Subscribe for Updates!

Enter your email address:

Delivered by FeedBurner

Wednesday, May 31, 2017

Wednesday Morning Livestock Market Update

GENERAL COMMENTS:

Cash cattle action should be slow in developing Wednesday. Feedlot managers will probably keep one eye on the board and the other on news from the FCE. Given the holiday-shortened schedule, it's more difficult than ever to predict the timing of cash business. Yet significant trade volume could easily be postponed until Thursday or Friday. At this point, we assume asking prices will start out around $134 in the South and $210 to $212 in the North. Live and feeder futures are set to open moderately higher, supported by follow-through buying and still-large cash premiums.
The cash hog trade should open with bids steady to $1 higher. It sounds like analysts are expecting this week's kill to total close to just under 2 million head. Processing margins remain well into the double-digits, and for Saturday, could total as much as 220,000 head. Lean futures should open on a mixed basis tied to residual selling and short-covering.

BULL SIDE BEAR SIDE
1) Cattle futures seemed to quickly shake off the bearish implications of the May 1 Cattle on Feed report by closing with solid gains on Tuesday. More and more traders are concluding that current discounts may be deep enough. 1) New showlists distributed in feedlot country on Tuesday were generally larger with only Nebraska offering fewer ready steers and heifers.
2) After a three-week period of sluggish sales, out-front (i.e., with delivery specs of 22 days or more) boxed beef business picked up last week, topping 1,000 loads for the first time since late April. 2) With spot June live cattle at a $9 discount to last week's cash market, basis remains very strong, compared with more typical levels in late Mayand June being par to $1 below cash. Such basis strength is likely to work against feedlot leverage.
3) Despite the clumsy start to the short trading week, lean hog futures continue to sport both bullish short and long market trends. 3) Nearby lean hog futures failed to tap follow-through buying strength and technical potential Tuesday by closing sharply lower. Such action supports ideas that the board is overbought and/or running out of gas.
4)
Bellies hold the key to summer highs for the cutout, hogs and futures. The good news is that seasonal odds favor a sharp belly appreciation as we speed toward BLT season over the next 30 to 60 days.

4) For the most part, the current structure of lean hog futures points to greater and greater pork production through the balance of 2017 and into 2018.

OTHER MARKET SENSITIVE NEWS

CATTLE: (foodmarket.com) -- JBS S.A., the world's largest meatpacker, announced Friday that Joesley Batista resigned as chairman and member of the board. The Board of Directors unanimously elected Tarek Farahat as Batista's replacement.
Company owners and brothers Joesley and Wesley Batista entered into a plea bargain deal that accused Brazil's President Michel Temer of endorsing the bribing of a witness in the country's largest meat scandal. The brothers' testimony, released last week, unleashed a political crisis, alleging that they bribed hundreds of politicians, reports Reuters. Both brothers resigned from their senior posts effectively immediately.

Tarek Farahat has worked for Procter & Gamble for 26 years, serving in a number of leadership positions in several regions around the globe, including the Middle East, Europe and Latin America. From 2006-12, he served as president of P&G Brazil. In 2012, he became president of P&G Latin America and an officer of the company's executive board. Farahat has been a member of the Board of Directors of JBS since 2013 and has served as global president of Marketing and Innovation since 2015.

In the same meeting, José Batista Sobrinho was unanimously elected vice chairman of the Board.
The Board also ratified the creation of a Governance Committee, which will be led by Farahat and whose main objective will be to implement global best practices in corporate governance and compliance at JBS.

"Governance is my utmost priority. We will work hard to restore trust with the market and protect the more than 235,000 families that are part of JBS. There is a significant amount of work to be done in order to regain the trust of our stakeholders," states Farahat.

"We remain focused on offering consumers the highest quality products and services while maintaining a close partnership with our suppliers and clients, and supporting our more than 235,000 team members worldwide," adds Farahat.

HOGS: (foodmarket.com) -- A Canadian shipment of pig feet to China has tested positive for residues of banned growth drug ractopamine and may curb future trade, Canadian government and industry officials say.

China views the tainted shipment as a "systemic failure" of Canada's program that certifies pork sent to China is free of ractopamine, and the situation "could affect future pork exports," according to an email to the industry from the Canadian Food Inspection Agency (CFIA). The email circulated on Monday and was obtained by Reuters.

China, the world's biggest pork consumer, is one of Canada's biggest pork markets, importing 314,000 tonnes worth C$587 million in 2016, according to Statistics Canada. Pig feet are a popular dish in China.

Tuesday, May 30, 2017

Tuesday Midday Livestock Market Summary

GENERAL COMMENTS:

Firm gains have redeveloped in feeder cattle futures at midday as traders have steeped back into the market. Additional support is moving back into some live cattle contracts, although a trade volume is limited. Overall market activity is likely to remain sluggish through the rest of the Tuesday trading session. Corn prices are lower in light trade. July corn futures are 7 cents lower. Stock markets are lower in light trade. The Dow Jones is 34 points lower while Nasdaq is down 4 points.

LIVE CATTLE:
Mixed trade is seen through live cattle futures with steady to 60 cent gains seen in nearby contracts while light loses have developed through deferred contracts. Narrow market moves are seen through the rest of the complex as traders are looking for very little additional outside or fundamental market activity to develop. This could limit widespread price shifts across the live cattle trade. Cash cattle activity remains light Tuesday with bids and asking prices still undeveloped as packers and feeders return from the long holiday weekend. Show lists are generally larger with Nebraska showing a few less market ready steers and heifers. But the overall trend is a larger number of cattle available on lists early in the week. Beef cut-outs at midday are mixed, $1.39 higher (select) and down $0.37 per cwt (choice) with light movement of 64 total loads reported (24 loads of choice cuts, 27 loads of select cuts, 8 loads of trimmings, 5 loads of ground beef).

FEEDER CATTLE:
Firm buyer support has returned to the feeder cattle futures complex with short covering activity developing following strong liquidation seen through the end of last week. Even though early losses were seen across the entire cattle market, buyers seemed willing to hang around the market and wait until selling pressure ran out of gas. This has quickly allowed nearby contracts to post triple digit gains, moving $1 to $1.50 per cwt higher at midday. Even though the market still remains weak and is focusing on the larger than expected placements seen in April, the ability to hold prices near $148 per cwt could help to establish some stability through the rest of the week.

LEAN HOGS:
Mixed trade continues to hold through lean hog futures, but the lack of support in cash markets Tuesday morning and pullback in front month June futures seems to be putting a cautionary tone through the entire nearby market. Most of the selling pressure is seen in June and July futures, although this pressure is focusing on position taking after setting contract highs late last week. The overall market remains bullish and is not likely to change significantly on just one days market prices. Cash prices are lower on the National Direct morning cash hog report. The weighted average price lower $0.83 at $70.26 per cwt with the range from $67.00 to $71.50 on 2,895 head reported sold. Cash prices are unreported due to confidentiality on the Iowa Minnesota Direct morning cash hog report. The National Pork Plant Report reported 150 loads selling with prices adding 0.18 per cwt. Lean hog index for 5/25 is at $76.34 up $0.09 with a projected two-day index of $76.45 up $0.11.

