Friday Morning Livestock Market Update - Meat Futures Seem Staged to Open With a Firm Undertone

GENERAL COMMENTS:

Light to moderate trading surfaced in parts of cattle-feeding country late Thursday (i.e.., $110 to $111, mostly $110), but short-bought packers still need to do some work in terms of procurement (especially in the North). Asking prices on unsold cattle are around $114 to $115 live and $184 plus dressed. Live and feeder futures should open moderately higher, supported in large part by signs of greater cash stability.

Look for cash hog buyers to resume work Friday with significantly higher bids. Ready numbers are tightening and product demand is improving. Not a bad combination to be sure. The Saturday kill should amount to nearly 235,000 head as packers move to compensate for the week's slow start. Lean hog contracts should open with a firm undertone thanks to improving seasonal fundamentals.

	BULL SIDE		BEAR SIDE
1)	Light to moderate fed cattle trade volume surfaced in Kansas, Texas and parts of Nebraska late Thursday thanks to steady/firm packer bids (i.e., $110 live). The balance of showlists will be priced with some confidence.	1)	The inability of live cattle futures Thursday to extend limit gains scored on Wednesday worked to reinforce overhead technical resistance. Additionally, board potential remains checked by the anticipated growth of beef tonnage over the next 30 to 60 days.
2)	For the week ending May 19, cattle carcass weights decline, countering some judgments that a seasonal bottom was already in: all cattle averaged 795 pounds, 4 poundsless thanthe week before and 6 pounds more than the previous year; steers averaged 846 pounds, 2 pounds less than the prior week and 10 pounds more than last year; heifers averaged 782 pounds, 9 pounds less than the previous week and 12 pounds more than 2017.	2)	For the week ending May 26, U.S. hatcheries set 232 million eggs in incubators, up 3% from a year ago. At the same time, chicks placed in the United States totaled 185 million chicks, up 2% from 2017.
3)	Despite significantly higher bids in hog country on Thursday, negotiated dressed receipts were no better than moderate (i.e., only 8,250 head basis the national report). The failure of higher bids to stimulate country movement clearly signals how ready numbers are tightening.	3)	With two weeks of trading left until expiration, the June contract remains at a 700-point premium to the cash index. Though seasonal fundamentals are friendly, that seems like a lot to expect out of the cash market. In other words, the board's nearby premium seems vulnerable.
4)	Pork carcass value exploded sharply higher on Thursday thanks to aggressive demand for bellies, hams, loins and picnics.	4)	If the trade war continues to heat up, the potential of U.S. pork exports could be significantly compromised.

OTHER MARKET SENSITIVE NEWS:

CATTLE: (Brownfield.com) -- U.S. Meat Export Federation spokesman tells Brownfield the Brazilian trucker and dockworker strike might not affect the U.S. meat industry very much.

Joe Schuele tells Brownfield the real impact in the U.S. will be for a few companies exporting specialty cuts of beef to Brazil. "That isn't going to have a big impact on U.S. exports overall, but for those companies that have gotten their plants and their products and labels approved to move product into Brazil, I would assume the truckers strike is a concern for them."

Schuele says U.S. producers might not gain many international sales, even though Brazil is having trouble moving product to ports. "U.S. red meat in many cases does not compete head-to-head with Brazil. We tend to serve a lot of markets that Brazil either doesn't have access to or doesn't ship much product to. For example, they don't serve Japan. They just started to get a little bit of pork into Korea but they don't send beef to Korea."

There are reports of meat rotting in Brazilian trucks and chickens being killed because producers cannot get feed delivered to farms. Drivers and dockworkers are refusing to work because of high fuel taxes.

HOGS: (NPR) -- The Trump administration's latest move to impose tariffs on steel and aluminum imports from the U.S.'s biggest strategic and trade partners has touched off a barrage of criticism and retaliation.

Commerce Secretary Wilbur Ross said Thursday that the U.S. will impose tariffs of 25 percent on steel and 10 percent on aluminum for imports from the European Union, Canada and Mexico just after midnight on Friday. Europe, along with Canada and Mexico had been granted a temporary reprieve since President Trump first announced the tariffs in March.

The administration is taking the action under a relatively obscure U.S. trade law intended to protect national security. Many prominent Republicans have criticized the administration's aggressive use of that justification, saying its trade actions will hurt the U.S. economy. The international response to the action was swift. Here is a breakdown of the response, by region.

European Union: The EU threatened to make good on a threat it issued in March to impose tariffs on imports from the U.S. that is 10 pages long, including everything from corn and tobacco, to T-shirts, Levi's jeans, bourbon, motor boats and various forms of steel. The EU also started the process of filing a complaint with the World Trade Organization.

In a statement, European Commission President Jean-Claude Juncker said "this is protectionism, pure and simple." Trade Commissioner Cecilia Malmstrom added that the U.S., through months of negotiations, threatened steep tariffs in order to obtain trade concessions from the EU. "This is not the way we do business, and certainly not between longstanding partners, friends and allies," she said in a statement.

Mexico: Mexico's ministry of economy pledged to impose equivalent measures, and included a partial list of U.S. goods that would face tariffs, including pork bellies, cheese, and produce such as grapes and apples.

Canada: A list of countermeasures would include tariffs on U.S. metals and food products such as yogurt, pizza and cucumbers, as well as household products like mattresses and refrigerators.

Canadian Prime Minister Justin Trudeau said the Trump administration's argument that the tariffs were necessary for national security reasons was an "affront" to Canada, which has fought alongside the U.S. in numerous armed conflicts.

United Kingdom: Britain issued a statement saying, in part: "We will defend the UK's interests robustly. We continue to work closely with our EU partners and will consider carefully the EU's proposals in response."

The UK's Secretary of State for International Trade Liam Fox told Sky News it, too, is considering retaliatory measures and joining the EU's complaint with the WTO. As for the U.S.'s national security argument, Fox said, "In the case of the UK, we send steel to the US that is vital to their defence industry; it is patently absurd.

France: Bruno Le Maire, France's minister of the economy and finance, said the U.S. tariffs are "unjustified, unjustifiable and dangerous." He told NPR's Audie Cornish: "We are close allies, we the Europeans, to the United States and we cannot understand that decision. We strongly believe that the decision taken Friday by the American administration is really an unacceptable one." "[French] President Macron expressed Thursday his willingness to work on the renewal of the trade system with the United States, but we cannot negotiate, we cannot enter into any kind of discussion, under pressure, and being hit by tariffs will not help us to open the door to any kind of negotiation," Le Maire said.