It's
been weeks since cattle buyers and sellers have backed themselves into
the 11th hour. Yet here we are. Light biz surfaced in part of the North
on Thursday, but for the most part the country trade remains untested.
Asking prices this morning should be restated around $132-134 in the
South and $217-218 plus in the North. March 1 on feed report is set to
be unveiled this afternoon at 2:00 CDT. Average trade guesses anticipate
the following: on feed, 100-101 percent; placed in February, 98-99
percent; marketed in February, 103-104 percent. Live and feeder futures
should open on a mixed basis as bulls and bears posturing before the
development of feedlot cash and the release of new on-feed data.
Expect
the late week cash hog market to open with bids steady to $1 lower.
Market numbers are plentiful and pork demand seems to be struggling.
Assuming a Saturday of 135,000, the weekly slaughter total should be
close to 2.34 million. Lean futures seem likely to begin with uneven
price action tied to residual buying interest on one hand and pork
demand nervousness on the other.
| BULL SIDE | BEAR SIDE | ||
| 1) | Though Thursday's cash cattle trade was quite limited, the small sample reported in parts of the North definitely contained sharply higher prices (i.e., $215 dressed, $7-8 higher than last week's weighted average basis Nebraska; $134.50 live, $ 4 higher than last week's weighted average basis Nebraska). Today's cash trend is not likely to be any lower. | 1) | Today represents the first Friday showdown in the cash cattle trade in nearly a month. The ability of packers to finally waiting this late in the week to complete procurement chores may suggest that they are slowly but surely gathering more cattle around them and will soon enjoy much better cash leverage. |
| 2) | Many believe that the damage suffered by Brazilian meat exporters will sting for months if not year, opening the door for U.S. shippers to fill the void with some combination of beef, chicken, or pork. Net pork export sales last week surged to 30,100 MT, up 12,198 MT the week before and 75 percent greater than the prior 4-week average. | 2) | There was more stuttered apparent in the wholesale beef market yesterday with cut-outs no better than mixed and box supplies described as "moderate to heavy." It goes without saying that surging carcass value this month has caused retail margins to tighten significantly. |
| 3) | Increases were reported for Mexico (12,600 MT), South Korea (7,300 MT), Japan (3,200 MT), Canada (2,600 MT), and the Dominican Republic (1,100 MT). | 3) | Once again, the pork carcass value closed significantly lower, demolished in large part by breaking butt (off $7.48) and belly (off $4.71) primals. |
| 4) | Lean hog futures scored impressive reversals on Thursday with spring and summer contracts successful in attracting aggressive buying interest below 100-day moving averages. | 4) | John Harrington can be reached at feelofthemarket@yahoo.com |
CATTLE:
(Dow Jones) -- Brazilian meatpacker JBS SA said Thursday it has
suspended beef production for three days at 33 of its 36 slaughterhouses
as demand for Brazilian meat abroad has slumped following the
announcement of an investigation into allegedly corrupt practices in the
country's meat sector.
The world's biggest
producer of animal protein said it will also reduce beef production by
35% of capacity at its slaughterhouses in Brazil for all of next week.
Brazilian
police announced Friday they are investigating irregularities in the
issuance of sanitary certifications permitting the sale of meat.
Countries
including China, Chile and Egypt have suspended imports of Brazilian
meat while they wait for more information from the country's
authorities.
HOGS: (Dow
Jones) -- A major meat scandal in Brazil could open up opportunities for
U.S. producers to feed China industry, which is the globe's biggest
exporter of beef and poultry, has ground to a halt following a police
investigation dubbed "Weak Flesh" into allegations that meatpackers
bribed inspectors to give health certificates to rotten meat.
The
meat producers and the government deny the charge, but the damage is
done. Brazil's meat exports were worth, the world's most populous
country. But it is China's biggest pork producer who may do best.
The
Brazilian meat a mere $74,000 on Tuesday, compared with $60.5 million
on Monday, as 17 countries have imposed restrictions on Brazilian meat
imports. These countries include China, which together with the semi
autonomous territory of Hong Kong is the biggest buyer of Brazilian
meat.
That could be good news for U.S. meat
producers Tyson Foods and Cargill. The companies are waiting to sell
more meat to China, which lifted a 13-year ban on U.S. beef in 2016,
imposed due to fears over "mad-cow disease". The beef trade has yet to
resume, due to administrative issues, but the Brazilian incident could
speed things up. Though a big chunk of U.S. beef has likely already
crossed the border through gray channels into China from Hong Kong,
which is the fifth-biggest importer of U.S. beef, the establishment of
an official channel would likely boost demand.
But
there is an easy alternative for China's carnivores: eat more pork,
which is way more popular than beef in the country anyway.
Brazil also exports pork, though not as much as beef and poultry.
Meanwhile, China's WH Group, which bought America's Smithfield Foods in 2013, stands to benefit.
The
whole rationale of the Smithfield purchase was to take advantage of
lower hog prices in the U.S. and higher pork prices in China. Progress
since the deal has been slow, but seems to have picked up. WH reported
better-than-expected earnings on Wednesday for 2016, as operating profit
for its U.S. fresh pork business nearly tripled, partly due to more
exports. Its Hong Kong-listed stock rose 10% Thursday—in a reaction to
the results rather than the news out of Brazil.
It is time for the competition to feast on Brazil's "weak flesh."
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