Tuesday Morning Livestock Market Summary

GENERAL COMMENTS:

Cattle buyers and sellers will naturally have ears cuppedMonday morning for reports on the success of meat clearance over the long holiday weekend. Beyond such efforts, feedlot activity will be limited to the distribution of new showlists. Our guess is that the post-holiday offering will be somewhat larger than last week. Initial asking prices could be around $134 plus in the South and $212 plus in the North. Live and feeder futures seem likely to open moderately lower, checked by follow-through selling and further worry linked to the larger-than-expected April placement confirmed by Friday's May 1 Cattle on Feed report.

The cash hog trade seems set to open with bids steady to $1 lower higher. Bullish expectations seem to be building as we move into the last third of the second quarter. Weekly kill levels should be steadily dropping as we move to we move toward midsummer. Last week's kill fell to 2.19 million head, but the cutback was primarily skewed by the holiday and a Saturday kill of no more than 6,000 head. Still, the pre-holiday production decline should help support a higher wholesale trade through the week. At this point, we expected to see a very large Saturday slaughter ahead as packers move to make up for lost time. Lean futures should open moderately higher with the help of residual buying interest, bull spreading and ideas of a shift toward more constructive fundamentals over the next several months.

BULL SIDE BEAR SIDE
1) Look for cattle buyers to start out the short week with longer shopping lists, a function of relatively slow country movement last week on one hand and the need to cover the first full production week of June on the other. 1) The May 1 Cattle on feed report released on Friday was generally judged to be bearish thanks to confirmation of a much larger than expected April placement.
2) In the wake of at least average meat clearance over the Memorial Day weekend, retailers and food managers should be fairly aggressive supporters of beef cutouts for at least several days. 2) According to the DTN placement schedule, big lots now have approximately 6.36 million head of steers and heifers scheduled to finish this summer, 10% more than June-August 2016 and 9% greater than the five-year average.
3) Summer lean hog futures closed on Friday with another round of new contract highs, suggesting that nearby bulls are eager to anticipating more constructive fundamentals over the next 30 to 60 days. 3) Uncertainties surrounding the exact timing of new chain speed in the months ahead and the level of herd expansion to be suggest by the June 1 Hogs & Pigs report probably means that deferred lean hog futures are set to lose more and more ground to summer contracts.
4)
During the week ending May 23, noncommercial traders were net buyers of 13,800 lean hog contracts, extending their net long to 44,500 contracts.
4)
The potential appreciation of the pork carcass value through the summer season could be significantly limited by falling beef prices as cattle slaughter levels mount over the next 30 to 60 days.


OTHER MARKET SENSITIVE NEWS

CATTLE: (voanews.com) -- A new ban imposed by India's government on the sale of cows and buffaloes for slaughter to protect animals considered holy by many Hindus is drawing widespread protests from state governments and animal-related industries.

Many state governments criticized the ban as a blow to beef and leather exports that will leave hundreds of thousands jobless and deprive millions of Christians, Muslims and poor Hindus of a cheap source of protein.

The rules, which took effect Friday, require that cattle traders pledge that any cows or buffalos sold are not intended for slaughter.

At least one state government is planning a challenge in court. Some have said the ban infringes on states' commercial autonomy and are calling for a nationwide protest.

Others say the ban will hurt farmers who will be forced to continue feeding aged animals, and that millions of unproductive cattle will be turned out on the streets.

The new rules also propose the setting up of a vast animal monitoring bureaucracy, including animal inspectors and veterinarians, to ensure the rules are followed. Traditionally, cattle fairs and markets allow the sale of animals headed to abattoirs to provide raw materials used in dozens of industries, including leather making, soap and fertilizer.

The state governments have appealed to Prime Minister Narendra Modi to repeal the order, which they say was issued without consultations with them. Modi's Bharatiya Janata Party has been pushing a Hindu nationalist agenda since it came to power in 2014.

Chief Minister Pinarayi Vijayan, the top elected official in southern Kerala state, wrote to Modi on Sunday describing the restrictions as a ``drastic move'' that would have "far-reaching consequences and would be detrimental to democracy."

He said the move amounts to "an intrusion into the rights of the states" in India's federal structure and violates the principles of the Indian Constitution.
The government of West Bengal state also protested the move, saying the Modi government cannot make such decisions unilaterally.

Chief Minister Mamata Banerjee said the state would not accept the imposition of such restrictions on its commercial authority. She described it as a step by the Modi government to ``destroy the federal structure of the country.''

"We won't accept the decision. It is unconstitutional. We will challenge it legally," Banerjee told reporters Monday.

Hindus, who form 80 percent of India's 1.3 billion people, consider cows to be sacred, and for many eating beef is taboo. In many Indian states, the slaughtering of cows and selling of beef is either restricted or banned. India has the highest number of vegetarians in the world as a result of Hinduism's predominance, although not all Hindus are vegetarians.

While the eating of beef is not a crime in many states, slaughtering a cow carries a punishment of up to seven years in jail throughout the country. In Gujarat state, lawmakers have approved a bill increasing the punishment for killing a cow to life imprisonment.

Critics say the new rules, ostensibly to protect the way animals are treated and transported, are in keeping with demands of Hindu nationalists, who have long been pressing for a nationwide ban on the sale of beef. The past two years have also seen a rise in vigilante attacks on Muslims and lower caste Hindus involved in the cattle trade. Several deaths have occurred.

On Monday, police arrested seven people on suspicion of assaulting two Muslim men who were transporting meat in western Maharashtra state. The men were beaten and forced to chant Hindu slogans by a vigilante group on Sunday, police said.

Meanwhile, leather and meat industry groups said the ban could push them out of business.
Fauzan Alavi of the All India Meat and Livestock Exporters Association said beef exports, which had been growing rapidly, have already been affected. "Such a drastic move is bound to hit the industry," Alavi said Sunday.

The government "has handed a death certificate to us," said Ramesh K. Juneja of the Council of Leather Exports.

HOGS:(Bladen Journal) -- Smithfield Foods announced that it is investing more than $45 million to expand its blast cell cold storage capabilities at its processing facility in Tar Heel, N.C.
The investment will create approximately 30 new jobs at the Tar Heel facility as well as new employment positions within Smithfield's logistics partner.

This expansion will increase the facility's capacity by 140 million pounds starting in 2018. This project provides additional capacity to support the company's ongoing growth and aligns with its mission to have best-in-class operations.

Sunday, May 28, 2017

US cattle grazing plan for Idaho monument draws criticism

BOISE, Idaho (AP) - Federal officials on Friday released a cattle grazing plan for central Idaho’s Craters of the Moon National Monument and Preserve that immediately came under fire from an environmental group.

