Look for cattle buyers to show more buying interest Thursday, but it remains to be seen if any of the Midwest noise will be attractive enough to trigger significant feedlot cooperation and significant trade volume. Showlists will probably be priced around $115 plus in the South and $183 plus in the North. Live and feeder futures should open on a mixed basis tied to a combination of follow-through buying and beef demand worries.
The cash hog trade seems ready to open with bids steady to $1 higher. The premium of the pork cutout over the latest cash index now totals no more than 67 cents, implying significant red ink in the processing world. Indeed, it's not surprising that Saturday kill plans are virtually nothing at this time. Lean futures also seem geared to begin with uneven price action thanks to residual selling on one hand and short-covering on the other.
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Cattle futures impressive shook off outside markets Wednesday to close significantly higher. August landed its best close since March 20.
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Beef cutouts closed sharply lower on Tuesday, underscoring ideas that the best of seasonal demand is probably behind us and further tightening packer margins.
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The June 1 Cattle on Feed report, scheduled for release on Friday, is expected to reveal another month of smaller year-over-year placements (probably 5% to 10% below 2017) larger marketings, and easing on-feed inventories.
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The Australian Bureau of Agriculture, Resource Economics and Rural Sciences (ABARES) on Tuesday raised its forecast for beef exports in 2018-19 by more than 4% (i.e., 1.15 million metric tons (mmt), up from the 1.11 mmt it estimated in March).
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Interviewed by CNBC on Tuesday, Jamie Dimon and Warren Buffet both expressed confidence that the ongoing economic recovery (still young by historical standards) would probably last enough two to three years.
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While the short-term trend in lean hog futures is bullish, the longer-term trend is decidedly bearish. Furthermore, the market structure has shifted to be with the summer contracts trading discount to the cash market.
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For the next couple of weeks, the industry will be preparing for the Fourth of July holiday and gains in pork product values are expected through the end of June.
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U.S. pork shipments destined to Japan during April were 95 million pounds, which is lower than expectations. This volume was lower than the prior month by almost 9% and lower than theprior year by almost 8%. March and April were both lower for Japan than is typical and it may signal a change in export relationships.
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CATTLE: (foodarket.com) -- This is a story about two ranchers in western South Dakota-- Kenny Fox and Eric Jennings.
The two men have both been busy vaccinating and branding their calves, and preparing to get hay ready for winter. Fox is in his 60s; Jennings is in his 50s. Their lives, jobs and outlooks have a lot of overlap. Where the two men differ sharply, however, is on trade.
"We have people who have lost jobs because of NAFTA," says Fox.
On the flip side, Jennings says, "We're very happy with NAFTA. It has opened up our borders tremendously."
The North American Free Trade Agreement is at a crossroads-- renegotiations for the 24-year-old trade deal started last August. The three parties-- the US, Canada and Mexico-- have made some progress, but don't appear close to an agreement, with President Donald Trump continually threatening to walk away from the trade pact if he can't get a better deal.
NAFTA is generally seen as positive for most segments of US agriculture. For beef, the pact got rid of tariffs and quotas between the three nations. Since NAFTA came into effect in 1994, US beef exports to Mexico have increased by more than 450 percent, while exports to Canada have more than doubled.
But sales are going in every direction. Beef, and live cattle, imports to the US from Canada and Mexico have also risen sharply in the time of NAFTA. During that time, the US has accumulated a $32 billion trade deficit for beef products. And that's why Fox, the farmer opposed to NAFTA, doesn't like the trade deal.
"I don't think we need as many cattle coming into this country as there is," says Fox. "That is causing people to go out of business. It is causing young people not to go in because it costs so much money to get started.
Economists say trade deficits don't really matter-- they're simply a reflection of products going from where they're most efficiently produced to where there's demand. And since NAFTA came into effect, beef production is up in all three nations. Still, for established cattle men like Fox, more competition can often mean more work for less money.
"We repair what we got instead of buying new. We don't build new fences. We just kind of limp along and hope for the best," says Fox.
These days, however, he's got more hope that things will change.
"President Trump is the only ally that we really have [in Washington]," says Fox. "And I feel that he has done more in the short time he's been there than any president that I know of in my lifetime."
Fox is a member of R-Calf USA, a nationwide organization of cattle ranchers. Bill Bullard, the organization's CEO, says since NAFTA came into effect, imports of Mexican and Canadian products have taken a toll.
"Since the 1994 implementation of NAFTA, we have lost 20 percent of all of our beef cattle operations in the United States," says Bullard.
There've also been other factors at play during that time: droughts, technological advances and consolidation of farms.
Bullard says they're not opposed to competition, just unfair competition. He says stricter American regulations make it more expensive to produce beef in the US than in Canada or Mexico. And his organization argues that Canadian and Mexican cattle ranchers get more help from their respective governments.
Bullard says NAFTA needs some key revisions to protect American cattle ranchers.
"If Mexico can produce cattle far cheaper than the United States, then we should add tariffs to that product coming into this country so that our beef produced under the US production regime can compete with the Mexican cattle," says Bullard.
His organization also wants other issues addressed by American trade negotiators, like restoring country of origin labeling for beef and implementing stricter food safety standards. And Bullard says if NAFTA can't be fixed: "We should rip it up."
Then there is the other US perspective on NAFTA coming from The National Cattlemen's Beef Association. The headline of their one-page summary reads: "US Beef Under NAFTA: An Export Success Story."
