Cash cattle potential could take on greater definition Thursday, both in terms of more specific bids and asking prices. Opening live bids should be around $119 to $120 in the face of higher asking prices of $125 or better. Yet if the board stays firm, significant trade volume may not develop until sometime Friday. No delivery intentions were announced against the April live contract on Wednesday. Live and feeder futures seem staged to open moderately higher, supported by follow-through buying and cash optimism.
Look for the cash hog trade to open with bids steady to a $1 higher. Although the development of bullish fundamentals have slowed this week, the supply/demand mix is expected to sweeten through the month of May. WTD is running a bit over last week, but late-week chain speed should reverse that trend (especially assuming a Saturday kill close to 53,000 head). Lean futures should open generally higher with nearbys outperforming deferreds.
| BULL SIDE | BEAR SIDE | ||
| 1) | Spot April live cattle opens Thursday roughly even with last week's cash market. Given large premiums that have held over the last several months, such a relatively "weak" basis should lend feedlot managers decent leverage in the late-week cash trade. | 1) | Whether cattle prices are moving higher or lower, the April/June live spread just keeps widening. Summer bears just can't stop worrying about the possibility of unmanageable beef supplies ahead. |
| 2) | Beef cutouts continue to roll higher on Wednesday as retailers and food managers respond to warming spring weather, increasing outdoor activity and improving red meat demand. | 2) | While cattle carcass value will surely drift seasonally lower over the next several months, most analysts believe weights will remain well above the levels of 2017, further compounding the potential of beef production through the balance of the second quarter. |
| 3) | The pork carcass value moved moderately higher at midweek, supported by better demand for all primals except the loin. | 3) | For the week ending April 21, U.S. hatcheries set 229 million eggs in incubators; up 3% from a year ago. At the same time, chicks placed totaled 183 million chicks, up 1% from 2017. |
| 4) |
Seasonal demand and tightening production should push the pork cutout consistently higher over the next eight weeks or more (especially powered by fresh cuts and bellies).
| 4) | For the week ending April 21, Iowa barrows and gilts averaged 286.2 pounds, 1 pound heavier than the previous week and 1.3 pounds bigger than 2017. |
CATTLE: (drovers.com) -- In the face of growing beef production, all eyes are on beef demand in 2018. Beef production is up about 1.5 percent so far this year but total production is projected to increase roughly five percent year over year by the end of the year.
Choice retail beef prices in March were $5.871/lb., up from $5.828/lb. in February but down 0.6 percent from one year ago. The All Fresh beef retail price for March was $5.598/lb., up from $5.53/lb. in February and up 0.9 percent from one year ago. Choice boxed beef cutout has declined from a February high of $224.46/cwt. to $213.34/cwt. in mid-April but remains 1.6 percent higher year over year for the latest weekly data.
In the last four weeks, higher primal values for the rib, chuck, brisket, short plate and flank have been partially offset by lower loin and round values. Brisket values are especially strong, with wholesale value up over 30 percent year over year, while Ribeye values are down some from earlier highs but still up six percent from last year in the last four weeks. Higher chuck values are led by strong Flat Iron steak and Chuck Roll prices, up roughly 28 percent from one year ago. Short Ribs are also up about 27 percent, likely supported by strong export demand.
Lower loin values are a short term concern and a continuation of a longer term trend of weaker relative loin values. Loin values have declined relative to other parts of the carcass over the last decade. Currently wholesale values for Tenderloin are down about 11 percent year over year while Loin Strip prices are roughly 7 percent lower than one year ago.
Retail beef prices continue to hold up well relative to pork and poultry pries. March retail pork price was $1.502/lb., up from $1.478/lb. in February and down 0.7 percent from one year ago. Composite broiler retail price in March was $1.867/lb., up slightly from the February level of $1.861/lb. and down 0.6 percent from last year. The ratio of retail beef price to both pork and broiler continues to hold strong despite growing supplies of beef, pork and poultry. Production of beef, pork and broilers are all expected to be record large in 2018 leading to record large total meat supplies of nearly 103 billion pounds, up 3.3 percent year over year. This includes other chicken, turkey, lamb and mutton and veal production.
Net meat exports are projected to move just over 12 percent of total meat production offshore this year and hold per capita domestic meat consumption to 219.4 pounds, retail weight. This level is 1.3 higher than last year and the highest total meat consumption since 2007 but below the record level of 221.9 pounds in 2004. Strong domestic and international meat demand will be critical to minimize the supply pressure on meat prices in 2018.
HOGS: (GlobalMeatNews) -- The European Union (EU) and Mexico have agreed, on 21 April in Brussels, a momentous revised trade deal meaning 99% of products will be traded duty-free, and potentially substantially increasing the EU's pork exports to Mexico.
Under the agreement, which will replace a year 2000 trade deal, there will be duty-free trade for virtually all pork products, where customs duties now range up to 20%.
Its terms also mean that Mexico will ease import health checks on pork imports from EU slaughterhouses. Notably, inspectors will no longer have to check every slaughterhouse before clearing them to export meat products to Mexico.
EU commissioner for agriculture Phil Hogan told journalists on 23 April that the deal would help the meat sector in particular, where "trade is low at present".
In a European Commission communiqué, Paulino Tello Cano, CEO of the Toledo, Spain-based Tello Group, said the accord would make "our high-quality pork products much more competitive on the Mexican market". Mexico will also remove its high tariffs on "economically relevant poultry products", where tariffs can be as high as 100%, the Commission said.
But the deal was not so generous for beef, where only limited amounts will be exported tariff-free. EU farm association secretary-general Pekka Pesonen told GlobalMeatNews that he considered Mexican beef exporters would get too much access to EU markets because of the deal: "An import quota of 10,000 tonnes for beef is 10,000 tonnes too much."
Paolo Patruno, deputy secretary general for the EU's Liaison Centre for the Meat Processing Industry (Clitravi), said: "In general we are happy with the agreement, if we assume duties on processed meat will disappear."
The agreement will also boost protection from imitation for 340 European food and drink products in Mexico, including Parma ham, Nürnberger Bratwürste (German sausage) and Szegedi szalámi (Hungarian salami).
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