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Monday, July 31, 2017

Monday Closing Livestock Market Update

GENERAL COMMENTS
Feedlot country saw a typical round of "show and tell" with packers pretty much collecting showlists and going home. The new offering is mixed with greater ready numbers in Colorado, fewer in Nebraska and Kansas, and about the same in Texas. According to the closing report, the national hog base is $1.64 lower ($75.00-81.50, weighted average $79.40). Corn futures closed generally 3 cents lower, checked by forecasts of relatively mild growing weather. The stock market closed mixed with the Dow posting a record high close at 21,891, up 60 points, and the Nasdaq finishing off 26.
LIVE CATTLE
Troubled by ideas of mounting beef tonnage through late summer and uncertain demand, live contracts closed lower at the conclusion of the week's opening round of CME business (i.e., off 27 to 90). Closing right at 112 (its poorest finish since April 24), spot August has fallen out of the lateral trading range held since late spring. Beef cut-outs: mixed, up $1.02 (select, $197.84) to off .47 (choice, $205.75) with light to moderate demand and offerings (63 loads of choice cuts, 18 loads of select cuts, 12 loads of trimmings, 20 loads of ground beef).
TUESDAY'S CASH CATTLE CALL:
Steady to $2 lower. Tomorrow should be typically quiet in cattle country with both bids and asking prices poorly defined. This lack of definition will probably characterize the trade until Wednesday or later.
FEEDER CATTLE
Although significantly pressure along with their live counterparts in the early going, feeder contracts closed no worse than mixed (i.e., up 27 to off 80) thanks to late-session short-covering. Most months finished 100-150 points above session lows. On an estimated run of 2,782 head ( below last week's total of 3,948 and smaller than receipts of 5,439 in 2016), Oklahoma City is sold feeder steers and heifers on an unevenly steady basis. CME cash feeder index: 07/28: 150.41, up 1.07.
LEAN HOGS
Lean hog futures closed generally 10 to 110 lower with spot August getting hit the hardest. Though deferred selling was relatively mild, October and December sank to their saddest settlement seen since April 24. Carcass value closed solidly higher with all primals contributing to the aggregate progress except the picnic. Pork cut-out: $99.66, up .91. CME cash lean index for 07/27: 88.75, off .64 (DTN Projected lean index for 07/28: 88.10, off .65).
TUESDAY'S CASH HOG CALL:
$1 lower. Look for opening bids in the morning to stay on the defensive with packers expecting ready numbers to grow.

Monday Midday Livestock Market Summary

GENERAL COMMENTS: 
Activity in feedlot country this morning is limited to the distribution of new showlists. The early month offering appears to be mixed, larger in Colorado, smaller in Kansas and Nebraska, and about unchanged in Texas. Overall, ready numbers of fed steers and heifers seem to be somewhat smaller. According to the midday report, the national hog base is $1.80 lower compared with the Prior Day settlement ($75.00-81.00, weighted average $79.24). Corn futures are generally 3 cents lower near the top of the noon hour, pressured by improving growing crop conditions. The Dow is posting a new record high at midday, up 87 points at 21,918. On the other hand, the Nasdaq is off 17.
LIVE CATTLE:
Live tracts are generally 42 to 95 points lower near midday, pressured by long liquidation and technical selling. While price action has been choppy through the morning, business has essentially been stuck in red ink. For the moment, spot August continues to find support in the 112-112.50 area. A close below that level would probably trigger more long liquidation. Beef cut-outs are mixed at midday, up $1.69 (select, $188.56) to off 002 (choice, $206.20) with light box movement (36 loads of choice cuts, 9 loads of select cuts, zero loads of trimmings, 11 loads of coarse grinds).
FEEDER CATTLE:
Feeder prices are mixed at midday, pushed and pulled by defensiveness in the live market on one hand and lower corn prices on the other. On an estimated run of 3,000 head (somewhat below last week and smaller than receipts of 5,439 in 2016), Oklahoma City is called steady/firm at midday.
LEAN HOGS:
Lean futures are moderately lower as traders move into the session's final hour. Spot August seems to be catching the most selling/ling liquidation interest thanks to signs that hog buyers continue to hammer away at country sales. Carcass value at midday is sharply higher with all primals showing decent progress except the picnic. Pork cut-out: $100.67, up $1.92. CME cash lean index for 07/27: 88.75, off 064 (DTN Projected lean index for 07/28: 88.10, off 0.65).