As a cattle rancher, you kind of have to choose sides, like going with the Mets or the Yankees; it's hard to support both. Eric Jennings, the rancher who supports NAFTA, chose the Cattlemen's Beef Association, but he's a fish out of water in South Dakota.
HOGS:(National Pork Producers Council) -- In search of new ideas and solutions, not just for Thursday but for Friday, too, more than 20,000 producers, employees and pork professionals attended the 2018 World Pork Expo, June 6-8. Presented by the National Pork Producers Council, Expo also welcomed nearly 1,000 international guests from 35 countries to Des Moines.
Marking its 30th year, the 2018 Expo presented a record number of trade-show exhibitors, hospitality tents, educational seminars and live hogs in the Junior National show. The Iowa State Fairgrounds provided the perfect backdrop for a festive summer evening during MusicFest, giving visitors the opportunity to share fun and fellowship. A long-time highlight, the Big Grill-- staffed by Iowa's Tama County Pork Producers Association-- served up more than 10,000 free pork lunches over the event's three days.
"It's hard to believe Expo has been around for 30 years," says Jim Heimerl, NPPC president and producer from Johnstown, Ohio. "Just as the U.S. pork industry has evolved over the years, so too has Expo. Thursday it is an excellent venue to visit with a number of pork professionals and share insights in a short period of time. I hope there are many more Expos to come." More exhibits, more innovations
Topping the list of priorities for Expo attendees was the world's largest pork-specific trade show, and this year's offering set a record. The addition of the Jacobson Exhibition Center and an expanded outdoor exhibit space pushed the trade show beyond 360,000 square feet. A mix of first-time and long-time exhibitors from more than 500 U.S. and international companies displayed the latest products, services and technologies for pork production.
A record 60 hospitality tents provided pork producers and their employees an opportunity to meet with allied industry representatives in a relaxed setting. Trade show exhibitors were pleased not just with the number, but the quality of Expo's attendees. "They are very business oriented, very professional," says Kevin Hermesch, strategic account manager, Provimi North America. "It used to be that one person did it all within a pork production system. Thursday, you have experts within a specific production area, and they have different needs and expectations."
Expo provides an opportunity to meet multiple people within a production company, from managers to finance specialists, over a couple of days, Hermesch points out. A 30-year Expo exhibitor, Provimi provides nutritional services to pork producers.
He reports that, despite some market uncertainty lingering in the background, producer attitudes remained positive. "They tend to focus on what's in their control and where they need to go in the future," Hermesch adds. "That means looking for ways to get better, be more efficient and improve the bottom line." Rick Knauer, national technical sales manager with SKOV, echoes that sentiment. "The customers and atmosphere of Expo have been great," he says. "Producers are looking for solutions, new technologies and what they need for the future."
A Danish company, SKOV provides energy-efficient climate control solutions and weighing options for pork production systems; 2018 marked its second year exhibiting at Expo. With a presence in 87 countries, Knauer particularly likes Expo's link to international visitors.
Another plus is the training and education opportunities that Expo provides. SKOV sponsored a business seminar on barn climate solutions. "We're excited to come back next year," Knauer says. His message for producers who don't attend Expo: "You're missing out. There are more than enough companies here to find what you need for your business."
The vibrant World Pork Expo Junior National continued its steady growth, with nearly 1,200 youth, representing 32 states. That compares to 1,050 exhibitors from 32 states in 2017. Also breaking records were the number of live hogs exhibited-- 2,800 head-- an increase of 300 hogs from 2017's record. To accommodate the ever-expanding show, the events began on Monday, June 4, and ran through the end of the week. Hosted by the National Junior Swine Association and Team Purebred, the Junior National combines educational activities such as a Skillathon and Youth PQA Plus® certification, with swine judging, live-hog competitions and showmanship.
On Friday, June 8, the open show featured more than 760 crossbred and purebred boars and gilts. Junior exhibitors were eligible to join other swine breeders for the competition and the opportunity to be selected for the breeding stock sale on Saturday morning, June 9. Results for the open shows and sales for National Swine Registrybreeds can be found online.
Pork producers are known for their continuous quest for information and ideas, which made the many educational and business seminars an Expo bonus. This year, pork producers and their employees could select from 20 free seminars. In addition to educational presentations, the sessions provided an opportunity for open dialogue and interaction with the presenters.
Presented by allied industry, the business seminar topics ranged from consumer trends to production-data analysis to maximizing vaccination and disease programs to environmental solutions inside and outside the hog barn and more. PORK Academy seminars, presented by Pork Checkoff, addressed such topics as sow longevity and productivity, antibiotic resistance and responsible use, and domestic and international pork marketing strategies. There also was an update on the industry's Secure Pork Supply Plan, which is designed to address pork producers' needs in the event that the United States faces a market-limiting foreign animal disease. Market outlook and weather presentations rounded out the educational events and provided information that producers can use for long-term strategic planning.
Each year, World Pork Expo offers pork producers and others a place to meet and visit with a wide range of people who share a common interest-- to produce the world's best pork products," Heimerl says. "There is always something to learn and insights to share."
World Pork Expo will move into its 31st year in 2019. So, mark your calendars and plan to attend the 2019 World Pork Expo, June 5-7, at the Iowa State Fairgrounds in Des Moines.
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