The U.S. Bureau of Land Management’s Final Environmental Impact Statement allows cattle grazing on nearly all of the roughly 275,000 acres (111,290 hectares) it administers in the monument.
The document stems from a federal lawsuit filed by the Western Watersheds Project citing concerns about sage grouse and a subsequent court ruling requiring the federal agency to come up with a new plan.

Lisa Cresswell, the planning and environmental coordinator for the Twin Falls District of the BLM, said the document combined with the BLM’s 2015 Greater Sage Grouse Approved Resource Management Plan Amendment protects sage grouse habitat while allowing grazing in Craters of the Moon.

“We were mostly trying to direct livestock grazing toward (seeded areas) and away from native sagebrush,” she said.

Craters of the Moon contains ancient lava flows of rough and jagged rocks, but some areas not covered by the flows are suitable for cattle grazing.

The plan reduces by 300 acres (121 hectacres) the amount of cattle grazing area compared with the previous plan, and it reduces the number of cattle by a small amount.

That’s not enough of a change, said Greta Anderson, deputy director for Western Watersheds Project. “Our concerns that the BLM’s livestock plans will continue to contribute to sage-grouse decline within this National Monument are unresolved,” she said in an email to The Associated Press.
Anderson also said that the sage-grouse Resource Management Plan Amendments that the BLM cites as providing sage grouse protections in the Environmental Impact Statement are themselves being challenged in court in a case that hasn’t been resolved.

Anderson said BLM’s plan will lead to declines of sage grouse and their possible elimination from Craters of the Moon.

Sage grouse are ground-dwelling, chicken-sized birds found in 11 Western states, where as few as 200,000 remain, down from a peak population of about 16 million. The males are known for their strutting courtship ritual on breeding grounds called leks, and they produce a bubble-type sound from a pair of inflated air sacks on their necks.

BLM’s publication of the document opens a 30-day protest period available to those who previously took part in the process.

Meanwhile, the Trump administration earlier this month listed all 738,000 acres (298,664 hectares) of federal lands in the monument dating from 1924 as up for possible revocation. Twenty-six other U.S. monuments on the list only go back to lands designated since 1996 in accordance with an executive order signed by Trump.

The U.S. Department of the Interior in an email to the AP on Friday said it was checking on the apparent discrepancy but didn’t have an immediate response.

John Freemuth, a Boise State University environmental policy professor and public lands expert, said the Interior Department appeared to make a mistake by including the entire monument and preserve. He also noted that 410,000 acres (165,924 hectares) was designated as a preserve by Congress following efforts by U.S. Rep. Mike Simpson, R-Idaho, in 2002. That moved that land from the BLM to the National Park Service. For it to no longer be a preserve would require another act by Congress, Freemuth said.

“They can’t touch the part that Simpson got in in 2002,” he said.

About 53,000 acres (21,450 hectares) were designated a monument before 1996, most of that occurring in 1924.

The remaining federal lands of the monument are the 275,000 acres (111,290 hectares) administered by the BLM and the subject of the Environmental Impact Statement.

Ted Stout, Craters of the Moon spokesman, said monument officials have sought clarification from the Interior Department about whether the entire monument is being reviewed by the Trump administration, but they haven’t yet received a response.

Many local communities have pushed to have the initial 53,000 acres (21,450 hectares) designated a national park in the hopes of bringing more tourism dollars to the area. Earlier this year, the Idaho Senate passed a resolution seeking that result, but it stalled in the House amid objections from agricultural interests.




Friday, May 26, 2017

Friday Closing Livestock Market Summary

GENERAL COMMENTS
The cash cattle trade was limited to scattered sales in parts of the North at $132.50 live and $208.00-$210.00 dressed. The national hog base closed off $0.75 compared with the Prior Day settlement ($67.00-$73.00, weighted average $71.01). From Friday to Friday, livestock futures scored the following changes: Jun LC Off $0.75; Aug LC Off $2.10; Aug FC Off $3.50; Sep FC Off $3.47; Jun LH Up $2.32; Jul LH Up $1.73. Corn futures closed a nickel higher, supported in part by reports of wide spread replanting activity. The stock market closed narrowly mixed with the Dow off 2 and the NASDAQ up 4.
LIVE CATTLE
Futures closed sharply lower, off 122-285. Before the release of the on-feed report at 11 a.m. CDT, losses here were no worse than moderate in light volume as profit-taking and long-liquidation took their late-week toll. Yet after the government confirmed larger-than-expected April placement activity, selling interest accelerated, tied both to commercial hedgers and specs covering long positions. The May 1 on-feed report looks like this: on feed up 2%; placed in April up 11%; and marketed in April up 3%. Beef cut-outs: weak (choice, $245.60 off $0.51, select $218.45 off $0.53) on light-to-moderate demand and offerings (47 loads of choice cuts, 39 loads of select cuts, 03 loads of trimmings, 15 loads of coarse grinds).
TUESDAY'S CASH CATTLE CALL:
Steady to $2 lower. Tuesday's activity will be limited to the collection of new showlists. Additionally, both buyers and sellers will pause to evaluate the success of Memorial Day meat clearance.

FEEDER CATTLE
Futures closed sharply lower, off 352-430. Feeders also took the on-feed news hard. Indeed, feeder contracts lost significantly more ground than their live counterparts. The additional selling energy may have been tied to the discounted status of the cash index as well as the firming action of late week corn. CME cash feeder index: 05/25: $143.89, up $0.80.
LEAN HOGS
Futures closed mixed, off 17 to up 132. Summer contracts finished a very successful week by scoring another round of new contract highs. With June through August all over 81, summer bulls are clearly anticipating an extended period of declining market hog numbers and improving pork demand. With summer issues surrounded by such optimism bull-spreading has become a very popular strategy (i.e., looking to lift nearby contracts and pressure the fourth-quarter). Pork cut-out: $90.28 (FOB Plant) off $0.02. CME cash lean 05/24: $76.25, up $0.18 (DTN Projected lean index for 05/25: $76.34, up $0.09). 
TUESDAY'S CASH HOG CALL
Steady to $1.00 higher. Hog buyers should return from the holiday ready to bid higher on an expected decline in ready numbers.