Monday Morning Livestock Market Update

GENERAL COMMENTS:
Early week activity will be typically limited to the distribution of new showlists. We expect the early month offering to be somewhat larger than last week. While feedlot managers are likely to be cautious until Wednesday or later, look for asking prices to start out around $120 in the South and $190 in the North. Live and feeder futures to open moderately lower, pressured by residual selling interest and uncertain cash prospects.
Look for cash hog buyers to resume procurement efforts this morning with lower bids. Market psychology seems to be growing more and more defensive. Last week's s slaughter totaled 2,239,000 head,
26,000 more than the previous week. We could see such incremental growth through the month of August before accelerating after Labor Day. Lean futures should start out under selling pressure thanks to lower carcass value and cash worries.
BULL SIDEBEAR SIDE
1)First of the month paychecks typically stimulate consumer meat spending, a reality that could help to stability wholesale markets this week.1)Japan's safeguard mechanism has triggered an increase in the duty charged on imports of frozen beef from U.S. and other countries. The rate will increase from 38.5 percent to 50.0 percent for the remainder of the current fiscal year
2)Seasonally, August live cattle futures tend to strengthen from here into expiration next month.2)For the week ended July 25, noncommercials continued liquidating their long position in live cattle futures which declined by 1,400 to 109,900 contracts.
3)The American economy grew at an annual rate of 2.6 percent last quarter, a big pickup from the beginning of 2017. The Commerce Department's report issued on Friday is a sign that the economic recovery remains on track.3)For the week ending July 25, noncommercial traders were net sellers once again, reducing their net long position in lean hog futures by 2,500 contracts to 60,800.
4)Japan's safeguard mechanism has triggered an increase in the duty charged on imports of frozen beef from U.S. and other countries. The rate will increase from 38.5 percent to 50.0 percent for the remainder of the current fiscal year
4)The pork carcass valued fell more than a dollar lower in Friday with softer demand evident in all primals except the butt and picnic.
OTHER MARKET SENSITIVE NEWS 
CATTLE: (USA Today) -- In unwelcome news for American farmers, Japan said Friday that it was imposing emergency tariffs of 50% on imports of frozen beef, mainly from the U.S.
Finance Minister Taro Aso announced the move Friday, saying he was prepared to explain the decision to the U.S. side.
"The tariff will take effect automatically as the volume of the imported US frozen beef exceeded the quota set by law," Aso said, "So this is what has to be done."
Japan's beef farmers are famed for their luscious marbled Kobe beef and other delicacies, and the government has long used tariffs and other measures to protect its farmers from foreign competition. Still, prices for imported beef tend to be half or less those for beef from domestically-raised cattle.
The U.S. and Australia account for 90% of all imports of frozen beef, which is mostly used by beef bowl, hamburger and other fast food outlets.
The usual tariff rate for frozen beef imports is 38.5%. Under World Trade Organization rules, Japan can introduce safeguard tariffs when imports rise more than 17% year-on-year in any given quarter.
U.S. farmers had been hoping for wider access to Japan's lucrative market through a Pacific Rim trade initiative, the Trans-Pacific Partnership. But U.S. President Donald Trump withdrew from that accord after taking office.
Trade terms Japan negotiated with the 10 other remaining members of the TPP remain in force. So Australia, the biggest rival to U.S. beef exporters with a more favorable tariff rate of 27.5% for frozen beef, will not face the same jump in tariff rates thanks to a free trade agreement reached with Tokyo as part of the TPP talks.
Relatively affordable "Aussie beef" is an increasingly popular feature of most supermarket meat sections, with Australia supplying more than half, about 55 percent, of all frozen beef imported to Japan.
According to figures from the U.S. Department of Agriculture, the U.S. supplies around 35%, though U.S. beef exports to Japan have risen recently as prices fell after the livestock sector recovered from years of drought.
The Finance Ministry reported 89,253 metric tons of frozen beef were imported so far this year.
HOGS: (nationalhogfarmer) -- The long-anticipated and long-awaited increase in U.S. hog slaughter capacity is finally at hand. It began slowly last September when MoonRidge Pork opened its plant in Pleasant Hope, Mo., and continued this spring with the opening of Prime Pork in Windom, Minn. But the big jumps are coming this fall though there are still some questions about timing. Let's hope the timing is good because even with the largest single increase in slaughter capacity in memory, larger hog numbers will once again test capacity this fall.
Note first that I [Dr. Steve Meyer] have changed my time frame.
Historically we have placed our capacity figures in the spring of the year in question. That fit the early to mid-summer timing of our survey and provided a "historical" perspective. This year, I have changed the time frame to the fall of the year since a) the two big plants are not yet open, but will be operational in the fourth quarter and b) the fall of the year is the critical time period during which our capacity is usually tested.
