Little is expected to develop in the cash cattle market Tuesday with bids and asking prices poorly defined. Depending on further development in carcass value and deep board discounts, significant trade volume may not surface until Thursday or Friday. We are assuming bullish feedlot managers will price ready steers and heifers several dollar higher (e.g., $126 basis the South). Live and feeder futures seem likely to open moderately higher Tuesday morning thanks to short-covering, cash premiums and higher cutouts.
Expect another round of near-steady bids in the cash hog trade. While most are betting that slaughter numbers will steadily decline through the second quarter, we haven't yet reached the tipping point in terms of fueling higher bids with tighter supplies. Needless to say, when numbers drop enough to make a cash different, stronger product sales shouldn't be far behind. Lean futures are geared to open on a mixed basis with nearbys opening somewhat higher than deferreds.
| BULL SIDE | BEAR SIDE | ||
| 1) | Generally speaking, cattle feeders distributed smaller showlists on Monday (especially in the South) with only Nebraska producers offering more ready steers and heifers. | 1) | Ignoring the impressive strength of feedlot sales last week, cattle futures quickly gave up much of Friday's rally. True discount believers are alive and well. |
| 2) | Beef cutouts moved sharply higher Monday, particularly in terms of the choice box. Memorial Day, the crown jewel of seasonal beef demand, remains nearly 30 days away, plenty of time for meat buyers to get and stay aggressive. | 2) | On the other hand, boxed beef supplies were already described as "heavy." With chain speed set to steadily accelerate through the balance of the second quarter, can beef demand keep channels clean enough to avoid aggressive wholesale price discounting. |
| 3) | Early bird guesses suggest that hog slaughter this week should fall by another 20,000 to 25,000 head. | 3) | Sources out of China predict that trade talks scheduled in Beijing this week will not go well, increasing the chances for a global trade war. |
| 4) |
As disappointing as lean hog futures have performed in recent weeks, premiums still do exist in spring and early summer contracts. The seasonal trend is for June hog futures to chop about for the couple of weeks before trending higher into contract expiration.
| 4) | Lean hog futures could find it difficult to launch a decent seasonal rally as long as June and August live cattle futures continue to nurse such hugh discounts. |
CATTLE: (US NEWS) -- Traffic at McDonald's was surprisingly strong during the first quarter, pushing the world's biggest burger chain far past Wall Street expectations.
Comparable-store sales in the U.S., where the company has struggled, rose 2.9 percent. They rose 5.5 percent globally, which is a lot stronger than the 3.6 percent increase that industry analysts had forecast, according to a survey by FactSet.
The company, based in Oak Brook, Illinois, earned $1.38 billion, or $1.72 per share, for the period ended March 31. A year earlier the hamburger chain earned $1.21 billion, or $1.47 per share.
Earnings, adjusted for pretax expenses, came to $1.79 per share, which is way better than the per-share earnings of $1.67 that industry analysts had projected, according to a poll by Zacks Investment Research.
Total revenue declined to $5.14 billion from $5.68 billion, but managed to edge out forecasts.
HOGS: (AGDAILY) -- After last week's news that a North Carolina jury awarded $50 million to Murphy Brown/Smithfield neighbors, the National Pork Board wants the public to know the U.S. pork industry has a strong record in environment and sustainability efforts.
The verdict is the first in a series of cases brought against the world's largest pork producer. In this case, the 10 neighbors of the 15,000 hog operation said the farm impacted their quality of life due to offensive odors and manure that was applied on nearby fields.
The National Pork Board says over the last decade, the U.S. has played a leading role in advancing animal agriculture's environmental and conservation efforts. In a 50-year look-back completed by the University of Arkansas in 2012 -- and which is currently being updated with data through 2015 -- U.S. pig farmers had reduced land use by 78 percent, reduced water use by 41 percent, and had a carbon footprint that was 35 percent smaller. Preliminary data over just the past five years shows continued progress.
"Sustainability on the farm is an ongoing commitment by pig farmers today," said Terry O'Neel, National Pork Board president and a Nebraska pig farmer. "As an industry, farmers are committed, through ongoing environmental sustainability efforts, to safeguard natural resources for future generations."
Pig farms throughout the U.S. must carefully manage the manure that is produced, and do so according to the requirements of all environmental permits and regulations. Manure is a valuable nutrient resource for the production of all crops, and is applied to fields in accordance with agronomic needs of the crop and according to state and federal regulations.
"Pig farmers learn from the examples of others and we routinely share best practices," said O'Neel. "That's the motivation behind the development in 2008 of our We Care platform and its six ethical principles of production."
We Care, which marks a decade of commitment this year, includes steps to:
• Produce safe food
• Protect and promote animal well-being
• Ensure practices to protect public health
• Safeguard natural resources
• Provide a safe work environment
• Contribute to a better quality of life in our communities
Smithfield Foods said they plan to appeal the verdict. A senior vice president of corporate affairs for Smithfield Foods, said in a statement that the "lawsuits are an outrageous attack on animal agriculture, rural North Carolina and thousands of independent family farmers who own and operate contract farms."
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