While we typically don't expect significant
trade volume in cattle country to develop as early as Tuesday, it's
certainly possible if attractive basis opportunities develop (e.g.,
short-bought packers bidding well above April's deep discount). Needless
to say, it's tough to price cattle when the board keeps falling like a
lead anchor. If the board can stabilize, our guess is that initial
asking prices will be around $122 live and $184 dressed. Live and feeder
futures should open moderately lower, checked by residual selling and
further technical selling.
Hog buyers should return to work Tuesday with
bids steady to $1 higher. Slaughter is expected to get back in the
groove Tuesday, totaling close to 465,000 head. We expect that level to
be maintained through Thursday, fall back some on Friday, and then close
to 150,000 on Saturday. It will no doubt take some time to sort out the
exact price impact of the new Chinese tariffs on U.S. pork.
Accordingly, lean futures will probably remain under pressure on the
opening Tuesday.
| BULL SIDE | BEAR SIDE | ||
| 1) | New showlists distributed in cattle-feeding country look generally smaller than last week. We may be entering the bubble where yearling supplies tighten and the first wave of calf-feds are not yet ready for market. | 1) | Spot April live futures lost another 135 points Monday, closing at the lowest level since the end of August last year. June live had the largest loss of 162 points, falling to levels not seen since early April of 2017. Evidence that nearby live futures still has energy to dig for better discounts does not bode well for cash stability. |
| 2) | First of the month paychecks typically move red meat items toward the top of the family list. | 2) | During the week ending March 27, another combination of reduced longs and increased shorts resulted in a very sharp decline in the net-long position in live cattle futures held by noncommercials (i.e., by 16,900 to 57,400 positions, the lowest since late 2016). |
| 3) | The pork carcass value was moderately higher on Monday, supported by better demand for all primals except the loin and picnic. | 3) | The current supply of hogs is negative to price at least for the near-term and until more clarity can be determined regarding the effect of China's announcement. |
| 4) | Isowean (i.e., piglets under
10 pounds) turned red hot toward the end of the December-February
quarter (i.e., trading as high as $80 for several weeks, possibly
suggesting that the winter old-crop was not as large as suggested by the
March 1 inventory (e.g., perhaps tied to disease and death loss). |
4) | During the week ending March 27, noncommercial traders were net sellers of lean hog futures, decreasing their net-long position by 1,000 contracts to the 7,400 contract level. |
OTHER MARKET SENSITIVE NEWS
CATTLE: (Times Newspapers Limited 2018) --
Australia is preparing to demand that Britain accepts hormone-treated
beef as the price of a symbolic early Brexit trade deal.
Liam Fox has identified a deal with Australia as
an early "win" and informal discussions have been taking place for the
past 18 months. But in return, Britain will be told to scrap a European
Union ban on the sale of meat from cattle treated with growth hormones.
The practice can increase their weight gain by
more than 10 per cent a day, cutting the time it takes to fatten the
animals for market. The EU claims that at least one of the hormones used
is carcinogenic and their use has been banned since 1981. The
Australians have long disputed this scientific analysis. They see the
ban as a form of protectionism to shelter European farmers from
competition alongside tariffs of 12.8 per cent.
Sources close to the talks say lifting the ban
is a key issue for the Australian side. Mr Fox, the international trade
secretary, is understood to be sympathetic, arguing that it would reduce
meat prices for consumers. Significantly, while the government has
ruled out allowing the import of chlorine-washed chicken on animal
welfare grounds, it has made no public comment on hormone-treated beef.
Behind the scenes, Australian ministers are understood to be arguing
that the EU ban -- which is based on a precautionary approach --
violates World Trade Organisation rules requiring member states to
present scientific evidence to support any plant or animal health
regulations that have a negative effect on trade. Their stance is being
backed by the Australian meat industry, which is keen to get access to
UK markets that were lost when Britain joined the common market. In a
briefing paper for ministers, the Australian meat industry warned that
if Britain imposed the hormone regulations after leaving the EU,
"Australian producers will struggle to materially increase supply to the
UK market".