The big increases happen in the middle of the table. Clemens Food Group leads the way with their new plant in Coldwater, Mich., which will have a first-shift capacity of 12,000 head per day. Clemens has announced — and adamantly stood by the announcement — that they will commence operations on Sept. 5 with a ramp-up to full one shift capacity early next year. Several large eastern Corn Belt producers were instrumental in getting this plan built, but they do not own share in the plant. They actually invested in Clemens Food Group and now hold a minority stake in the entire company.
Triumph-Seaboard's plant in Sioux City, Iowa, will have a first-shift capacity of 10,100 head per day. It, too, is officially scheduled to open Sept. 5, though significant industry chatter suggests that it will be at least late-September before the first pigs are harvested. This plant is a joint venture between Triumph Foods and Seaboard Foods. Note that we list the two parent companies and this plant as separate entities in spite of the clear interlocking ownership of this new plant. Officials at Triumph and Seaboard have been quite pointed in their statements that this will be a separate operating entity. The only known overlap of the two parent companies would be Seaboard's marketing the pork products coming out of Triumph's original St. Joseph, Mo., plant. Procurement at Triumph and Seaboard has always been independent and we understand that both marketing and procurement for the Sioux City facility will be independent of the other entities.
MoonRidge Pork (Mount Pleasant, Mo.) and Prime Pork (Windom, Minn.) are in this year's table with capacities of 2,500 and 5,100 head per day, respectively. MoonRidge began operations last September and are still running less than 1,000 head per day. Cooler challenges have limited their ramp-up but company officials hope to have those solved soon. Prime Pork is reported to be operating in the 3,500 to 4,000 head per day range with an increase to 5,000 planned this fall.
JBS, as expected, increased the throughput at the plants that it acquired from Cargill last year. The 1,600 head per day increases at both the Beardstown, Ill., and Ottumwa, Iowa, plants added 8.5% to the capacity of the old Cargill plants. Capacity at JBS's other three plants has not changed.
The only other increase of over 1,000 head per day was at Dakota Pork in Estherville, Iowa. This light hog processor doubled their capacity from one year ago, going from 1,250 to 2,500 head per day.
Several other companies expanded their capacities slightly during the past year. The largest of these was a gain of 550 head per day at The Pork Co. in Warsaw, N.C. The company has historically processed light hogs and a few heavy gilts when the opportunity arises, but has expanded into organic and antibiotic-free products.
The 100 head per day reduction for F.B. Purnell Sausage is an adjustment of their previous number. There was no change in Purnell's operation.
Finally, we direct your attention to the bottom of our rankings for changes that, though they have little impact on total capacity, are noteworthy due to their drivers.
Weltin Meat Packing in Minden City, Mich., is still open for business and offering pork and beef products. However, they are no longer slaughtering pigs because, according to management, "We can't find labor. No one wants to do the hard work required in a slaughter plant." We have no idea what the local labor conditions are (though they are likely tight just as they are in much of rural America) or the wage that Weltin is offering, but this will not likely be the last we hear of this labor story. We have already heard rumors that labor is a reason for the delay in Sioux City and that is the largest town in which a new facility has or will begin operations. One would think the worker pool might be best there.
Kapowsin Meats suspended operations in late-August last year after a second round of salmonella contamination resulted in a number of sickened consumers. The company's first round of difficulties was in December 2015 after which it re-opened, but then closed after another incident in July 2016 and the recall of over 116,000 pounds of whole roaster pigs.
The industry has had very few food safety issues that have actually caused human illness but this case is a warning on several fronts.
What if it had been larger? In cuts or packaged meats instead of roaster pigs? If someone had actually died? Further, the consequences are clearly huge for a plant that has only one slaughter facility.
Will this be enough shackle space this fall? Assuming the two big plants can ramp up to half-speed by December, the industry should be able to process about 2.611 million head in a 5.4 day workweek. My forecasts based on the June Hogs and Pigs report would have slaughter peaking at 2.628 million head the week after Thanksgiving and getting to 2.626 million head two weeks later. Those are "handle-able" runs given the new capacity. Since we neither exceed capacity significantly nor do it for more than a couple of weeks, I foresee few, if any, price impacts from high capacity utilization. Prices will be lower because of large pork supplies but little of that downward pressure will come from plants being full and over-worked.
Full ramp-ups of the new plants and the addition of a second shift at Sioux City in 2018 will likely put us in a similar position next fall. The Prestage Farms plant in Iowa will, if it stays on schedule, be open in October 2018 but it will not provide much help until the spring of 2019.