Friday Midday Livestock Market Update

GENERAL COMMENTS: 
Trade volume remains light to moderate across livestock futures as gains have quickly moved back into the complex. This has created a shift from the early trade direction, which pushed markets lower on fundamental market weakness in the cattle complex. Traders in the hog complex have moved away from the narrow pressure based on firming cash hog support, with gains developing in most nearby contracts. Corn prices are lower in light trade. July corn futures are 1 cent lower. Stock markets are higher in light trade. The Dow Jones is 76 points higher while Nasdaq is up 45 points.
LIVE CATTLE:
Moderate-to-strong buyer support has quickly moved back into the cattle complex with front-month June futures posting firm triple-digit gains. This significant midday adjustment in livestock markets has little to do with market fundamentals, which still remain weak due to lower cash markets and mixed beef values but lack of overall market activity before the long holiday weekend. The shift from moderate pressure early through the session continues to create adjustments as the day continues. Cash cattle are untraded Thursday morning following light-to-moderate activity in both areas midweek. It is expected that movement in the South will be adequate for the week, but additional trade will be needed to be done through the North. Bids are developing in the North with prices seen at $130 to $132 live and $208 to $210 dressed basis. Asking prices on cattle left on show lists are $134 and higher live basis and $210 and higher. Cash business done earlier in the week are generally $2 per cwt lower in the South and $5 per cwt lower in the North. Beef cut-outs at midday are mixed, $0.43 lower (select) and up $0.07 per cwt (choice) with light movement of 59 total loads reported (22 loads of choice cuts, 25 loads of select cuts, 8 loads of trimmings, 5 loads of ground beef).
FEEDER CATTLE:
Despite firm selling pressure early in the session, strong triple-digit gains quickly moved into the feeder cattle market, changing the course of market direction at midday. August futures have moved above $150 per cwt with prices seeing more than $1.50-per-cwt gains as traders are quickly adjusting to previous market losses and trying to adjust to market losses seen early in the week. An attempt to make an end-of-the-week rally and shift prices higher would not only help to sustain weekly chart prices, but would also mean adjusting monthly charts heading into the summer months.
LEAN HOGS:
Following the lackluster interest seen through the morning, buyer support has moved into the lean hog complex as cash support has developed during the morning reports. This has moved all nearby futures contracts higher and sparked increased underlying commercial support through the complex. A fundamental move higher through the end of the month could bring increased technical and fundamental interest back into the market, which may bring even more upward market potential during the summer months. June futures are leading the complex higher, testing the market with prices reaching at $80.50 per cwt at midday. Cash prices are higher on the National Direct morning cash hog report. The weighted average price added $0.15 at $70.46 per cwt with the range from $65.00 to $72.00 on 5,416 head reported sold. Cash prices are higher on the Iowa Minnesota Direct morning cash hog report. The weighted average price added $0.46 at $71.37 per cwt with the range from $65.00 to $72.00 on 1,206 head reported sold. The National Pork Plant Report reported 100 loads selling with prices adding $0.92 per cwt. Lean hog index for 5/23 is at $76.07 up $0.13 with a projected two-day index of $76.25 up $0.18.

Friday Morning Livestock Market Summary

GENERAL COMMENTS:
Although trade volume totals are not that large, it's possible that the cash cattle market is done for the week. If more scattered are yet to shake out, it seems more likely to happen in parts of the North and at prices steady with those seen on Thursday (i.e., $208-210 dressed/$132-132.50 live). The May 1 on feed report is scheduled to be released this afternoon at 11:00 CDT. Average guesses look like this: on feed, 101 percent; placed in Aoril, 106.5 percent; marketed in April, 101 percent. Look for live and feeder futures to open on a mixed basis as traders position ahead of on feed news and the long weekend.
Expect the cash hog trade to open this morning with basically steady. While seasonal bulls generally feel like they're in the groove, the big question as we stare into the birth of early summer concern how much further weekly kills can be expected to tighten over the next 30-45 days. Lean futures seem ready to open with uneven prices thanks to a slow combination of light bull spreading and late week profit taking.
BULL SIDEBEAR SIDE
1)Cattle traders seemed to relight the bullish torch on Thursday, stoking a rally in live and feeder futures to the tune of triple digits, pushing contracts back into the upper end of the lateral trade range of the last two weeks.1)For the week ending May 13, steer and heifer carcasses averaged 836 and 772 pounds, both 2 pounds heavier than the prior week.
2)Given the fact that spot June live remains $8-9 below feedlot cash suggests that the board still has ample bearishness built it to accommodate potential country price pressure over the next month.2)Despite yesterday's rally in live cattle futures, charts seemed locked in lateral trading ranges and going no place fast. For example, formidable resistance between 125 and 126 continues to restrain spot spot June in a straitjacket.
3)Lean hog futures moved solidly higher yesterday with June and August setting new contract highs. Summer issues still seem eager to anticipate more constructive fundamentals through the first half of the summer.3)The weather outlook for Memorial Day weekend isn't looking ideal in many areas (i.e., cool temps and rainy forecasts), including the central part of the country and much of the Northeast.
4)The national lean hog base jumped more than a dollar on Thursday, generating significant trade volume in the process. Both price strength and volume could be signs of significantly tighter market hog supplies just around the next corner or two.
4)Actual pork exports last week declined to 21,900 MT, down 2 percent from the previous week and 3 percent from the prior 4-week average.
OTHER MARKET SENSITIVE NEWS 
CATTLE: (foodmarket.com) -- For Memorial Day weekend, beef features make up 27% of total protein ad volume, while seafood claims 23%. Chicken features account for 22% of the mix, while pork comes in with 18%.
In the beef complex, steaks have 48% of feature volume, while ground beef ads hold 32%. The steak complex averages $7.29 per lb., down 38 cents per lb. from a year ago. Porterhouse, bone-in strip, and top sirloin steaks are all featured below year ago levels, while bone-in rib and boneless shell steaks are priced higher. Ground beef prices are up slightly over a year ago this week, at $3.71 per lb. for 80% lean. Memorial Day is a notorious burger holiday at retail as an easy, cost-effective way to feed large gatherings from the grill. Looking at pork, bacon ad volume takes the lead with over 30% of features. Brand label bacon ads average $5.33 this week, up about 30 cents per lb. from a year ago.
Coming in second with 26% of ad volume is pork chops, while ribs claim 24%. Chops average $3.10 per lb. on feature, up 6% from a year ago. Back ribs run about $3.38 per lb., down nearly 12% from year ago levels. Spareribs average $2.17 per lb., down from $2.44 per lb. a year ago. Pork shoulder roasts average $1.95 per lb. and will be ideal for pulled pork applications this holiday weekend.
Boneless skinless chicken breast features make up the bulk of ads in the chicken complex. Currently averaging $3.86 per lb., chicken breasts will be solid alternatives to higher priced steaks this holiday. In addition, items in the dark meat complex ranging from $1.09 to $1.38 per lb. are sure to turn some heads.
HOGS: (Star Tribune) — An oversupply of turkey in the marketplace continues to be a drag on Hormel Foods Corp.'s financial results, the company reported Thursday.
The Austin-based company reported a weaker than expected second quarter, ending April 30, with a profit of $211 million. This marks a 2 percent drop over the same period in 2016.
Earnings per share was also down a penny from a year ago to 39 cents.
Jennie-O Turkey Store, the company's third-largest business unit, saw its operating profit plunge 29 percent in the second quarter as Hormel reacted to lcompetition and pricing pressure. Its turkey volume was down 6 percent and its sales down 8 percent.
"Despite ongoing challenges in the turkey industry, our balanced model allowed us to deliver earnings within 2 percent of last year's results," said Jim Snee, Hormel's president and chief executive, in a release. "Three segments delivered earnings growth, margin expansion, and adjusted volume and sales growth this quarter."
Refrigerated foods, the company's largest unit accounting for nearly half of its sales, posted relatively flat operating profit. This segment includes products like Hormel bacon and Natural Choice deli meats,
Grocery products, Hormel's second-largest unit with 20 percent of the overall business, was a bright spot this past quarter with an operating profit up 15 percent. Some of the company's newest and least conventional brands, like Justin's peanut butter and Wholly Guacamole, and its signature product, Spam, compose this segment.
International sales were up 19 percent, leading to an operating profit increase of 38 percent compared to 2016, while its specialty foods segment saw an operating profit drop of 16 percent.
The company maintained its 2017 full-year guidance range of $1.65 to $1.71 per share, but expects a the challenging commodity environment to push it toward the lower end.
"We expect the pressure on Jennie-O Turkey Store to continue for the remainder of the fiscal year given the oversupply in the turkey industry," Snee said in a release. "Even in this challenging commodity environment, our team is working hard to generate earnings growth by providing customers, consumers, and operators with on-trend, innovative value-added products."

