Cattle buyng interest could start to improve at
midweek with opening bids around $190-192 in the North and $120 in the
South. Asking prices should be around $195-plus in the North and
$125-plus in the South. Yet both sides will be closely monitoring the
board. Further strength could work to delay significant trade volume
until Thursday or Friday. Live and feeder contracts should open
moderately higher thanks to follow-through buying and cash premiums.
The cash hog market seem set to open with bids
steady to $1 higher. The country's offering of ready barrows and gilts
does seem to be tightening. That fit with early estimates of the
Saturday of no more than 42,000 head. Lean futures should also open
moderately higher with the help of spillover buying and fundamental
optimism.???
| BULL SIDE | BEAR SIDE | ||
| 1) | While beef cut-outs closed no better than mixed on Tuesday, the red hot choice box continues to drive the composite carcass value higher. Decent packer margins should support a certain degree of stability in feedlot cash this week. | 1) | Although June moved slightly below the short-term uptrend before turning sharply higher, the high of the reversal remained below the highs of the last two weeks. Those levels of $107.57 and $107.82 become technical resistance if the market should continue moving higher. |
| 2) | June live cattle moved slightly below the short-term uptrend before turning higher, in a 232-point trading range for the day. The discounts in June and August remain near historic wide levels, near $19-$21 below last week's cash market, compared to more "average" levels of about $9.50 at this same time in May. In short, one could still argue that the board is grossly oversold. | 2) | Bearish expectations remain in the cattle market for significant downward moves in cattle prices in the weeks and months ahead, nervousness that should continue to encourage producers to be aggressive in their marketing rates. |
| 3) | The cash hog market jumped nearly a buck higher on Tuesday as packers reacted both to a tighter country offering and firming carcass value. Regarding the former, note that weekly chain speed is already running 11,000 head below last week. | 3) | China has ramped up inspections of imported U.S. pork, the latest American product to be hit by a potentially costly slowdown at Chinese ports in the past couple of weeks. Ports are opening and inspecting every cargo that arrives, significantly lengthening the time product stays at the port. |
| 4) | Soon to be spot month June live hogs closed Tuesday's session over 210 points higher at $76.30, up roughly 600 points from contract lows posted in early April. June lean hogs have a tendency to post at lrsdt modest gains heading into Memorial Day. | 4) | Despite yesterday triple-digit bounce in summer hog futures, the short-term market trend remains negative, as is the long-term trend. |
OTHER MARKET SENSITIVE NEWS
CATTLE: (Woodward News) -- Estimated cattle
operation losses from the April wildfires that raged across parts of
western Oklahoma exceed $26 million, based on available information.
"More than 348,000 acres burned causing a wide
variety of losses to livestock, pastures, hay, fences and facilities,"
said Derrell Peel, Oklahoma State University Cooperative Extension
livestock marketing specialist.
Estimated cattle industry losses in Oklahoma include:
• $16.4 million for fence replacement and repair;
• $1.4 million for livestock killed or destroyed
as a result of the fire plus veterinary costs and reduced value of
surviving injured animals;
• $6.3 million for burned facilities and corrals;
• $1.6 million for emergency feed; and
• $660,000 for burned pasture and hay.
The estimates are based in part on preliminary
totals of some 1,600 head of cattle lost and over 2,100 miles of fences
affected. The totals do not include any estimates for vehicle and
equipment losses or homes or other personal property destroyed in the
fires.
"Naturally, estimates may increase as a more comprehensive assessment of the losses is completed," Peel said.
HOGS: (American Agriculturist) -- Thank goodness
for the spring recovery in hog prices. The year started out with a bang
as hog prices ran higher than the previous year. Lean prices reached a
high of around $72 per cwt in early February. Over the next two months,
the bottom fell out, with lean prices dropping to $45 per cwt by the
first week of April. I [Dr. Chris Hurt] will say it one more time: Thank
goodness the spring price recovery brought prices back up.
Larger pork supplies got the downward price
momentum underway, but the would cause consumers to buy some of that
volume, and the U.S. would get some added export business to non-Chinese
destinations. Retail pork prices would drop in the U.S. by 1%.
After all these effects, I estimate that the
lost pork business would represent about 1% of our production. The
impact to farm-level hog prices would be about a 2% reduction, or around
$3 per head. While my estimates were that hog prices would drop about
2% due to the tariff, the June lean hog futures dropped 8% from the day
before the announcement to the low on the third day after the
announcement.
The U.S. pork industry has pursued exports as a
strategy to grow. That has had favorable results, as world pork trade
has been expanding at a rate of more than 5% a year. In fact, the U.S.
exported 22% of production last year. However, one of the disadvantages
of relying on greater trade is that it can add instabilities, such as
what we have seen this year with talk of Chinese pork tariffs.
The price outlook for hogs has weakened, and
costs have risen. Lean hog prices are now expected to average near $65
in 2018, with costs of production around $68 per lean cwt. There should
be a bit of profit above all costs this spring and summer, with prices
in the low $70s, but losses are expected to be large in the final
quarter of this year and the first quarter of 2019. Current estimates
are that losses at that time may be close to $20 per head.
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