Friday, July 28, 2017

Friday Closing Livestock Market Summary

GENERAL COMMENTS

Light-to-moderate trade developed in several cattle feeding states. Live sales in Texas were marked at $117, generally $3 lower than last week. On the other hand, dressed deals in the North ranged from $187-$188, $2-$3 lower. The national hog base closed off $1.03 compared with the prior day settlement ($76-$82.75, weighted average $80.98). From Friday to Friday, livestock futures scored the following changes: Aug LC off $3.52; Oct LC off $4.98; Aug FC off $6.90; Sep FC off $6.05; Aug LH up $0.30; Oct LH off $0.72. Corn futures closed fractionally higher, but ended up about a nickel lower on the week thanks to more friendly growing weather across much of the Corn Belt. The stock market closed mixed with the Dow off 33 and the NASDAQ off 7.

LIVE CATTLE
Futures closed moderately to sharply lower off 37-140. Most contracts were pressured by long liquidation and ideas of worsening fundamentals through much of the third quarter. Trading also seemed to be bothered by news that Japan would soon impose higher tariffs on frozen beef imports. The first five contracts closed the week well below 100-day moving averages. Beef cut-outs: steady (choice, $206.22 off $0.21, select $196.82 up $0.16) on light-to-moderate demand and offerings (53 loads of choice cuts, 19 loads of select cuts, 03 loads of trimmings, 19 loads of coarse grinds).

MONDAY'S CASH CATTLE CALL:
Steady to $2 lower. Monday will be typically slow as packers limit efforts to the collection of new showlists. We expect ready numbers to be generally larger than this week.

FEEDER CATTLE
Futures closed mostly sharply lower, off 185 to up 2. Feeders put in a tough week thanks in part to last week's midyear herd inventory, which suggested a growing number of feeder cattle outside of feedlots. Commercial selling was also encouraged to buy the discount structure of deferred live futures. CME cash feeder index: 07/27: $149.36, off $1.94.

LEAN HOGS
Futures closed mixed, up 115 to off 117. Nearby issues lost ground to 2018 contracts. Large fourth-quarter discounts reflected concerns about late-year supplies and the markets ability to find sufficient demand to minimize price erosion. Note that December closed at 61.05, the lowest price level seen since April 26. Pork cut-out: $98.75 (FOB plant) off $1.19. CME cash lean 07/26: $89.39, off $0.45 (DTN Projected lean index for 07/27: $88.75, off $0.64).

MONDAY'S CASH HOG CALL:
$1 lower. Hog buyers will start out next week on the defensive, troubled by signs of increasing market numbers and struggling pork demand.

Friday Midday Livestock Market Update

GENERAL COMMENTS:

Sharp triple-digit losses have quickly developed through cattle trade with nearby futures contracts holding losses from $1.50 to $2 per cwt. The lack of buyer interest redeveloping at the end of the week following moderate to strong support Thursday has created additional market uncertainty. Corn prices are higher in light trade. September corn futures are 1 cent higher. Stock markets are lower in light trade. The Dow Jones is 2 points lower while Nasdaq is down 3 points.

