Packer inquiry in cattle-feeding country could
slowly start to develop at midweek. Look for initial bids around $105
live and $172 dressed. Our guess is that feedlot managers will start out
pricing steers and heifers around $110 plus live and $178 plus dressed.
Significant trade volume could easily be delayed until Thursday or
Friday.
Hog buyers should resume work on Wednesday with
bids steady to $1 lower, hoping to extend the strengthening of leverage
since late last week. While processing margins have been improving, they
remain pretty bleak. Chain speed seems to be running a bit faster.
Weekly slaughter should total close to 2.21 million head. Lean futures
seem set to open moderately higher, supported by follow-through buying
and the premium of the cash index.
| BULL SIDE | BEAR SIDE | ||
| 1) |
With the cost of live inventory
dropping faster than cutouts, beef processors own decent margins and
appear to have a formidable commitment to tonnage over the next several
weeks. This reality should lend some support to the cash cattle trade.
|
1) |
Cattle futures closed little better
than mixed on Tuesday, a pretty puny dead cat bounce in the wake of
Monday's ugly price fall.
|
| 2) |
Although May placement (2.124
million head) exceeded trade expectations and matched the large
in-movement of late spring 2017, the average size of animals placed was
considerably different than last year. Placements less than 600 pounds
were up 45,000 head (11%less than a year ago), while placements over 800
pounds were down 2%. This points to a broader scattering of ready
cattle this fall, one that may be more manageable vis-a-vis demand.
|
2) |
The discount of late-summer
livestock futures, coupled with the danger of excessive heat to both
consumer demand and animal heath, could soften the selling resolve of
producers.
|
| 3) |
The pork carcass value continues to
show good strength. The cutout closed solidly higher again on Tuesday
thanks to better demand for all primals except the ham.
|
3) |
The fact that the Fourth of July
holiday is falling in the middle of the week is likely to take away some
of its punch in terms of retail meat buying.
|
| 4) |
Although nearby lean hog bulls
didn't manage to completely erase the board damage suffered on Monday,
spot July did succeed in nosing back above its 100-day moving average.
|
4) |
As far as lean hog futures are
concerned, the short-term trend is bearishand sois the long-term trend.
The structure of the market is also bearish with spot July trading at a
discount to the current settlement index value, and the remaining
contracts are trading at a discount to the July.
|
OTHER MARKET SENSITIVE NEWS:
CATTLE: (Feedstuffs) -- Joel Haggard, USMEF
senior vice president for the Asia Pacific, said re-establishing a
foothold in the world's fastest-growing beef market has not been easy,
and the threat of new duties has already had an effect on customer
interest in U.S. beef, especially in the form of a noticeable slowdown
from some of the industry's loyal restaurant and retail partners.
"I think owners and operators are nervous not
just about supply reliability after additional 25% duties imposed and,
of course, the pricing, but they're also concerned about consumer
response, especially if the war of words on the trade front escalates
further," he said.
USMEF expects that the volume of beef entering China will decline once the higher duty rate takes effect.
"U.S. exporters can't be expected to lower
prices by the extent of the duty because alternative markets exist for
the U.S. beef products being shipped to China now, such as rib-eye,
short ribs, chuck rolls, other steak cuts, etc. So, it really means we
face the prospect of a significantly lower flow of beef coming into the
marketplace here and very likely the loss of existing U.S. beef accounts
ranging from Korean barbeque restaurants to steakhouses and
supermarkets," Haggard said. "This is all very regrettable, because the
U.S. beef industry has put a lot of effort and capital into getting
things kick-started over here over the last year."
USMEF will continue to support loyal customers
regardless of any larger turmoil and uncertainty as the group still
believes China offers incredible long-term potential to the U.S. beef
industry, he added.
HOGS: (American Farm Bureau Federation) -- A
cookout of Americans' favorite foods for the Fourth of July, including
hot dogs, cheeseburgers, pork spare ribs, potato salad, baked beans,
lemonade and chocolate milk, will cost slightly less this year, coming
in at less than $6 per person, says the American Farm Bureau Federation.
Farm Bureau's informal survey reveals the
average cost of a summer cookout for 10 people is $55.07, or $5.51 per
person. The cost for the cookout is down slightly (less than 1 percent)
from last year.
"This is a very tough time for farmers and
ranchers due to low prices across the board. It is appropriate that this
very painful situation hitting farmers be reflected at the retail level
as well," said AFBF Director of Market Intelligence Dr. John Newton.
"We are seeing record meat and dairy production in 2018 so that has also
influenced retail prices and so, for consumers, this year's Fourth of
July cookout costs will be slightly less than last year's."
AFBF's summer cookout menu for 10 people
consists of hot dogs and buns, cheeseburgers and buns, pork spare ribs,
deli potato salad, baked beans, corn chips, lemonade, chocolate milk,
ketchup, mustard and watermelon for dessert.
"Milk production in 2018 is projected at a
record 218 billion pounds, contributing to lower retail milk prices,"
Newton said. While fluid milk prices have declined, tighter stocks of
American cheese contributed to slightly higher cheese prices, he added.
Competition in the meat case continues to
benefit consumers through lower retail prices, making grilling for July
Fourth even more affordable for consumers this year, according to
Newton.
A total of 96 Farm Bureau members in 28 states
served as "volunteer shoppers," checking retail prices for summer
cookout foods at their local grocery stores for this informal survey.
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