Cattle country should be staged for a typically quiet Monday with the distribution of new showlists about the only item on the agenda. Our guess is that the early May offering of fats will be steady to somewhat larger than last week. While bids and asking prices are likely to stay guarded for at least several more days, it's a good bet that feedlot managers will not hesitate to eventually price ready steers and heifers at least several dollars higher. Live and feeder futures seem likely to open significantly higher thanks to follow-through buying and aggressive packer spending on Friday.
The cash hog trade is expected to open Monday with generally steady bids. Last week's kill totaled 2.363 million head, 74,000 below the previous week. We look for this pace of erosion to persist over the next 30 to 45 days. As slaughter and pork production lightens, carcass value should be supported accordingly. Lean futures seem likely to open on a mixed thanks to follow-through selling and early-week short-covering.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle feeders once again demonstrated on Friday that they possess superior leverage over packers by pushing live prices $2 higher in the South and $4 to 4.50 higher in the North. | 1) | Once April live goes off the board at noon Monday, deeply discounted spot June could easily strip leverage from feedlot managers with the implicit advice "better to sell early rather than late." |
| 2) | After shivering through a cold, early-spring period, beef demand has finally found the heat of seasonal sun. From Friday to Friday, the choice and select cutouts exploded higher by $9.76 and $4.19. | 2) | For the week ending April 24, noncommercials continued to liquidate their net-long position in live cattle futures (i.e., down another 6,400 loads to 22,700). |
| 3) | The pork carcass value closed solidly higher on Friday, supported by better demand for all primals except the picnic. Furthermore, last week's smaller slaughter (i.e., 2.36 million hogs) should help the wholesale pork trade this week. | 3) | Lean hog futures have made a reversal with the June contract closing Friday nearly 500 points lower on the week, shifting the short-term market trend back to bearish. |
| 4) |
Specs may be gearing up for a seasonal rally in lean hog futures. During the week ending April 24, noncommercial traders reduced their net-short position by 400 contracts, now net-short 4,200 contracts.
| 4) | The pork cutout could not gain significant momentum this week despite the gains in the loins and butts. The weakness in hams and bellies was enough to counter the other gains. |
CATTLE: (Hoosier Ag Monday) -- The European Union is preparing to allow more tariff-free U.S. beef into the region as part of an attempt to avoid a trade war. The move comes at the same time French President Emmanuel Macron and German Chancellor Angela Merkel are making high-level diplomatic trips to Washington, D.C. Both leaders are trying to dissuade President Donald Trump from slapping tariffs on European steel and aluminum imports, set to begin on May 1.
An EU concession on American beef may go a long way toward appeasing the U.S. President, who has made it clear that Europe has "unacceptable" barriers to trade. "Our farmers can't send their product into the European Union as easily as they should," Trump says, "and we accept their products. So, we have to make a change, and they understand that." To make the change happen, the EU would have to alter a 2009 agreement which allowed the U.S. to export 45,000 tons of hormone-free beef without paying dues.
European agriculture associations typically do not favor more beef imports, but they seem to be supportive of tweaking the quota.
HOGS: (WIUM Tristates Public Radio) -- Dozens of congressional Democrats are opposing a recently proposed federal rule that would change hog-slaughterhouse inspections and the number of hogs that can be processed daily.
The Modernization of Swine Slaughter Inspection rule, which falls under the U.S. Department of Agriculture's purview, was announced in January. The politicians believe any such changes will will endanger workers at hog slaughterhouses and increase the risk for foodborne illness. But pork industry leaders argue the rule would provide a much needed update to a system that's become obsolete.
The proposed rule would lift the cap on how quickly pigs can be slaughtered. According the federal Bureau of Labor Statistics, the injury rate for employees in meatpacking plants is 2.4 times higher compared to other industries.
The proposal also would allow plant employees to carry out the initial visual inspection of incoming animals, which is currently the responsibility of federal inspectors. In turn, the agents would focus on other parts of the plant, like testing for harmful bacteria and ensuring the humane handling of animals.
The Food and Safety Inspection Service (or FSIS) has said the new regulations will place more emphasis on testing to prevent the spread of bacteria that can cause foodborne illnesses.
A push to increase slaughter speeds isn't isolated to the hog industry. Recently the FSIS introduced a waiver program for poultry slaughterhouses to process 175 birds a minute versus the former requirement, which was 140 birds per minute.
The letter sent to the USDA on Monday by 63 representatives (including Mike Quigley of Illinois, Emanuel Cleaver of Missouri and Dave Loebsack of Iowa) urged the USDA to "withdraw the rule immediately." In it, they also pointed to a 2018 report from Water and Food Watch alleging that similar programs had been unsuccessful. The report reviewed records from the USDA and found that 30 percent of plants operating under a similar pilot program, known as the New Poultry Inspection System, failed to comply with salmonella performance standards.
The National Pork Producers Council said the new swine inspection rule will modernize a system that has existed for 100 years. Dan Kovich, the council's director for of science and technology, said the old rules were designed during a time when visible health risks, like blemishes or cancers, were more common but slaughterhouses now need to focus more on microbiological issues.
"[The new system] allows both industry and FSIS to focus on things that are offline that can really make an impact on food safety," Kovich said.
Kovich also said that, regardless of speed or where federal inspectors are stationed, every slaughterhouse must still comply with federal laws and regulations to ensure safety and the humane treatment of animals. "Not everyone is just going to turn up a knob somewhere and just move faster without a lot of care, thought and intention into making sure that they can do it appropriately," he said.
The USDA is taking public comment on the proposed changes through Wednesday.
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