Last week's cash cattle trade once again required market-watchers to burn the midnight oil. Finally, in the late afternoon, short-bought packers were forced to find bigger checks ($119 in the South; $187 in the North) in order to cover mid-December slaughter needs. Movement seemed moderate to fairly active, especially in the North. Monday's activity will be limited to the distribution of new showlists. We expect the offering to be steady to somewhat larger than last week. And don't be surprised if buyers and sellers schedule yet another price party on Thursday or Friday. Cattle futures are staged to open moderately higher, generally supported by constructive fundamentals.
Hog buyers seem geared to resume work Monday with basically steady bids. If severe winter weather doesn't interrupt the country movement of market hogs or the normal operation of packing plants (both remain a wildcard in the Southeast U.S.), the weekly kill should once again approach the 2.6-million head level. Finishing floors will continue to need an abundance of pork demand in order to sweep clean through the balance of 2018 and into the early rounds of 2019. Lean futures are expected to open mixed Monday with deferreds outperforming nearbys.
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The cattle game clock may be quickly running down, but feedlot managers continue to display decent bargaining power in the country; late-year fed supplies remain quite manageable as evidenced by $119 live sales in the South on Friday (i.e., generally $1 higher than the prior week).
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Even though the winter season has not yet officially began, adverse weather continues to roar from region to region. And remember, cold and stormy conditions can always cut both ways. For example, consumer meat demand through the southeast U.S. this weekend was clearly hurt by record snowfall.
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Beef cutouts blasted sharply higher on Friday with box movement described as good with moderate-to-heavy offerings. There seems to be some last-minute holes in the holiday party to fill.
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China's trade surplus with the United States ballooned to a record $35.6 billion in November, official data showed on Saturday, as exports across the Pacific remained strong despite a raft of U.S. tariffs while imports shrank. China's exports to the U.S. rose 9.8% for November on-year, while imports for the month fell 25% on-year, the data from China's customs administration showed.
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The wholesale pork trade is also reflecting strong demand before the weekend break with the carcass value impressively supported by all primals except the rib.
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U.S. employers added a disappointing 155,000 jobs in November as hiring slowed amid worker shortages, the country's trade fight with China and wild stock market swings. Economists surveyed by Bloomberg had estimated that 199,000 jobs were added last month.
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For the week ended Nov. 27, noncommercial traders increased their long position in lean hog futures by 500 contracts, now long 19,800 contracts. There is a strong seasonal tendency for the December contract to work higher from here towards contract expiration.
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Producer marketing and leverage will be increasingly difficult to command and regulate as we move into the last two full business weeks of 2018.
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CATTLE:(USDA) -- U.S. Trade Representative Robert Lighthizer and U.S. Secretary of Agriculture Sonny Perdue announced Friday that the government of Morocco has agreed to allow imports of U.S. beef and beef products into Morocco. 2018 is the first year that U.S. beef and poultry exporters have access to Morocco's market under the terms of the U.S.-Morocco Free Trade Agreement (FTA). Morocco opened its market to U.S. poultry in August, 2018.
"President Trump continues to prioritize the opening of new markets for U.S. agricultural products. New access to the Moroccan market for beef and beef products is an important step in ensuring that American farmers and ranchers can continue to expand their exports of U.S. agricultural products," said Ambassador Lighthizer. "I welcome Morocco's agreement to allow imports of U.S. beef and look forward to growing our shipments to Morocco."
"Finding new markets for American agricultural products has been a priority for the Trump Administration from day one, and the opening of the Moroccan market is good news for our producers," said Secretary Perdue. "American beef is the best in the world, and once Moroccans get a taste of it, they'll surely want more."
In 2017, the United States was the world's third largest beef exporter, with global sales of beef and beef products valued at $7.3 billion. As of November 2018, U.S. exports of agricultural products to Morocco exceeded $512 million. Initial estimates indicate that Morocco would be an $80 million market for U.S. beef and beef products. Morocco had prohibited imports of U.S. beef.
Under the leadership of USTR Chief Agricultural Negotiator, Amb. Gregg Doud and the direction of U.S. Department of Agriculture's Ken Isley, U.S. and Moroccan officials met to negotiate a health certificate and the terms for the import of U.S. high quality and standard quality beef into Morocco. Representatives also discussed improvements to the administration of Morocco's wheat tariff-rate quota and other agriculture and SPS issues, and will continue this work through the agriculture and SPS subcommittees under the FTA.
HOGS:(Smithfield Foods) -- Smithfield Foods, Inc. is investing nearly $45 million and adding 70 new jobs to its Sioux Falls, South Dakota, operations. The investment includes renovating a high-speed bacon line, a ground seasoned pork operation, and the distribution center, as well as the rebuilding of a facility that houses more than 8,000 hogs. This investment and expansion will help Smithfield meet the increasing domestic demand for bacon and international demand for ground seasoned pork, a growing category in export markets. "At Smithfield, we're committed to our continual investment in our facilities and farms in Sioux Falls," said Kenneth M. Sullivan, president and chief executive officer for Smithfield Foods. "In the past five years, we have invested more than $73 million into our operations in South Dakota, which positively impacts the local economy. With these new projects, we're proud to further strengthen our presence in this state."
"In South Dakota, one in 10 jobs are in manufacturing and agriculture is the number one industry in our state," said Governor-Elect Kristi Noem, State of South Dakota. "Smithfield's latest investment bolsters these two key industries, which has a far-reaching, positive economic impact across the entire state." With U.S. demand for bacon on the rise, Smithfield is increasing its bacon capacity by upgrading equipment to include high-speed lines. The renovations, on track to be completed by May 2019, will improve the volume, yield, and quality of the bacon produced by the facility.
Changes to Smithfield's ground seasoned pork operation will bolster its ability to support increased demand by export markets and include a renovation to the existing distribution center, which is currently underway and on schedule to be completed by March 2019. Once complete, it will be the most modern operation in the industry, incorporating the latest technology for automated packaging, boxing, labeling, and stacking.
"Export markets are key for the continued growth of all U.S. hog producers and pork processors," said Jason Richter, president of the international group for Smithfield Foods. "This new project further positions the company to meet the demands of consumers in these key markets, benefitting our national and local economies, including creating new jobs in Sioux Falls."
Smithfield is also renovating its hog barn, which will be complete in early Fall 2019. The new barn's features and design will reflect leading animal handling practices, including automatic climate control systems.
"For decades, we've called Smithfield and its employees our neighbors," said Mayor Paul TenHaken, City of Sioux Falls. "I'm thankful for Smithfield's long-term commitment to Sioux Falls and their continued investment in our community, and proud to partner with them on this project."
The 70 new employees will join nearly 3,600 others at Smithfield's Sioux Falls facility, which was built in 1909 and produces fresh pork, ready-to-cook bacon, deli meats, hot dogs, and smoked hams. Earlier this year, the North American Meat Institute recognized the facility, as well as 23 other Smithfield locations, for workplace safety achievements, including an effective safety and health program specifically focused on injury and illness reduction.
Local employees are active members of the community and have donated nearly $7.5 million to the Sioux Empire United Way in the past 15 years. With these efforts and those of other locations, Smithfield continues to deliver on its promise to produce "Good food."
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