Activity in feedlot country will be limited to the distribution of new showlists. We expect the early June offering to be somewhat larger than last week. Live and feeder futures seem likely to open moderately higher, supported by cash premiums and short-covering.
Hog buyers seem set to start work this week with bids steady to $1 higher. Our guess is the bullish combination of tightening slaughter numbers and improving pork demand this season will be as good as it's going to get over the next 30 days or so. Lean futures seem geared to open moderately lower Monday, pressured by the discounted cash market and Friday's drop in carcass value.
| BULL SIDE | BEAR SIDE | ||
| 1) | Fed steers and heifers in the North sold mostly $1.25 higher on a live basis Friday (i.e., $111), proving that despite large country offerings, feedlots still have some bargaining power. | 1) | Despite the theoretical need for retailers and food managers to reload in terms of beef supplies, cutouts last week struggled to score just more gains. Also, wholesale prices were not helped much by the holiday-shortened round of beef production. |
| 2) |
For the week ending May 24, net beef export sales exploded to 31,300 metric tons (MT), the biggest weekly order since March 2013. At the same time, actual exports totaled 18,400 MT, up 14% from the previous week and representing a marketing-year high.
| 2) | Live cattle futures remain trapped between 40-day and 100-day moving averages. Spot June challenged the overhead resistance in the $106 to $106.50 area last week before falling back. There remains major resistance at $108 to $108.50. August is trying to move beyond the resistance area of $104, with the next important area being $108. |
| 3) | The U.S. economy added 223,000 jobs in May, above private expectations of around 188,000. Average hourly earnings rose 0.3% last month as the unemployment rate ticked down to 3.8%. All of this data bodes well for meat spending in the weeks ahead. | 3) | Despite the round of holiday-shortened product, the pork carcass value tanked by nearly $2 on Friday, pressured by softer demand for butts, hams, ribs and picnics. |
| 4) | For the week ending May 24, net pork export sales increased to 21,800 MT, up 6% from the previous week and 14% from the prior four-week average. Increases were reported for Mexico (10,200 MT), Japan (2,800 MT), Chile (1,800 MT), South Korea (1,700 MT) and Canada (1,400 MT). | 4) | For the week ending May 24, actual pork exports dropped to 20,800 MT, down 17% from the previous week and 13% from the prior four-week average. The primary destinations were Mexico (8,900 MT), Japan (4,000 MT), South Korea (2,900 MT), Canada (1,700 MT) and Colombia (800 MT). |
OTHER MARKET SENSITIVE NEWS:
CATTLE: (globalnews.ca) -- The recent beef between Canada and the United States over trade could impact Alberta's well-known meat industry.
Last week, American President Donald Trump announced Canada would no longer be exempt from a 25 per cent steel and 10 per cent aluminum tariff, leading Prime Minister Justin Trudeau to announce Canada would implement retaliatory tariffs at the start of July.
Rich Smith, executive director of Alberta Beef Producers, told the 630 CHED Alberta Morning News that while the tariffs don't directly impact their industry, it could lead to higher costs for the equipment that farmers and ranchers use.
Smith added cattle producers in Canada, the US and Mexico favour open borders and free trade in cattle and beef. However, Smith notes the industry could become "collateral damage" in the future. "As countries get into trade wars and there's retaliation back and forth, there's always a concern that it could interfere in the trade with our products." Talks surrounding the North American Free Trade Agreement (NAFTA) have also soured, with Trump suggesting the U.S. could make separate trade deals with Canada and Mexico.
Smith said that has producers even more worried.
"It shows the risks associated with relying too much on one market."
Now, Smith said Alberta Beef Producers is looking to send their products across the Pacific and Atlantic Oceans to Asian and European markets-- but they need the federal government to ensure the 11-country Trans Pacific Partnership is ratified soon.
"That would open up a bunch of markets in Asia where we'd be able to be quite competitive and reduce our reliance on the United States."
HOGS:(NPPC) -- The National Pork Producers Council has consistently stated its concern about retaliation against U.S. agriculture, including pork, in response to tariffs placed by the United States on steel and aluminum imports. The decision to impose tariffs on steel and aluminum from Mexico and Canada, critical export markets, significantly heightens our concern as Mexico is already threatening to retaliate against U.S. pork. U.S. pork shipped $1.5 billion of product to Mexico, its largest export market, and $792 million to Canada, its fourth-largest market, last year.
Global export market uncertainty has resulted in considerable lost value for U.S. pork producers. According to Iowa State University Economist Dermot Hayes, hog futures dropped $18 per animal, amounting to a $2.2 billion loss on an annualized basis, since March 1 when speculation about U.S. pork access to the critical Chinese market began.
The market disruption caused by export market uncertainty comes at a time when U.S. pork is expanding production to record levels. Five new pork processing plants have recently opened or will soon begin operations, increasing U.S. pork production capacity by approximately 10 percent from 2015 levels by next year. Exports accounted for more than $53 of the average $149 value of a hog last year and support over 110,000 U.S. jobs.
We call for an end to these trade disputes so that hard-working U.S. pig farmers can do what they do best: meet global demand for one of our nation's most competitive export products, one that favorably impacts U.S. trade imbalances with countries around the world.
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