Thursday, May 25, 2017

Thursday Closing Livestock Market Summary

GENERAL COMMENTS
Light cattle trading slowly surfaced in parts on the North with dressed sales reported from $208 to $210, $3 to $5 lower than last week's weighted average basis Nebraska. Some live deals in the area were marked at $132 to $132.50, $2 to $2.50 lower. According to the closing report, the national hog base is $1.42 higher ($65.00-73.00, weighted average $71.73). Corn futures settled several cents lower as traders remain essentially stuck in a sideways price range. The stock market firms further with the Dow closing 70 points higher and the Nasdaq improves by 42.
LIVE CATTLE
Surging back toward the upper end of its lateral price range, live contracts surged 100 to 180 higher. Thursday's rally appeared to be sparked by bull-spreading, short-covering, and ideas of greater cash stability following the Memorial Day break. Beef cut-outs: mixed, up .03 (choice, $246.11) to off .62 (select, $218.98) with light to moderate demand and moderate offerings (57 loads of choice cuts, 35 loads of select cuts, 8 loads of trimmings, 10 loads of coarse grinds).
FRIDAY'S CASH CATTLE CALL:
Steady/weak with Wednesday. Trade volume totals still look short for the week, especially in the North. Yet it's certainly possible that both sides are done for the week.

FEEDER CATTLE
With the exception of expiring spot May (i.e., off 47), feeder contracts followed the bullish lead of their live counterparts by closing 72 to 245 higher. New-spot August will take the point on Friday nearly $8 above the cash index. CME cash feeder index: 05/24: 143.09, off .31.
LEAN HOGS
Lean hog contracts recaptured their bullish focus Thursday and closed with solid progress. Most issues settled 30 to 75 points higher with June and August setting new contract higher. Clearly, summer bulls are not yet ready to throw in the towel regarding the improvement of supply and demand fundamentals over the next 30 to 60 days. Carcass value closed moderately higher, essentially taking back what it surrendered on Wednesday. Pork cut-out: $90.30, up .44. CME cash lean index for 05/23: 76.07, up 1.13 (DTN Projected lean index for 05/24: 76.25, up .18). 
FRIDAY'S CASH HOG CALL
Steady. Late-week business in hog country should be both steady and slow.

Thursday Midday Livestock Market Summary

GENERAL COMMENTS: 
Trade volume remains light to moderate across livestock futures as gains have quickly moved back into the complex. This has created a shift from the early trade direction, which pushed markets lower on fundamental market weakness in the cattle complex. Traders in the hog complex have moved away from the narrow pressure based on firming cash hog support, with gains developing in most nearby contracts. Corn prices are lower in light trade. July corn futures are 1 cent lower. Stock markets are higher in light trade. The Dow Jones is 76 points higher while Nasdaq is up 45 points.
LIVE CATTLE:
Moderate-to-strong buyer support has quickly moved back into the cattle complex with front-month June futures posting firm triple-digit gains. This significant midday adjustment in livestock markets has little to do with market fundamentals, which still remain weak due to lower cash markets and mixed beef values but lack of overall market activity before the long holiday weekend. The shift from moderate pressure early through the session continues to create adjustments as the day continues. Cash cattle are untraded Thursday morning following light-to-moderate activity in both areas midweek. It is expected that movement in the South will be adequate for the week, but additional trade will be needed to be done through the North. Bids are developing in the North with prices seen at $130 to $132 live and $208 to $210 dressed basis. Asking prices on cattle left on show lists are $134 and higher live basis and $210 and higher. Cash business done earlier in the week are generally $2 per cwt lower in the South and $5 per cwt lower in the North. Beef cut-outs at midday are mixed, $0.43 lower (select) and up $0.07 per cwt (choice) with light movement of 59 total loads reported (22 loads of choice cuts, 25 loads of select cuts, 8 loads of trimmings, 5 loads of ground beef).
FEEDER CATTLE:
Despite firm selling pressure early in the session, strong triple-digit gains quickly moved into the feeder cattle market, changing the course of market direction at midday. August futures have moved above $150 per cwt with prices seeing more than $1.50-per-cwt gains as traders are quickly adjusting to previous market losses and trying to adjust to market losses seen early in the week. An attempt to make an end-of-the-week rally and shift prices higher would not only help to sustain weekly chart prices, but would also mean adjusting monthly charts heading into the summer months.
LEAN HOGS:
Following the lackluster interest seen through the morning, buyer support has moved into the lean hog complex as cash support has developed during the morning reports. This has moved all nearby futures contracts higher and sparked increased underlying commercial support through the complex. A fundamental move higher through the end of the month could bring increased technical and fundamental interest back into the market, which may bring even more upward market potential during the summer months. June futures are leading the complex higher, testing the market with prices reaching at $80.50 per cwt at midday. Cash prices are higher on the National Direct morning cash hog report. The weighted average price added $0.15 at $70.46 per cwt with the range from $65.00 to $72.00 on 5,416 head reported sold. Cash prices are higher on the Iowa Minnesota Direct morning cash hog report. The weighted average price added $0.46 at $71.37 per cwt with the range from $65.00 to $72.00 on 1,206 head reported sold. The National Pork Plant Report reported 100 loads selling with prices adding $0.92 per cwt. Lean hog index for 5/23 is at $76.07 up $0.13 with a projected two-day index of $76.25 up $0.18.