LIVE CATTLE:
Sharp end-of-week price pressure has quickly developed across the live cattle futures trade with nearby futures holding losses of $1.50 to $2 per cwt lower at midday. The swift move from narrow losses early in the session to aggressive triple-digit losses has created additional uncertainty through the complex and may lead to even more market pressure and contract liquidation once traders come back to the market Monday as the close out the month of July. Cash cattle markets are showing light activity in the south Friday morning with clean-up trade seen in Texas at $117 per cwt. Clean-up activity is expected to be the only activity seen through the rest of the day, although the tone of the market seems to be set with live prices at $117 per cwt and dressed basis at $188 per cwt. Generally prices for the week have been $2 to $3 per cwt lower than last week's levels. Beef cut-outs at midday are lower, $0.77 lower (select) and down $0.94 per cwt (choice) with light movement of 69 total loads reported (41 loads of choice cuts, 13 loads of select cuts, 3 loads of trimmings, 11 loads of ground beef).

Feeder Cattle:
Sharp losses have developed through feeder cattle futures with nearby contracts quickly moving from narrow market losses early in the session to losses nearing $2 per cwt at midday. The overall lack of trade volume and continued fundamental pressure held over the complex continues to create uncertainty through the complex as a whole and leave buyers unwilling to step into the market at the end of the week.

LEAN HOGS:
Early market activity remained mixed in a narrow trading range, but the pressure developing in cattle futures quickly leaked into nearby lean hog futures contracts at the end of the week and has caused moderate to significant pressure to nearby lean hog futures through late-morning trade. Trade volume has remained extremely sluggish through most of the morning, with traders holding losses of 80 cents to $1.20 per cwt in remainder 2017 contracts as the focus is moving to end of the week and month position taking. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $1.05 at $80.96 per cwt with the range from $80.00 to $82.75 on 4,108 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $1.27 at $81.53 per cwt with the range from $80.00 to $82.75 on 1,545 head reported sold. The National Pork Plant Report reported 147 loads selling with prices falling $1.14 per cwt. Lean hog index for 7/26 is at $89.39 down $0.45 with a projected two-day index of $88.75, down $0.64.

Friday Morning Livestock Market Summary

GENERAL COMMENTS:

Light trade volume is possible in feedlot country Friday with prices about steady with the lower money seen at midweek (i.e., $117 live; $188 dressed). Yet we won't be surprised if little business is added by the end of the day. Late-week asking prices should be around $118 to $120 in the South and $190 in the North. Live and feeder futures seem staged to open moderately lower, pressured by long liquidation and nervousness regarding late-summer fundamentals.
The cash hog trade is expected to open with bids ranging from steady to $1 lower. If Saturday's kill totals close to 65,000 head, the weekly slaughter should end up very close to 2.2 million head. Lean futures should start out moderately lower as well thanks to ideas of both larger hog supplies and softer pork demand ahead.

