Cattle buying interest should start to improve Thursday with bids moving some closer to higher asking prices of $120 in the South and $190 plus in the North. This seems to be the first time since mid-March that feedlot managers definitely smell the possibility of higher fed sales. In fact, unless the board suddenly implodes, producers may have enough confidence to dig in with firm asking prices until Friday if need be. Live and feeder futures should open at least moderately higher thanks to short-covering and cash optimism.
Look for the cash hog trade to open with bids steady to $1 higher. The country offering has tightened somewhat this week, but the carcass values have remained on the defensive. Processing margins have narrowed accordingly. Maybe that's why the Saturday kill is estimated at no more than 102,000 head. Lean futures are set to open on a mixed basis with deferreds probably holding up better than nearbys.
| BULL SIDE | BEAR SIDE | ||
| 1) | Several thousand steers and heifers sold late Wednesday in Kansas at $118, nearly a dollar higher than last week. Packers seem short bought. | 1) |
Although forward sales of boxed beef increased last week, the six-week rolling average on negotiated forward sales 22 to 90 days declined by five loads to 1,048 loads and was 3% below last year.
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| 2) | Though action in cattle futures this week has been no ball of fire, the general example of price stability is much better than last week. This fact appears to be at least temporarily draining some of the panic from country psychology and leverage. | 2) | For the week ending April 7, U.S. hatcheries set 228 million broiler eggs in incubators; up 2% from a year ago. At the same time, chicks placed totaled 183 million chicks; up 1% from a year ago. |
| 3) | The cash hog trade actually seems to be on a bit of a roll this week, possibly a reliable indication that the market is finally starting to slide into seasonally supportive fundamentals. | 3) | The pork carcass value closed moderately lower on Wednesday, pressured by softer demand for all primals. |
| 4) |
On an absolute basis, market hog harvest levels should begin to trend lower from here for the duration of the spring and summer.
| 4) | Hog weights remain large, still resisting the seasonal trend and significantly above 2017 scale tickets. For the week ending April 7, Iowa barrows and gilt averaged 286.5 pounds, unchanged from the previous week and 3.3 pounds heavier than 2017. |
CATTLE: (North Texas News) -- Drought conditions grip much of West Texas and the Panhandle, driving many producers to reconsider herd stocking rates, while water and cool- and warm-season grasses are plentiful in eastern areas of the state, according to Texas A&M AgriLife Extension Service specialists.
Dr. Bruce Carpenter, AgriLife Extension livestock specialist, Fort Stockton, said most rangeland and pastures west of the Pecos River haven't received a meaningful rain since October. Most producers provide water for cattle via wells, but available forage is becoming scarce.
Carpenter said drought conditions are forcing, or could soon force, producers to make decisions regarding their herds if a significant rain does not arrive soon. Some producers with reasonable standing forage may be able to wait for rain or cull lesser cows to make pastures last longer, but the weather will determine how long.
"Wheat hasn't had the moisture to get the growth producers need for normal stocking rates," he said. "They're having to rethink their plan. Some producers are culling. Those who aren't probably need to be looking at their pastures and deciding when and what cattle to cull or whether they might be able to make the next rain."
Dr. Ted McCollum, AgriLife Extension beef cattle specialist, Amarillo, said the cow/calf outlook was normal for the Panhandle aside from drier-than-normal conditions.
"There may be some instances where producers have had to adjust their stocking rates due to drier conditions, but I've not heard anything out of the ordinary for this time of year," he said.
McCollum said most producers appear to be faring well despite the lack of precipitation since October. Good conditions through late fall provided adequate stockpiles of forage on rangelands for winter grazing.
But the lack of rain could mean a slow start for warm-season grasses, he said. That may extend the time producers provide supplemental feed.
Stocker cattle on wheat began coming off pasture earlier than normal because of forage conditions, he said. Many calves never went out to graze, while others have been shipped earlier than normal.
There are still cattle grazing out small-grain fields in the region, McCollum said.
"The flow of stockers on and off small grains this year is different than normal and may influence some markets by the different distributions and movement over the winter and spring," he said.
The feeder cattle market has deflated recently as the number of fed cattle marketed has drifted lower, he said. The light calf market has held better than that for heavier feeder calves.
"It will be hard to kick spring off well if we don't get some rain soon," McCollum said. "We have good deep moisture in pastures and rangelands, but the topsoil profile needs some help. If the dry spell continues, it will mean a slow start to spring, and that could mean some further adjustments to producers' stocking rates."
Dr. Jason Cleere, AgriLife Extension, beef cattle specialist, College Station, said ample rains and relatively normal springtime temperatures created good conditions for cow/calf operations in East and Southeast Texas.
"Some producers may still be calving, but most have calved out and are beginning to work them," he said. "If it continues to rain, we should be in good shape."
Cold fronts have slowed growth in warm-season grasses like Bermuda and Bahia, Cleere said, but that cool-season forages like ryegrass and clover remain prevalent in pastures.
He said producers have begun to fertilize some warm-season pastures in the hopes of timing applications with rains, but that the timing could be too early and benefit cool-season grasses instead.
"Producers want to take advantage of spring rains, but if it's applied too early, remaining winter/spring weeds, ryegrass and clover will steal nutrients that were intended for Bermuda grass," he said.
HOGS: (drovers.com) -- Purdue University economist Chris Hurt tells AgDay reporter Tyne Morgan the strength of the U.S. economy has been a boost to strong beef demand. "There are a lot of people working, low unemployment, and a lot of jobs and rising wage rates those are all positive to meet consumption," Hurt says. "We've got a world that has an economy doing very well, and what that says exports are doing very well."
In 2017, Hurt says, demand outweighed the supply increase. "I think this year we're talking about the demand will not be strong enough to outweigh the supply increase. We're going to have 4 or 4-plus percent more beef in the marketplace, 3.5% to 4% percent more pork, and about 2% more poultry. And what that says is while we have strong demand we're probably going to sell it at lower prices than we did last year."
In terms of outlook for pork prices, Hurt says at the start of the year the price was $53 per cwt., with costs about $50 per cwt.
"That's reversed as we've seen higher corn and meal prices. So now we've got our costs up to about $53. And with these Chinese tariffs we're now down to about $48 or 49 on hogs. That's a $4 to $5 per cwt. loss, or a $12 to $13 per head loss this year shifted from a little profitability early in the year to some losses that we're anticipating now for 2018."
"Now again, the losses aren't won't be big enough this spring and summer to force contraction, but as we get into the fall we think and winter time we think we'll see losses $20 to $25 dollars a head. That's big enough to start stopping the expansion leveling off the herd or maybe even some contraction into 2019."
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