Another of the main meat exporters, JBS
Australia, said: "In our view, the guiding principles for the Australian
negotiators must be expanding access for Australian red meat through
reducing technical and tariff barriers. When dealing with these trade
barriers, this must be science based and consistent with WTO
obligations. [This] is critical to... establishing separate arrangements
for the UK."
Environmental groups and farmers reacted with
concern. "Ministers promised that UK standards on animal welfare and the
environment wouldn't be slashed post-Brexit, so caving in on
hormone-treated beef would be a complete betrayal," said Kierra Box, of
Friends of the Earth.
John Royle, chief livestock adviser at the
National Farmers' Union, said: "Future trade negotiations should ensure a
level playing field for British farmers in order for them to be
competitive, profitable and productive in the future. We do not believe
the British public would want our own farmers to be put at a competitive
disadvantage by allowing the import of food produced to different
standards and using methods which are not allowed in Britain."
A spokesman for the Department for International
Trade said: "This government has been very clear that the UK will
maintain its own high animal welfare and environmental standards in
future free trade agreements. To say anything else is untrue."• The EU
has similar characteristics to the Soviet Union and will suffer a
similar fate within a generation, a Brexit-supporting academic says.
Gwythian Prins, an emeritus professor at the London School of Economics,
says its "mounting complexity and declining legitimacy" have sowed the
seeds of its demise and Brexit is merely the start. He argues that EU
leaders had long ago stopped considering the interests of its citizens.
The paper was written for a group called Briefings for Brexit, which
claims the support of 50 academics.
HOGS: (Fox News) -- The U.S. meat and fruit
industries asked President Donald Trump to resolve trade tensions after
China rolled out tariffs on their products in retaliation to U.S. duties
on steel and aluminum imports.
"These retaliatory tariffs will
disproportionately affect hard-working American pork packers and
producers, who will bear the main burden of these measures in the form
of lost revenue and restricted market access, particularly as U.S. pork
production is slated to rise this year," Barry Carpenter, president and
CEO of the North American Meat Institute, told FOX Business.
China's tariffs, which began on Monday, include a
25% increase on pork products and scrap aluminum as well as a 15% levy
on 120 other U.S. commodities, from almonds to apples and berries. White
House spokeswoman Lindsay Walters said Monday in a statement that
China's subsidies and overcapacity are the root causes of the trade
tensions. "Instead of targeting fairly traded U.S. exports, China needs
to stop its unfair trading practices, which are harming U.S. national
security and distorting global markets," she said.
Carpenter said the move by China comes at a time
when it is already expanding its hog production, which is already
pushing domestic pork prices down. In 2017, China was the second-largest
market in volume and the third-largest market in value for U.S. pork
exports, totaling more than $1.1 billion.
"It's clear the future growth of the U.S. meat
sector, and agricultural economy depends upon a robust trade
relationship with China," Carpenter said, adding that "we once again
urge the Trump administration to pursue constructive negotiations with
the Chinese government to prevent further escalation of a trade war that
will undoubtedly harm U.S. businesses and consumers."
The fruit industry had similar concerns, saying
the trade dispute with China may erase all of the work it has done to
build a good relationship with the Asian country.
"The U.S. has made important gains in the
Chinese market for a number of fresh produce products," Robert Guenther,
senior vice president of public policy at the United Fresh Produce
Association, told FOX Business. "The current proposal by the Chinese
government targeting fresh fruit with retaliatory tariffs hurts farmers
and businesses and is counterproductive to the growth of our export
efforts."
Guenther said the organization plans to work with U.S.
negotiators and trade representatives to focus energies on additional
export markets for fresh produce including new and emerging markets.
"In the meantime, we ask that both countries
continue to resolve their differences and ensure a strong marketplace
for our products in China," Guenther said.
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