BULL SIDE
BEAR SIDE
1) Actual beef exports last week totaled 15,476 metric tons, up 5% from the previous week, 10% from the prior four-week average, and a marketing-year high. 1) Beef cutouts closed significantly lower on Thursday with carcass values rolling lower from the early week advance. Box supplies were described as "heavy."
2)
For the week ending July 15, cattle carcass weights dropped contrary to the seasonal trend, suggesting that intense summer heat is taking a toll (i.e., all cattle: 806 pounds, 5 lbs. lighter than the prior week and 14 lbs below 2016; steers: 865 lbs, 1 lb smaller and 15 lbs under last year.
2) Historically large March/April placement means the fed cattle numbers are clearly set to increase through the end of the summer.
3) Net pork export sales last week jumped to 19,100 MT, up 63% from the previous week and 26% from the prior four-week average. 3)
The pork carcass value lost more ground Thursday, closing moderately lower thanks to softer demand for all primals except the loin and belly.
4) The fact that the dollar index has weakened to a 13-month low is good news for U.S. meat exports. With inflation remaining in low gear, the Fed seems unlikely to raise interest rates anytime soon. 4) Spot August lean hogs settled Thursday's session slightly higher at 82.25, a 715-point discount to Wednesday's CME two-day settlement index value. The seasonal trend is for the August contract to chop around sideways to lower from here into contract expiration in just over two weeks. It looks like the board remains confident in leading the cash market lower.
OTHER MARKET SENSITIVE NEWS
CATTLE: (Bloomberg News) -- McDonald's Corp. Chief Executive Officer Steve Easterbrook is keeping a close watch on food safety as he rolls out fresh beef at the fast-food chain, aiming to avoid problems that continue to roil Chipotle Mexican Grill Inc. almost two years after an E. coli crisis.
"The absolute No. 1 priority for us is food safety," Easterbrook said in an interview with Erik Schatzker on Bloomberg Television Wednesday. "We never take that for granted."
After a successful round of testing, McDonald's announced plans in March to roll out fresh beef in its quarter-pound burgers at the majority of U.S. restaurants by next year. The shift means swapping out frozen patties and dealing with something that's different to source, transport, store and cook, Easterbrook said.
Though the switch won't apply to all of McDonald's burgers, it represents a key new challenge for the six-decade-old restaurant chain. Fresh beef requires more careful handling than frozen patties, and Chipotle's woes have brought more intense attention to food safety.
Chipotle, which was backed by McDonald's before its initial public offering in 2006, suffered a norovirus outbreak at a restaurant in Virginia this month. More than 135 customers were sickened, and the incident battered the stock last week. It also brought back memories of Chipotle's multiple foodborne-illness outbreaks in 2015.
Fresh beef is one of several initiatives aimed at improving McDonald's culinary reputation. The company removed artificial preservatives from Chicken McNuggets last year and stopped using high-fructose corn syrup in its sandwich buns. It also plans to switch to cage-free eggs by 2025.
The shift away from frozen beef may put more pressure on sanitation. Easterbrook warned last year that contamination was a potential risk.
Wendy's Co. has spent decades offering fresh burgers, but not at the scale of McDonald's 14,000 U.S. restaurants.
"Our job is to solve the operational challenges, but deliver what the customer is asking for," Easterbrook said.
HOGS: (NPPC): -- Stating that "pork producers, not animal-right activists, lawmakers or regulators, should make the decisions about what production practices are best for their animals and for producing safe food," Neil Dierks, CEO of the National Pork Producers Council, On Tuesday in congressional testimony pledged the organization's support for legislation that would prohibit a state from imposing tax or regulatory burdens on businesses, including pork operations, that are not physically present in the state.
The ''No Regulation Without Representation Act of 2017,'' H.R. 2887, introduced by Rep. James Sensenbrenner, R-Wis., would stop states from adopting laws and regulations that ban the sale of out-of-state products that don't meet their criteria.
Massachusetts, for example, last year approved a ballot initiative that outlaws in the state the use of gestation stalls for housing sows, battery cages for egg-laying hens and crates for veal calves and prohibits the sale of out-of-state pork, eggs and veal from animals kept in the banned housing. The California Legislature in 2010 adopted a similar sales prohibition after voters in the state in 2008 approved a nearly identical ban on animal housing.
NPPC has fought such bans, which have been pushed by animal-rights groups. Nine states have banned, through legislation or ballot measures, gestation stalls, battery cages and veal crates, but only California and Massachusetts extended the bans to sales in their state of products produced anywhere in the country that don't comply with their housing standards.
"Changes in production practices should be driven by the marketplace, not government fiats or even ballot initiatives," Dierks told the House Committee on the Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law, during its hearing on the growing problem of states regulating beyond their borders.
He pointed out that, while states have the prerogative -- however ill-advised or uninformed -- to ban certain agriculture production practices for their farmers, they shouldn't be allowed to adopt laws or regulations that dictate the practices of farmers in the other 49 states.
That restraint of interstate commerce, Dierks told the panel, would appear to be a violation of the U.S. Constitution's Commerce Clause, which gives absolute power to Congress to regulate such trade.
The Sensenbrenner bill would prohibit state intrusions on the sovereignty of other states, limiting state taxation and regulation to persons and entities that have a "physical presence" in the state.