Thursday Morning Livestock Market Update

GENERAL COMMENTS:
Light to moderate cattle trading developed at midweek as some producers moved to accept lower bids of $132 in the South ($2 lower than last week) and mostly $208 in the North (generally $5 lower). Our guess at this point is that packers and feedlot managers still have some work to do today before breaking for the long holiday weekend. Yet it's possible that country movement was larger than we thought, so check out mandatory summaries later this morning. However close cash players are to being done, the unsold steers and heifers remaining on showlists are probably priced around $134 in the South and $210-plus in the North. Live and feeder futures should open on a mixed basis tied to a combination of residual selling and pre holiday/on feed report short covering.
Hog buyers are expected to resume business this morning with generally steady bids. As we prepare to move toward the long weekend, Saturday slaughter plans are quite minimal, perhaps as large as 3,500 head but little more. Keep in mind that processors won't shift back into high gear until next Tuesday. But assuming that decent processing margins hold, chain speed will be aggressively ramped up the following Saturday (i.e., June 3). Lean hog contracts are likely to begin with mixed prices thanks to light bull spreading and late week positioning.
BULL SIDEBEAR SIDE
1)Between lower cattle costs and carcass value stability, beef packer margins continue to improve. Such a reality should eventually foster a recovery in the feedlot trade.1)Cattle buyers are being successful in pressing feedlot cash still lower this week, gathering light to moderate numbers at midweek with lower bids (i.e., $132, $2 lower in the South; mostly $208 in the North, $5 lower). Increasingly ample fed offerings seem evident to both buyers and sellers.
2)Even if Friday's on feed report confirms bearish April placement expectations (i.e., up 6-8 percent from last year), such negative news may already be built into discounted deferred live cattle contracts.2)For the week ending May 20, U.S. hatcheries set 225 million broiler eggs in incubators, up 2 percent from a year ago. At the same time, chicks placed totaled 181 million chicks; up 2 percent from 2016.
3)For the week ending May 20, Iowa barrows and gilts averaged 280.8 pounds, 1.2 pounds lighter than the prior week and 2.1 pounds smaller than 2016.3)The pork carcass value closed moderately lower on Wednesday, trimmed by lower sales of picnics, ribs, hams, and bellies.
4)Looking into next month, the historical odds for higher cash hog prices are quite good. June monthly average has been higher than May more than 70 percent of the time over the last 10 years.4)
Soon after an early attempt to extend an early-week rally, lean hog futures attracted significant selling interest on Wednesday. This stand as a sure sign of commercial nervousness, especially given current hedgable price levels through the fall and the uncertain sustainability of pork demand strength..

OTHER MARKET SENSITIVE NEWS 
CATTLE: (Omaha World Herald) -- New details have emerged on what U.S. beef producers may have to do to export their product to China, but the industry still awaits specifics that will determine the size of the opportunity ahead, the U.S. Meat Export Federation said Tuesday.
Producers would be required to track the locations where cattle raised for beef exported to China are born and slaughtered, under a U.S. proposal that has been accepted by Beijing, Reuters reported Monday, citing the USDA.
The beef exported to China also must be free from residue of beta-agonists, a growth-enhancing feed additive. And beef shipped to China must be from cattle under 30 months of age, a standard designed to reduce the risk of so-called mad cow disease.
Details could be finalized by early June, with shipments starting in July, the report said.
While there was intense buyer interest at a trade show in China last week, it's still hard to size up the market without a final deal in place, said Joel Haggard, senior vice president of the meat export federation. The group is a trade association representing cattle ranchers and feeders, and beef processors.
"Without having the details or protocol, without knowing the type of programs our ranchers are going to have in place to produce for the China market, it's very difficult to gauge the opportunity," he told reporters in a conference call Tuesday.
It appears ranchers and packers may have to raise and process beef specifically for the Chinese market, or be able to segregate those animals.
"It's pretty clear we're going to have a special China beef program that runs through our industry," Haggard said.
Exporters and importers don't have enough information yet to negotiate prices, which will affect demand and will determine how much of an incentive ranchers have to produce cattle to meet China's requirements, Haggard said.
"It's going to be a tricky start, I think it's going to be a slow start, but long-term, it looks promising," he said.
The federation expects China to assess its standard duty of 12 percent on imported beef, plus a 13 percent value-added tax.
Nebraska is the country's top beef processor, and state and business leaders have been laying the groundwork to benefit from what they estimate to be a $2.6 billion market for beef.
Omaha beef processor Greater Omaha Packing has contributed input to the industry groups working with the Trump administration on negotiations. A tour of the company's Omaha plant last fall helped spur China's decision to reopen its market to U.S. beef, the company said.
"We believe the tour helped them see how modern and capable plants can be in the U.S.," plant spokesman Mark Theisen said.
He said the plant already ships products to 58 countries, meeting a variety of food safety, traceability and labeling protocols.
And he said the company believes U.S. packers already exceed international animal health and food safety standards, so no extra criteria should be needed to make beef products acceptable in China, where some consumers are wary about food quality.
HOGS: (American City Business Journals) -- The Maschhoffs, a family owned pork producer, hired Paul Fox as chief operating officer, effective May 22.
Carlyle, Illinois-based The Maschhoffs has been without a COO since 2015, according to Josh Flint, company spokesman. Bradley Wolter had been COO of The Maschhoffs until fall 2015, when he was named president.
Fox previously served as managing director of economic benefits for Brighton, Illinois-based FamilyFarms Group, a member-owned group of family farm businesses, following a 17-year career at multinational food producer Tyson Foods Inc.
"Paul was selected based on his significant leadership experience in the protein industry," Flint said.
At The Maschhoffs, Fox will be responsible for the company's operations in nine states and five production regions. The pork producer has a 218,000-sow breed-to-wean business with an annual production capacity of about 5 million market hogs, according to the company.
A St. Louis native, Fox earned a bachelor's degree in animal science from Missouri State University, and a master's degree in leadership and ethics from John Brown University.
The Maschhoffs saw revenue drop 8 percent in 2016 to $1.2 billion, as an influx of hogs on the market led to a drop in pork prices. Last year, The Maschhoffs closed its holding company, Maschhoff Family Foods, as it sold its GNP Co. subsidiary to Pilgrim's Pride Corp. With the $350 million sale of GNP, a chicken supplier, The Maschhoffs is expected to see total revenue drop by one-third in coming years, Flint previously told the Business Journal .
The company is owned by Ken, Julie, Dave and Karen Maschhoff. Fox reports directly to President Bradley Wolter.

Wednesday, May 24, 2017

Wednesday Closing Livestock Market Summary

GENERAL COMMENTS
The Fed Cattle Exchange Auction report Wednesday listed a total of 2,648 head, but just half of the cattle actually sold. The weighted averages are as listed: 1-9 day delivery: 1,086 head, $132.54; 1-17 day delivery 144 head, $132.50; 10-17 day delivery 133 head, $132.50. Generally speaking, these price look $2-$3 lower than last week. Beyond this, a light-to-moderate trade surfaced in parts of the South at $132, roughly $2 lower than area weighted averages last week, and in parts of the North at mostly $208 dressed, about $5 lower. According to the closing report, the national hog base is $0.50 lower ($66.00-$72.00, weighted average $70.71). The corn trade closed generally 2 cents higher thanks to late buying at the conclusion of a lackluster session. The stock market closed higher with the Dow up 74 points and the Nasdaq better by 24.
LIVE CATTLE
Live cattle futures have been fighting a rearguard action ever since the trade failed to hold the high ground on Monday. The price slide continued Wednesday thanks to long liquidation and cash uncertainty. Contracts settled off 35 to 140. Positively, most issues managed to bounce 100 points or more off session lows. Additionally, spot June successfully closed above longer term support at 122. Beef cut-outs: mixed, up $0.34 (choice, $246.08) to off $1.57 (select, $219.60) with light to moderate demand and offerings (68 loads of choice cuts, 48 loads of select cuts, six loads of trimmings, 22 loads of coarse grinds).
THURSDAY'S CASH CATTLE CALL:
Steady/weak with Wednesday. Depending upon final trade volume totals generated on Wednesday, cattle buyers may need to own more cattle before breaking for the Memorial Day weekend.

