Cattle buyers and sellers could start to get
serious about the parameters of cash potential Thursday. Our preliminary
guess is that packers will cautiously open with bids around $117 to
$119 on a live basis, well below asking prices of $121 plus. But betting
on Friday business may be the safer way to roll the dice. Live and
feeder futures seem likely to open with mixed price action as traders
jockey ahead of cash clues.
Look for hog buyers to resume procurement with
bids ranging from steady to $1 lower. After a slow start to pork
production thanks to Christmas, we look for the kill to slip into high
gear as soon as possible. Barring any weather disruptions or adverse
development of outside markets, the weekly slaughter should easily total
close to 1.92 million head. Lean futures are geared to open moderately
lower, checked by plentiful late-year hog numbers and dubious pork
demand.
| BULL SIDE | BEAR SIDE | ||
| 1) |
Beef cutouts scored significant
gains at midweek, especially the choice box. This week's slower chain
and pace of production is likely to be price supportive.
|
1) |
Beef ribs and tenderloins have more
downside risk into winter lows. Forward sales are being made at a
significant discount to spot market levels.
|
| 2) |
For the week ended Dec. 18, there
was a big jump in the net-long live cattle positions held by
noncommercials, up 10,000 contracts to a total of 95,300. This was the
highest level since the first quarter of the year and came about
primarily from additions to the long side.
|
2) |
Seasonally, December live cattle tends to increase toward Christmas, before dropping lower into the end of the year.
|
| 3) |
Sales during the U.S. holiday
shopping season rose 5.1% to over $850 billion in 2018, the strongest in
the past six years, according to a MasterCard report, as shoppers were
encouraged by a robust economy and early discounts.
|
3) |
The pork carcass value closed moderately lower with all primals losing ground except the rib and ham.
|
| 4) |
???Well-margined pork processors
seem eager to make-up for holiday downtime. Specifically, Saturday's
slaughter schedule may total as large as 425,000 head.
|
4) |
For the week ended Dec. 18,
noncommercial traders reduced their long position in lean hog by 400
contracts, dropping to long 21,700 contracts. The seasonal tendency is
for February hogs to work lower into contract expiration.
|
OTHER MARKET SENSITIVE NEWS
CATTLE:(Restarant News) -- McDonald's is making yet another change to its value lineup.
The company is ditching its $6 Classic Meal Deal
less than two months after introducing the offer in a bid to win over
value customers.
Instead, the Chicago-based giant is bringing
back its 2-for-$5 Mix and Match deal offering two from a variety of
premium items for a single price. The offer includes a Big Mac, Filet O'
Fish and 10-piece Chicken McNuggets as well as a Quarter Pounder with
Cheese, which it didn't make available under the offer in previous
iterations.
In addition, the company said that it would give
local markets and franchisees flexibility on the 123 Dollar Menu that
was kicked off earlier this year. The idea is to enable those operators
to tweak the menu to fit local tastes and demands. "Our customers have
told us value is important to them, so value continues to be key in
sustaining our long-term growth," McDonald's Chief Marketing Officer
Morgan Flatley said in a statement.
McDonald's has struggled to generate traffic all
year long despite the new dollar menu as well as other value offers
that are traditionally supposed to bring customers in more often.
The company has struggled to develop compelling
since shifting away from the Dollar Menu in 2012. It kicked off a series
of individualized "McPick" offers in 2016 before ultimately bringing
back the evolved dollar menu earlier this year. The decision to give
local markets more flexibility has also come as the chain met resistance
from operators, who formed an independent franchise association for the
first time in the company's storied history.
HOGS:(porkbusiness.com) -- Trade uncertainty and
African swine fever top the list of the biggest game changers of 2019
in a recent PORK Poll. Topping the poll this month is trade with 36% of
respondents saying the uncertainties surrounding trade could swing the
marketplace either direction in the year ahead.
"I'm optimistic that we will get these trade
differences settled," says Chris Hurt, Purdue University agricultural
economist. "The signing of the U.S.-Mexico-Canada (USMCA) trade
agreement calms trade conflicts with Mexico and Canada, although it
still needs approval in each country. In addition, it leaves in place
the U.S. tariffs on steel and aluminum. It was these tariffs that caused
Mexico and Canada to place restrictions on U.S. pork. Those tariffs
still need to come off."
Hope for a cooling of the trade conflicts with China are potentially supportive to hog prices, Hurt adds.
"China needs food, so if we come up with a big
trade package with China that says they'll buy $70 or 80 billion in
total goods from the U.S., some of that will be ag and some will be
pork," he says. "I think that feels pretty positive right now."
Meanwhile, 30% said African swine fever was their pick and 24% said too
many hogs in the marketplace.
Hurt agrees that ASF is a significant factor,
but we still can't determine the magnitude. China is such a large market
and primarily produces its own pork -- 97% of the pork consumed in
China is produced there, Hurt says. If China loses 1% of its hogs to
ASF, it will need to increase imports by about 33% to cover that
tonnage.
"That gets the world pork market excited and
that will drive prices higher," Hurt says. "Will it come from the U.S.?
That doesn't make a difference. If it comes from other countries, then
we will get a benefit even if they don't buy from us."
 |
| #completeherdhealth |
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