Thursday, July 27, 2017

Thursday Closing Livestock Market Summary

GENERAL COMMENTS
Scattered feedlot sales were evident in several areas with live and dressed prices about steady with Wednesday's decline. According to the closing report, the national hog base is $0.36 higher ($76-$85, weighted average $82.11). Corn futures closed a penny plus higher, mildly supported by smaller-than-expected rainfall amounts reported across much of Iowa. Wall Street closed mixed with the Dow up 85 points and the Nasdaq off by 40.
LIVE CATTLE
For the most part, live futures closed moderately higher (i.e., steady to 90 higher) with all but spot August building a little on Wednesday's bounce. 2018 contracts are trying hard to dig in above 100-day moving average. The weekly closed scored on Friday could be important in that regard. Beef cut-outs: significantly lower, off $0.64 (choice, $206.43) to $1.21 (select, $196.66) with moderate demand and heavy offerings (89 loads of choice cuts, 43 loads of select cuts, 4 loads of trimmings, 10 loads of ground beef).
FRIDAY'S CASH CATTLE CALL:
Steady with Wednesday's lower trade. Clean-up action could surface in several corner on Friday. Yet, for the most part, business seems to be done for the week.
FEEDER CATTLE
Feeder issues closed 135 to 172 points higher, spurred by short-covering and signs of oversold charts. Besides oversold oscillators, spot August was no doubt supported by the premium status of the cash index. CME cash feeder index: 07/26: $151.30, off $0.27.
LEAN HOGS
While August and October managed to settle some higher, most contracts finished moderately lower (i.e., off 12 to 40). With spot August slowly firming and the cash index premium beginning to erode, the late-summer basis seems to finally be converging. The carcass value once again took a tumble, significantly tripped by all major primals except the ham and belly. Pork cut-out: $100.50, off $1.82. CME cash lean index for 07/25: $89.84, off $0.33 (DTN Projected lean index for 07/26: $89.39, off $0.45).
FRIDAY'S CASH HOG CALL:
Steady to $1 lower. Hog buyers are expected to open on the defensive in the morning thanks to flagging carcass values and ideas of building numbers in August.

Thursday Midday Livestock Market Summary

GENERAL COMMENTS: 
Firm pressure has developed in live cattle and lean hog futures midday Thursday even though light trade volume has been seen through the complex. Very little long-term market direction is expected to be seen over the near future which could allow prices to shift in a moderate range over the next few trading sessions. Corn prices are higher in light trade. September corn futures are 3 cents higher. Stock markets are higher in light trade. The Dow Jones is 51 points higher while Nasdaq is up 4 points.
LIVE CATTLE:
Light pressure has developed in live cattle futures with nearby futures holding losses of 12 to 65 cents per cwt at midday although trade volume has remained extremely light through the entire session. The inability to hold early buyer support as more trade activity moved into the complex quickly gave evidence that additional losses may continue to develop through the entire market. But as seen midweek, a strong late day market bounce is still not out of the question as the light trade volume is giving the opportunity to allow increased volatility into all markets. Cash cattle markets are generally quiet Thursday morning with bids redeveloping at $117 live basis and $186 to $188 dressed. Sales have not been reported at this point, and may be hard to find before the end of the week. It is likely that the market has been set at this point. Beef cut-outs at midday are lower, $0.64 lower (select) and down $0.26 per cwt (choice) with light movement of 87 total loads reported (47 loads of choice cuts, 29 loads of select cuts, 3 loads of trimmings, 7 loads of ground beef).
Feeder Cattle:
Narrowly mixed trade is seen across the feeder cattle market with traders taking a very subdued approach Thursday morning. The overall lack of direction seen through the entire trading session continues to draw front-month August futures slightly lower with August futures holding a 35 cent loss. Other nearby contracts have posted narrow gains with spillover buyer interest trickling into the complex through the last half of the week.
LEAN HOGS:
The lack of support seen through the entire complex has continued to develop Thursday morning with nearby contracts expanding early losses as October futures are now trading 62 cents per cwt lower in light trade. Market activity continues to remain sluggish across all contracts, with prices grouped in a narrow range, but firmly lower as most contracts 30 to 60 cents per cwt lower at midday. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.80 at $80.95 per cwt with the range from $80.28 to $82.50 on 3,810 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 180 loads selling with prices falling $1.19 per cwt. Lean hog index for 7/24 is at $90.44 down $0.69 with a projected two-day index of $89.84, down $0.60.