FEEDER CATTLE
For the most part, feeder cattle futures closed sharply lower, pressured by long liquidation and defensiveness in live futures. Spot May held relatively stable, supported more by the cash index. CME cash feeder index: 05/23: $143.40, up $0.13.
LEAN HOGS
Follow-through buying and impressive product demand popped lean contracts higher through midsession, but the market clearly ran out of gas later in the day. Settlements were generally 5 to 57 lower with only spot June able to salvage a minimal amount of black ink. The late selling was no doubt tied to long liquidation and commercial hedging. Carcass value closed moderately lower tied to lower sales of picnics, ribs, hams and bellies. Pork cut-out: $89.86, off $0.44. CME cash lean index for 05/22: $75.94, up $0.05 (DTN Projected lean index for 05/23: $76.07, up $1.13). 
THURSDAY'S CASH HOG CALL
Steady. Look for opening hog bids to be near steady when the cash trade resumes in the morning.

Wednesday Midday Livestock Market Update

GENERAL COMMENTS: 
Sharp losses have developed in cattle futures Wednesday morning as weakness continues to quickly develop through the complex. Early losses have eased slightly in live cattle and feeder cattle markets, pulling markets off of session lows. This could allow for some breathing room later in the session despite the extremely light volume through the end of the session. Gains seen during the morning in lean hog trade have started to erode as pressure in the deferred contracts are starting to overshadow the lightly traded market. Corn prices are lower in light trade. July corn futures are 1/2 cent lower. Stock markets are higher in light trade. The Dow Jones is 32 points higher while Nasdaq is up 10 points.
LIVE CATTLE:
Pressure has developed through cattle markets with August through February futures trading $1 per cwt lower at midday. Losses continue to remain significant, but are well off of session lows, as traders have limited losses to nearly half of the earlier pressure seen through the morning. Trade volume is expected to remain sluggish through the rest of the afternoon. Cash cattle trade took place in the Fed Cattle Exchange Auction report today listed a total of 2,648 head, with 1,333 actually sold, and 1,351 head listed as unsold. The state by state breakdown looks like this: KS 508 total head, with 508 head sold at $131.00-$132.75; NE 950 total head, with 310 head sold at $133.00-; TX 544 total head, with 401 head sold at $132.25-$132.50; CO 287 total head, all unsold; IA 281 total head, all unsold; other states 114 total head, with 114 head sold at $132.50, all in Oklahoma. The weighted averages are as listed: 1-9 day delivery: 1,086 head, $132.54; 1-17 day delivery 144 head, $132.50; 10-17 day delivery 133 head, $132.50. Feedlot bids started to develop through end of the morning Wednesday at $130 to $132 in the South live basis with bids seen in the North at $208 per cwt. Asking prices are currently seen at $136 to $138 in the South and $215 in the North. Beef cut-outs at midday are mixed, $0.82 lower (select) and up $0.18 per cwt (choice) with light movement of 80 total loads reported (36 loads of choice cuts, 23 loads of select cuts, 4 loads of trimmings, 15 loads of ground beef).
FEEDER CATTLE:
Sharp losses have developed across the cattle market with triple digit losses seen in feeder cattle trade at midday. Even though prices have backed away from session losses near $4 per cwt, the significant pressure is putting some significant uncertainty on the enter market and could limit the overall outlook of cattle market support through the next several trading sessions. May futures are lightly traded and holding light 40 cent losses while the rest of the complex is under triple digit losses based on the underlying weakness through the rest of the complex.
LEAN HOGS:
Firm buyer support has held in nearby contracts as traders moved into nearby contracts. But the inability to draw additional buyer support back into the market has severely limited overall market activity in all markets and created pressure in deferred futures. Weakness is seen in all but summer contracts as traders are lightly traded through the entire complex. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.44 at $70.77 per cwt with the range from $66.00 to $72.00 on 4,925 head reported sold. Cash prices are higher on the Iowa Minnesota Direct morning cash hog report. The weighted average price added $0.02 at $71.66 per cwt with the range from $66.00 to $72.00 on 2,010 head reported sold. The National Pork Plant Report reported 167 loads selling with prices adding 0.33 per cwt. Lean hog index for 5/22 is at $75.94 up $0.05 with a projected two-day index of $76.07 up $0.13.

Wednesday Morning Livestock Market Summary

GENERAL COMMENTS:
Assuming that cattle buyers would like procurement chores completed by Thursday night, it seems like a good bet that packer inquiry will start to take shape Wednesday. Perhaps late-morning results tied to FCE business will nudge country trading in one direction or the other. Our guess is that asking prices will start out around $136 in the South and $215 plus in the North. Live and feeder futures should open moderately lower Wednesday, initially checked by follow-through selling and eroding carcass value.
Hog buyers are expected to return to work Wednesday with bids steady to $1 higher. With carcass values still appreciating at a faster rate than the cost of live inventory, pork processing marginsare improving. Needless to say, this reality bodes well for further improvement in the country next week, especially as market receipts start to tighten more dramatically. Lean futures are staged to open moderately higher thanks to follow-through buying and encouraging product demand.
BULL SIDEBEAR SIDE
1)Initial pasture and range ratings this spring look historically favorable in all major grazing areas. Such a realty should work to check feedlot placement activity this week and next.1)Beef cutouts plunged sharply lower on Tuesday, a predictable sign that many retailers and food managers are simply out of the market until after the holiday.
2)Larger total open interest on higher prices in recent days suggests additional buying interest with noncommercials still sporting a large net-long commitment in live cattle futures.2)Between Monday's large pullback from session highs and follow-through selling that surfaced Tuesday, significant overhead resistance has been reinforced in the June live cattle chart.
3)Late-spring pork demand really seems to be on a roll. The cutout surged sharply higher again on Tuesday, powered by stronger demand for all primal except the loin.3)Given the fact that U.S./China beef negotiations seem to be developing nicely, with some believing U.S. exporters will be shipping beef to China as early as late June, it's possible that U.S. pork shipments could be checked to some extent as China realigns its red meat mix.
4)Interest in bull spending in lean hog futures continues to grow, a reflection of cash market optimism over the next 30 to 45 days. Note that spot June closed over $80 on Tuesday, a new contract high close.

