The cash cattle trade is likely to put in a slow day with bids and asking prices poorly defined. Both buyers and sellers will be carefully monitoring the board for hints of cash potential going forward. Live and feeder futures should open on a mixed basis thanks to a combination of follow-through buying and long liquidation.
The cash hog market should start out with generally steady bids. Yet numbers seem to be tightening. Look for this week's kill to be smaller, probably just a bit larger than 2.3 million head. Much of the cut back will be in a much smaller Saturday slaughter, possibly no larger than 30,000. Lean futures are expect to begin with uneven price action, pressured by follow-through selling and supported by strengthening carcass value.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures soared higher Monday, sparked by the possibility of greater Chinese demand for U.S. beef and ideas that summer board discounts have reached a worst case scenario for June-August cash. | 1) | The real odds of a sudden improvement in Chinese demand for U.S. beef seems remote at best. For example, China has zero tolerance on the use of growth promoter beta-agonist ractopamine and synthetic hormones used in U.S. beef. |
| 2) |
Monday's aggressive cattle kill of 120,000 head reflects extremely attractive processing margins. This represents the perfect, big appetite needed to offset large fed offerings.
| 2) | Beef cutouts closed on Monday substantially lower, pressured by a combination of last week's surge in commercial product and faltering pre-holiday demand. |
| 3) | The pork carcass value surged more than $2 higher on Monday, supported by stronger demand for hams, loins and picnics. | 3) | The dollar has rallied to a five-month high as relief over the fading risks of an outbreak of a China-U.S. trade war prompted investors to cut their short positions against the greenback. U.S. meat exports suddenly got more expensive. |
| 4) | Although China tariffs on U.S, pork remain in place, many believe they will soon be dropped after Commerce Secretary Ross travels to Beijing next week to work out the details. | 4) | Lean hog futures caught absolutely no support from recent talk of a trade truce with China. For one thing, there was no indication the current Chinese tariffs would be lifted. Indeed, some wonder if China has really made a major account to buy more U.S. commodities in general. |
CATTLE: (lancasterfarming.com) -- A beef checkoff-funded report is highlighting the commitment cattle producers demonstrate in the areas of animal welfare, beef quality, sustainability and community involvement. The Cattlemen's Stewardship Review gathers data from an independent 2017 telephone survey of beef producers to deliver a comprehensive profile of the U.S. beef community. The report and survey were coordinated by the National Cattlemen's Beef Association as a contractor to the Beef Checkoff Program.
The report compares to a 2010 checkoff-funded benchmark survey. It shows that improvements have been made in all four of the cattle industry areas studied.
"We want consumers to know we aren't just farmers and ranchers, but also animal caretakers, nutritionists, small business owners, environmentalists, and members of our communities," said Joan Ruskamp, part owner of J & S Feedlot in Nebraska and Cattlemen's Beef Board chairman.
"This report is a way to benchmark our progress, celebrate our successes and identify opportunities for improvement."
Findings of the survey, conducted by Aspen Research of a proportionate number of producers to the Agricultural Census, include:
The well-being of cattle is the top priority for 95 percent of producers. That commitment is demonstrated by the fact that the Beef Quality Assurance program influences more than 80 percent of the U.S. fed cattle supply, according to BQA managers.
Ninety-seven percent of cattle farmers and ranchers believe producing safe beef is crucial to the future of the industry. Producing the best beef possible is supported by nearly a century of research-based improvements funded by the industry in nutritional value, beef quality and safety assurance.
About 95 percent of producers say conservation of land is extremely important to them, while 86 percent manage their operations in a way that protects the quality of natural resources, including wildlife and biodiversity. Beef is produced in all 50 states by a diverse group of men and women of all ages who have different backgrounds and production methods, but who share the same core values.
The CSR found that more than nine of 10 cattle operations are family-owned, and 78 percent of farmers and ranchers say they intend to pass their operations on to future generations, with 58 percent of current operations in the family for at least three generations.
"When consumers understand the level of care that goes into the production of their beef, they feel better about enjoying it," said Ruskamp. "This report helps show that our attention to the needs of our animals, land and relationships parallel the concern our customers have for the beef they eat."
HOGS: (nationalhogfarmer.com) -- Profits for hogs marketed in April were negative for the second month in a row, according to calculations by Lee Schulz, economist at Iowa State University. The typical Iowa farrow-to-finish operation lost $22.17 per head marketed during April by Schulz's calculations. April net returns were the worst since November 2016.
ISU estimates the cost of production for April marketings at $45.97 per hundredweight (live) or $62.35 per hundredweight (carcass), the highest monthly cost since August 2016.
Hog slaughter has been up 3.3% during the 11 weeks since the start of March. That is only a small fraction below the 3.4% increase implied by the heavy weight market hog inventory in USDA's March inventory survey. Market hog slaughter during June-to-August should be up 3.1%, if the March 1 light weight hog inventory was also correct.
Year-to-date hog slaughter is up 2.8%, but pork production is up 3.6% due to heavier slaughter weights. Iowa-Minnesota market weights through early May averaged 285.6 pounds, up 3.2 pounds from same period last year.
If weights continue to run above the year-ago level, then summer pork production could be up in the range of 3.5% to 3.8%, year-over-year. Friday's average closing price for the June, July and August 2018 lean hog futures contracts averaged 4.3% lower than the June, July and August 2017 contracts were a year ago. Only having a 4.3% decline in hog price for a 3.5% to 3.8% increase in pork production would imply very strong demand.
The average retail pork price in April was $3.752 per pound, down 0.1 cents from the month before, but up 0.5 cents from April 2017. Hog prices were sharply lower. The average price for 51-52% lean live hogs in April was down $4.16 per hundredweight from a year earlier and down 5.59 from the month before. Packer margins were down 27.0 cents per pound in April, but the wholesale-retail price spread was up 35.8 cents per pound compared to April 2017.
The WASDE's first estimate of 2019 pork production for 2019 is 27.61 billion pounds, up 3.1% from this year which is expected to total 26.770 billion pounds up 4.6% from 2017's 25.584 billion pounds. The long-term growth rate for pork production has been 1.5% per year. It looks like 2019 will be the fifth consecutive year with growth faster than the 1.5% trend. Although USDA expects 2019 pork production to be up 3.1%, they expect 2019 prices to be more or less even with this year. It will take strong demand to make that happen.
USDA is forecasting 2019 U.S. pork consumption at 53.1 pounds per person (retail weight), up 1.2 pounds from 2018, up 3 pounds from 2017, and the highest since 54.2 pounds in 1981.
USDA is forecasting U.S. pork exports will be up this year, up again in 2019, and thus be record high for the third consecutive year. They expect little change in U.S. pork imports.
Tuesday afternoon USDA-National Agricultural Statistics Service will release its monthly Cold Storage report. Stocks of frozen pork have been above the year-earlier level at the end of each month since December and is likely to be up again on April 30.
On Thursday afternoon, USDA will release their monthly Livestock Slaughter report. Preliminary data indicate April hog slaughter was up 7.0% largely because of one more slaughter day than last year. On an equal day basis, last month's hog slaughter was up roughly 2.4% compared to April 2017.
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