Cattle buyers should quickly restate the bids
posted Wednesday (i.e., $108 live in the South, and $173 to $175 dressed
in the North), and then sit back and watch the board for at least an
hour or two. They'll no doubt be hoping that significant board weakness
will help their cause. Yet if futures don't cooperate that way, or even
manage to move higher, packers may soon be forced to start hiking bids
toward country asking prices of $115 live and $183 dressed. An extension
of the impasse could certainly be pushed into Friday, but we're
guessing that short-bought buyers need to make something happen sooner
rather than later. Live and feeder futures are likely to open on a mixed
basis as traders position before the development of cash news.
Look for the cash hog market Thursday with near
steady bids. Chain speed has been slower this week, partially because of
tightening numbers off finishing floors and partially because of poor
processing numbers. Saturday's kill is not likely to be much over 2,000
head. The weekly total should be around 2.2 million head. Lean futures
should also begin with uneven price action in light trade volume.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Between their short bought status
(i.e., linked to last week's limited buy of live inventory) and still
relatively attractive processing margins, cattle buyers are starting to
run out of time in terms of securing short-term slaughter. This reality
should lend feedlot managers greater late-week leverage.
|
1) |
For the third consecutive session, beef cutouts tripped significantly lower on Wednesday with box supplies described as "heavy."
|
| 2) |
While the gains scored by cattle
futures at midweek were relatively modest, the board seems to be
improving its technical progress. The close in spot June was a bit above
the 100-day moving average. August momentarily spiked above its 100-day
moving average for the first time since early March, closing slightly
below that technically important threshold.
|
2) |
For the week ending June 16, U.S.
hatcheries set 231 million eggs in incubators, up 3% from a year ago. At
the same time, broiler growers placed 188 million chicks; up 2% from
2017.
|
| 3) |
Poorly-margined pork processors have
been trading hard this week to slow the cash hog train down. Success in
this regard for a handful of days is one thing, but it could be more
like mission impossible over the next 30 to 45 days given the
perseverance of tight country supplies and keen competition between
packers trying to cover as much overhead as possible.
|
3) |
Traders of late summer and fall lean
hog futures are becoming increasingly nervous about the ability of
demand to handle third quarter and beyond supplies. August and October
tumbled significantly below 40 cent moving averages on Wednesday.
|
| 4) |
For the week ending June 16, Iowa
barrows and gilts averaged 278.5 pounds, .2 pounds below the prior week
(though still a pound heavier than last year).
|
4) |
If the EU and Canada moves to sell
more product to Mexico as they react to tariff realities, the U.S. share
of the Mexico could drop significantly (see article below).
|
OTHER MARKET SENSITIVE NEWS:
CATTLE: (Wyoming Tribune Eagle) -- Wyoming
startup company BeefChain is at the intersection of traditional cattle
ranching and the state's economic diversification efforts.
The company is using blockchain technology -- a
buzzword during this year's legislative session -- to give producers and
consumers the opportunity to track beef products farm to table.
The company, started five months ago, has
already tagged roughly 1,500 cattle on five ranches throughout the state
using radio frequency ID tags that are now linked to a digital
supply-chain ledger.
Founders believe this pilot program could be the
beginning of more international trade opportunities for ranchers, and
may put Wyoming on the front lines of "ethical agriculture." The end
goal is to highlight living conditions of livestock, ultimately
producing higher-quality meat to sell in foreign markets.
Co-founder Rob Jennings, CEO of Wyoming
Certified Beef LLC, said, at the very least, the endeavor will get
people talking about Wyoming beef.
"We currently have millions of dollars in
agricultural assets tagged in Wyoming," Jennings said. "We are taking a
new, modern technology and using it not to change what the Wyoming
rancher does, but to demonstrate what the Wyoming rancher does. We can
show the data points -- where cattle are fed, where they graze, how they
are handled and how they are vaccinated. Blockchain becomes not just a
practical tool for increasing sales, but for telling a story of the
Wyoming rancher."
The company is incorporated in Cheyenne, but ranchers throughout the state are taking notice.
Wyoming Sen. Ogden Driskill, R-Devils Tower, who
sponsored a number of blockchain bills in the Legislature this year,
signed on to BeefChain almost immediately, tagging 323 calves from his
family-owned Campstool Ranch near Devils Tower in May.
His free-range farming technique, one his family
has employed for generations, is pricier than industrial factory
farming operations. Although there is a growing market for ethically
raised livestock, the challenge lies in guaranteeing the food's source.
This is where the digital ledger comes into play.
Blockchain is often discussed in conjunction
with virtual currencies like bitcoin, but the ledger is also known for
its tracking and security properties. It uses decentralized databases to
verify digital transactions.
Thomas Haynes, who operates a small ranch in
central Wyoming, said he heard about the company during discussions with
other producers.
"It is something I continue to seriously think
about as the industry changes and there is more focus on quality and
animal welfare," Haynes said. "I am eager, as I know many are in the
industry, to see where this goes."
Last year, 11,400 Wyoming farms generated $1.1
billion in cattle sales, making it the 14th-largest producer in the
U.S., despite the state's small population.
Alongside Jennings, co-founder Tony Rose joined
former Morgan Stanley managing director and former president of
blockchain startup Symbiont, Caitlin Long, to decide what's next.
First, they want to demonstrate the technology's
value and see how it can grow in a manageable way. This includes the
possibility of changing how ranchers sell beef.
"Producers could essentially tokenize or
fractionalize ownership of the herd," Jennings said. "Once you have
recorded the cows into your ledger and verified it, you could sell
partial ownership to people; there is a way for the rancher to gain a
stronger footing in how his or her operations are financed every year."
Jennings said the blockchain beef is expected to be exported to Asia by 2019.
"People are hearing about this, and we have
interest from around the globe, but ultimately this is about the Wyoming
rancher and making his or her story known," Jennings said.
HOGS: (GlobalMeatNews) -- The US Meat Export
Federation (USMEF) has anticipated a sharp drop in US market share if
the EU and Canada decide to increase pork supplies to Mexico.
USMEF believes that if the EU and Canada up
their supplies to Mexico, then the US market share could decrease from
the 90% registered during the first quarter to 75% for the second half
of the year.
The decline in market share could result in a
decrease in US exports of around 10,000 metric tonnes per month or more
than 60,000 metric tonnes for the remainder of 2018.
The predictions came after USMEF issued a report
on the current and potential losses to the US pork industry from
retaliatory tariffs, with a focus on Mexico.
Mexico imposed a retaliatory 10% tariff on US
pork, which will increase to 20% from 5 July, after President Donald
Trump introduced tariffs on steel and aluminium imports, sparking a
negative reaction among US farmers.
Following the decision made by Mexico, US
farmers said the escalating tariffs on pork would "devastate"
pork-producing families across the country.
"If unit values hold at Q1 levels, the drop in
export value to Mexico would be more than US$100m over six months,"
USMEF said in the report.
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