4)As summer lean hog futures sit on the threshold of the low $80's, they approach the price area that many analysts have long considered to represent a best case scenario. A more promising collection of fundamentals may be very difficult to assemble.
OTHER MARKET SENSITIVE NEWS 
CATTLE: (Dow Jones) -- Shares of Brazilian meatpacker JBS plunged more than 30% Monday, costing the company about $2 billion, after President Michel Temer accused its owners of insider trading as part of a bitter battle over the country's corruption scandal.
JBS's shares have slumped since its executives said in documents made public last week by the country's top court that they bribed Mr. Temer and his two predecessors as part of its involvement in the graft scheme, raising fears over the company's future and its planned initial public offering in the U.S.
In a televised address Saturday, Mr. Temer said JBS's executives were lying and accused company Chairman Joesley Batista of making "millions and millions of dollars" by buying $1 billion in dollar contracts and selling the company's shares before leaking the allegations about him to the press.
The accusations accelerated JBS's share losses Monday, sending shares in São Paulo down 31.34% to 5.98 reais ($1.83). The drop erased about 7 billion reais ($2.14 billion) of its market cap in a matter of hours, said Guilherme Figueiredo, a fund manager at São Paulo-based investment firm M. Safra.
JBS has denied wrongful trades.
Moody's Investors Service downgraded both JBS and JBS USA by one notch Monday, citing increased risks related to potential future litigation.
"The IPO is dead -- [JBS's] name has been soiled in all markets," said Pedro Galdi, an analyst at São Paulo-based research firm Upside Investor.
JBS planned to list its international unit in the U.S. this year as part of its global reorganization plan. In May, it said it is delaying the listing because of the company's legal troubles but vowed it would go ahead at some point.
"It will likely have to go down the route of selling some assets," said Mr. Galdi. ] "JBS's operations are continuing at a normal pace, as set out in the business plan. The company has a robust financial situation and believes in the quality of its products and services," JBS said late Monday.
J&F, the holding company owned by Mr. Batista's family, may consider selling its pulp and paper company, Eldorado Brasil Celulose, and/or Alpargatas, owner of the popular flip-flop Havaianas brand.
"It will be much more expensive to get credit -- it will have to rethink its management strategy," Mr. Galdi said.
Brazilian market regulator CVM has opened five separate probes into the family holding firm, JBS, and Banco Original, which is also owned by J&F, over the past week following the allegations.
Once a butcher's shop, the global meatpacker has become the latest company to admit involvement in the Car Wash corruption investigation, which began three years ago and has since ballooned into the biggest scandal of its kind in Brazilian history.
Executives involved in the scheme have increasingly turned on their former allies in government, signing tell-all plea bargains with prosecutors in a desperate attempt to avoid jail time.
Mr. Batista, his brother and five other executives signed plea bargain deals with prosecutors in which they have agreed to pay a total of 225 million reais. JBS is also negotiating a leniency deal with prosecutors, who have demanded more than 11 billion reais to settle the case.
HOGS: (National Hog Farmer) -- Last fall we all feared a debacle in hog prices as concern mounted that slaughter capacity would be exceeded and result in a collapse in hog prices. It never happened.
It turns out that packer margins were highly profitable, so profitable that they were willing to pay overtime and process numbers above capacity without breaking cash hog prices severely. During the first two months of this year, when virtually no hogs were backed up during the early winter and the holidays, cash prices surged higher until finally peaking in February. Cash prices were then throttled lower during much of April as supplies were consistently larger than expected.
However, this behavior was eventually rectified as surging demand for pork once again saved the day. Cash hog prices have since rallied sharply during May almost as if a "bullish" switch had been turned on. In reflection, first quarter pork exports were up 17% compared to the first quarter of 2016. This represents a huge year-over-year change in trade. Typically we speak of exports being up or down 2% to 4%, not 17%. During the quarter exports to Mexico were up 33%, up 8% to Japan, up 32% to South Korea, up 34% to Australia, up 98% to Colombia, up 28% to the Dominican Republic and up 5% to the Philippines. During the quarter, exports were unchanged to Canada and down 12% to China/Hong Kong. So, the huge growth in exports occurred without the help from China. First-quarter pork exports as a percentage of production equaled 22.3% compared to 19.6% in the first quarter of 2016. Again, these are very impressive trends and should they continue one can anticipate higher hog prices during the course of 2017.
Finally, on the export front, the U.S. dollar has been trending lower making pork exports more attractive. Very few thought we'd be experiencing a weakening dollar during the course of 2017.
Domestic pork demand has also been powerfully strong. On the backside of record large pork production last year, total frozen pork stocks, as of April 1, were down 10% compared to last year. Clearly this indicates that usage has been greater than production, forcing a drawdown in frozen supply. Ham stocks on April 1 were down 6% from last year. Belly stocks were down 69%, loin stocks down 24% and trimmings were down 9%. Pork sparerib stocks were unchanged from last year with pork butts up 12%.
Looking ahead, the USDA is forecasting record large production this year as producers continue to expand at a steady, but cautious, rate. Pork production for this year is currently forecast at 26.0 billion pounds, or up 4.4% from last year. For 2018, the USDA is projecting production to be 26.9 billion pounds, or up 3% from this year. Both years would be record high production. I [Dennis Smith] have no quarrel with these projections although we're hearing that hog weights are declining a bit faster than normal due to quality issues with corn. Lower weights than expected might shave some production off future forecasts. The real good news for hog producers is the fact that slaughter capacity will be increasing into next year with total slaughter capacity slated to increase by 8%. Finally, export projections indicate that exports this year will rise by nearly 8% with exports for next year slated to increase by another 4%. These are very positive trends and actually project to only a very small increase in per capita pork supplies for this year. In addition, the huge pace of first quarter pork exports could indicate that actual exports may exceed projections.
From an analyst/trader standpoint there are several items that I'm watching closely going into summer. First, I'm hearing that bellies are being pulled out of the freezer during May. If this is correct, fresh belly prices could become explosive and wild this summer as usage increases and production declines. An increasingly large portion of bacon demand is centered in food service demand which, in my opinion, is more inelastic. For example, the widespread use of bacon at the fast food restaurant represents inelastic demand for bacon. Arby's has just re-introduced their pork belly sandwich. Chick-fil-A has just introduced, for the first time, a chicken sandwich topped with bacon. Burger King is advertising their burgers topped with bacon and McDonald's has featured bacon on their menu for months. These sandwiches won't be pulled from these menus regardless of the price of bacon.
Second, another item I'll be watching closely this summer will be packer processing margins. Finally, I'll be closely watching the size of the hog runs and the resulting seasonal decline in pork production. Last year the August lean hog contract reached $90 before topping. Summer hog futures contracts are just now testing and penetrating resistance levels at $80. In my opinion the summer hog market has $5 upside potential and possibly as much as $10 from current prices. Are you ready for the summer hog market?