Cattle buyers and sellers should experience a typical "do-nothing-Tuesday" with both bids and asking prices remaining poorly defined. Whether or not cattle futures can find stability will impact the timing of this week's cash trade. If both sides can manage to keep their cool, significant trade volume may not surface until Thursday or later. Live and feeder futures should open moderately lower, pressured by residual selling and uncertain fundamentals.
Hog buyers are expected to open Tuesday's cash market with bids ranging from steady to $1 lower. This week's slaughter should total close to 2.6 million head. Lean futures should also open moderately lower, pulled lower by residual selling and pork demand doubts.
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New showlists distributed in feedlot country on Monday were generally smaller than last week with only Kansas showing more ready steers and heifers.
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December live cattle futures blew through the support area near $116 and the low of the day was the lowest since Sept. 12. December is now below that range, below the 40-day moving average, and closed just 40 points above the 100-day moving average. Further downside could start challenging the short-term upward trend.
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| 2) |
September beef exports totaled 110,160 metric tons (mt), up 6% from a year ago, valued at $687.1 million -- up 11%. For January through September, beef exports were just over 1 million mt, up 9% from a year ago, while value surged 18% to $6.2 billion.
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September pork export volume was down 2% from a year ago to 179,423 mt, while export value fell 7% to $470.2 million. Pork muscle cuts were 2% higher than a year ago at 146,542 mt, but value still declined 3% to $397.6 million.
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| 3) |
China confirmed a new case of African swine fever on Monday in the southern Hunan province, marking the 50th outbreak of the highly contagious disease in the world's top pork producer. The disease, which can be deadly for pigs and has no vaccine, has reached 14 provinces and municipalities in China since it was first detected in early August. Most of the recent cases have been in the south, which has the country's highest pork consumption per capita.
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The prospects of record large available hog supplies in the weeks ahead and whether the U.S. industry will be able to efficiently move the resulting record large pork supplies continues to weigh on the lean futures market.
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| 4) |
The seasonal trend is for December lean hogs to trade sideways in early November and then turn higher later in the month.
| 4) |
The short-term trend remains in lean hog futures remains bearish and the longer trend as well.
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CATTLE: (Drovers) -- Why would In the Cattle Markets write an entire article on African Swine Fever? The answer lies in trade and competitive meat prices. African Swine Fever (ASF) is a highly contagious disease with no known vaccine. Incidences of the fever have been reported in China, Belgium, Poland, Japan and other countries. Backyard operations are not the only enterprises vulnerable to this disease as a couple weeks ago it was found in a commercial operation of 20,000 pigs. Although wild hogs have facilitated some of the disease spread, the most likely cause of the transcontinental jump to Belgium is attributed to human actions and the transportation of meat products between countries.
The very real concern is what will happen if/when it comes to the US. Until recently Poland was able to export pork from certain regions. Belgium is still able to export pork from certain regions. This concept of regionalization is important as it would allow trade from non-infected regions of a country to continue. Given that the US will produce over 26 billion pounds of pork in 2018 and over 22% will be exported, an incident of ASF in the US would be challenging with regionalization and devastating without regionalization. Should the US become infected with ASF, the impact on pork prices would be severe even if we can keep some of our export trade with regionalization. The lower pork prices would also negatively impact other animal protein products.
Regionalization can work well, provided the transportation of swine between the infected and non-infected regions can be stopped. Unfortunately, as is the case in China, this transportation wasn't stopped. China, the world's largest producer of pork products, had eight provinces reporting ASF cases at the end of September. China has approximately 433 million pigs, about 5.9 times that of the US. Approximately 80% of their pigs face movement restrictions. The supply/demand structure in the different regions of China has created large price spreads between the different regions of China. These price spreads will likely continue to promote the illegal trade between these different regions and propagate the spread of the disease in China.
The US produces approximately 32% of the world pork exports. US pork export quantities have increased in 2018, although prices have not held up as well. One country where US export quantities have decreased steadily since April 2018 is China. China imports approximately 26% of the world trade, and in September 2018 China increased pork imports by 8.4% over September 2017. Yet volume of US pork exports to China and Hong Kong are down 9% from 2017. Given the African Swine Fever issues in China and the increasing Chinese demand for pork, one can assume the decrease in US exports to China is related to tariff issues. All the pork exports on the international market would not be able to meet the entire pork demands of China. Yet, even with the lower Chinese production because of ASF, US exports to China have decreased in 2018. Trade negotiations may play a bigger role soon.
ASF is an animal disease that is specific to pork producers, yet US cattle producers need to be aware of any new developments. The incidence of ASF in China has both the potential to increase US pork exports, if we can work out a trade agreement with China to lower tariffs on US pork while also providing huge risk should ASF make the jump to the US. Cattle producers need to pay attention as significant changes in pork prices will impact beef prices and eventually cattle prices.
HOGS: (Brownfield) -- A USDA deputy secretary says the ball is in China's court regarding the current trade dispute. It's hard to predict what will transpire at the G20 Summit between President Trump and Chinese President Xi, said Steve Censky, Deputy Secretary at the USDA. It depends, said Censky, on whether China is "willing to come to the table in a meaningful, robust way to address long standing market access concerns" held by the U.S..
"Whether it affects poultry or beef, their biotech approval processes, other products and the intellectual property or not," said Censky. "That's going to really determine how the meeting goes."
News of the proposed meeting later this month in Argentina is widely viewed to be at least a hopeful sign of progress toward an easing of trade tensions between the U.S. and China.
Censky, now a year on the job at the USDA after having served as the CEO of the American Soybean Association, spoke to Brownfield at an Agricultural Business Council of Kansas City gathering Friday.
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| #chh |
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