Higher bids in the South yesterday prompted decent cattle movement. Indeed, regional business may be done for the week. On the other hand, it looks like the North still has some work to do before buyers and sellers can call it a week. Asking prices in Nebraska and Iowa should be posted around $128-plus live and $200-plus dressed. Live and feeder futures should open moderately higher based on follow-through buying interests and reports of higher cash sales.
Chances are opening cash bids in hog country this morning will be no better than steady. Although yesterday run of negotiated hogs seemed quite small, that fact may be countered by limited kill plans estimated at 41,000. For a minute there earlier in the week it looked like early summer bulls on the board were starting to come alive. Unfortunately, such action now looks like another false start. Lean futures this morning look ready to open lower, checked by residual selling and flat fundamentals.
| BULL SIDE | BEAR SIDE | ||
| 1) | The cash cattle market continues to roll higher. For example, Southern feed managers sold steers and heifers as high as $126 yesterday. Beef producers still have plenty of front-end leverage | 1) | Net beef export sales last week dropped to 16,200 MT, down 13 percent from the previous week and 15 percent from the prior four-week average. |
| 2) | For the week ending April 21, cattle carcass weight dropped sharply again with steers losing as much as 11 pounds from the previous week. | 2) | Despite yesterday's impressive rally in cattle futures, spot June still appears to be trapped below multiple levels of tough overhead chart resistance (e.g., the 50 percent retracement of the Jan-Mar sell-off; the 100-day moving average). |
| 3) | Actual pork exports last week surged to 26,300 MT, up 5 percent from the previous week and 25 percent from the prior four-week average. | 3) | Net pork: export sales last week fell to 17,400 MT, down 34 percent from the previous week and 20 percent from the prior four-week average. |
| 4) |
The seasonal tendency is for June hog futures to chop around for the next couple of weeks before working higher into contract expiration.
| 4) | The pork carcass value quickly surrendered most of the midweek rally on Thursday, pressured by softer demand for loins, bellies, and hams. |
CATTLE: (Drovers) — Many producers now have calves on the ground, so it's a good time to discuss prices and to update marketing plans for the new-crop. Calf prices are expected to behave certain ways within a calendar year because of the seasonal production cycle. The majority of the U.S. is weaning its calves in the fall, and many of those animals head straight to market forming the 500-to 600-pound calf market and setting prices for yearly lows in the fourth quarter. Analysis of this seasonal pattern places the highest prices in March and April. LMIC has data for the Western Kansas Auction dating back to 1973, allowing for a full 40 years' worth of observation of this weight class of cattle. However, it's important to keep in mind, genetics and focused management have allowed for calves to be weaned at heavier weights. Weaning a 550-pound calf was not always the norm.
Over time this auction market has had small changes, but the latest ten years have proven quite volatile. Using the seasonal index for individual years, the 2014-2016 years set the 40-year maximum and minimum index value for October, November, and December. Beginning in 2014, the U.S. started a new cattle inventory cycle, and herd grew 0.7% in 2015, after seven years of year-over-year declines. The following year (as of January 1, 2016), cattle numbers (all cattle and calves) jumped-up over 3%, and in that October and November seasonal indexes dipped to the lowest values in 40 years. U.S. cattle numbers had not grown that aggressively since the early 1970s. The average upcycle inventory increase is about 1.6%, and the average down cycle year-overyear change is close to 2.0%.
Currently, the U.S. is in the second longest herd expansionary phase since the cycle that began in 1976, posting four consecutive years of annual inventory growth. Larger calf crops tend to put downward pressure on prices, particularly in the fourth quarter. January of 2018 showed another 0.7% increase compared to the previous year, which would indicate that 2018 fall calf prices should be again the low price point during this calendar. So far in 2018, prices have been to slightly higher of the where seasonal indexes would suggest, up 3.2% for the first quarter of 2018. Higher than normal prices are not expected to hold through the year. The ten-year seasonal index indicates more potential downside than upside moving through 2018.
HOGS: (Xinhua) -- Wang Chang, a pig farm manager, reduced his breeding stock as he predicted falling pork prices. In fact, prices plummeted faster than he expected.
Pork prices are at a four-year low in the world's biggest pork market.
Wang said a 10-kg pig that sold for 780 yuan (122.5 U.S. dollars) in 2016, now sells for just 300 yuan.
Wang's company has eight pig farms in northeast China's Jilin Province, and saw output of 50,000 pigs last year.
"I reduced the breeding stock by 400 pigs at the most in each farm this year, but still suffered losses of 3 million yuan in the first quarter," said the deputy manager of the Jilin Hongzhui Pig Breeding Co. Ltd.
In 2016, pork sales brought the company 20 million yuan in profit, while in 2017, profit shrank to 5 million yuan.
Jilin is one of the most important granaries in China, and a major pig breeding ground. Wang Yaqin, a farmer in Lishu County, has raised pigs for 22 years, but felt confused about the price tumble, as it has fallen every day, especially since this year.
"Two years ago, I could earn 600 yuan from raising a pig, but now I would lose 300 yuan by raising one," she said.
According to pork price monitoring by the Chinese Ministry of Agriculture and Rural Affairs, at 500 county-level farm produce markets, the average pork price in the third week of April amounted to 10.87 yuan per kg, down 1.3 percent from a week ago, and 31.7 percent lower than the same period of last year.
Liang Qi, an agriculture product price expert, said pork was China's staple meat and its price subject to a boom-and-bust cycle depending on supply and demand.
"However,the prolonged cycle of price fall suggests asymmetric information of the supply and the demand sides, as they are separated by links in the production chain including slaughtering, cold chain logistics and meat processing," she said.
Liang called for a nationwide big-data information service system for early warning of pork prices in order to help guide farmers in production.
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