement] soon, the three countries have the political will, they're accelerating the technical work to reach a consensus on all the pending articles. We expect that there will be progress in the next two weeks and a conclusion will be reached," Fernando Ruiz Huarte said.
HOGS: (brownfieldagnews.com) -- The USDA says pork production during March was a new monthly record, a string of new all-time highs that dates back to last September. The big contributing factors are the record large U.S. herd and increased slaughter capacity.
March's total for pork was 2.297 billion pounds, up 1% on the year, with a slight increase in the slaughter up to 10.725 million and a two pound gain in the average live weight, at 286 pounds.
Beef came out at 2.204 billion pounds, down 2%, with a 2% decrease in the kill to 2.702 million head and eight pound gain for the average live weight at 1,358 pounds.
Total commercial red meat production was 4.521 billion pounds, a little bit less than last year, but the year to date total is 3% ahead of 2017's record pace, at 13.167 billion pounds.
The USDA's monthly Cold Storage report is out Monday afternoon.
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