Thursday Morning Livestock Market Update

GENERAL COMMENTS:
Although trade volume was limited on Wednesday, lower steer and heifer prices probably set the market for the balance of the week (i.e., $118 dressed/$117 live). Unsold cattle are priced around $120 in the South and $190 in the North. Look for trade volume to increase Thursday and/or Friday. Live and feeder futures seem set to open on a mixed basis thanks to a combination of follow-through buying and long liquidation.
The cash hog trade seem ready to open with bids $0.50 to $1 lower. Saturday slaughter plans are expected to total close to 63,000 head. Lean futures are staged to open lower, checked by short-covering and struggling product demand.
BULL SIDEBEAR SIDE
1)Live and feeder futures reversed and closed mostly higher, especially live contracts. Spot August live attracted new buying interest about long-term support around $112 to $112.50.1)Light to moderate cash cattle trading surfaced at midweek with dressed sales $2 to $4 lower and live deals off as much as $3. Such defensiveness may be ominous of greater trade volume through the balance of the week.
2)
Beef cutouts continued to recover on Wednesday with the select box jumping more than a buck for the third consecutive session.
2)The board structure continues to exhibit expectations of lower cattle and beef prices going into late summer and fall.
3)For the week ending July 22, Iowa barrows and gilts averaged 275.7 pounds, 1.1 lbs. lighter than the week before and 1.6 lbs. smaller than 2016.3)
For the week ending July 22, U.S. hatcheries set 227 million broiler eggs in incubators; up 5% from a year ago. At the same time, totaled 182 million chicks; up 3% from 2016.
4)Lean hog futures settled Wednesday's session higher, despite the continued easing of cash hog prices and fading overall wholesale pork product values. Such contrary behavior may suggested that discounted spot August is cheap enough.
4)The pork carcass value really took it on the chin Wednesday with significant softer demand for fresh cuts and ribs.
OTHER MARKET SENSITIVE NEWS 
CATTLE: (ABC) -- China has temporarily banned beef exports from six Australian meatworks, the Federal Government has confirmed.
Australia was made aware of the ban on Tuesday, and Trade Minister Steven Ciobo told the ABC he intended to work closely and constructively with industry and China to resolve the issue as quickly as possible.
Mr Ciobo said the ban related to Chinese concern about labelling non-compliance.
There is no suggestion that health or food safety issues are involved.
"This is obviously a very material situation," Mr Ciobo said.
"We've got, potentially, very significant amounts of trade involved in this and so it's a matter that I'm very mobilised on, my team, my office, as well as our embassy in China."
He said Australia and China had a strong relationship that "sees us work through irritants" such as Australia's recent ban on prawn imports.
"We intend to engage in a very constructive way," Mr Ciobo said, and sought to reassure the beef industry the Government would adopt a very "proactive" approach.
The Australian Meat Industry Council confirmed it was working with the Department of Agriculture through diplomatic channels on the issue.
There are shipments currently on the water.
But the ABC understands the Australian industry believes it has resolved the labelling issues, and the Government is hopeful it can resolve the issue before those ships arrive in China.
The ABC understands the affected abattoirs are in Queensland and NSW, and include two facilities owned by Australia's largest meat processor JBS.
Other companies affected are Kilcoy Pastoral, Australian Country Choice, the Northern Rivers Co-operative at Casino, and Thomas Food.
The Government was formally notified by the Chinese Government Wednesday and has been liaising with industry last night and Thursday.
The ABC understands the ban is because of non-compliance issues around labelling of meat from those plants, and is not because of health or food safety concerns.
Industry believes it has addressed those non-compliance issues and is hopeful the issue will be resolved quickly.
The Australian Department of Agriculture and Water Resources issued a statement saying the six affected export establishments were reported as suspended on the Administration of Quality Supervision, Inspection and Quarantine of China website.
Australia's beef exports to China were worth more than $600 million last year, and China is the fourth-largest market.
More beef and lamb processors were given approval in March to export chilled meat to China in a deal struck at the highest level, between the Chinese Premier and the Australian Prime Minister.
But Australian exporters are also now confronted with a new competitor in the market as China opens up to US beef imports for the first time in 13 years.
HOGS: (Restaurant News Release) -- From New York City to New Zealand and Canada to the Netherlands, McDonald's (NYSE: MCD) has expanded McDelivery with UberEATS to 13 countries, including 3,500 restaurants in the U.S. in the past three months. McDelivery is now available across the globe from over 7,800 restaurants in 47 countries and six continents.
In celebration of this new way for customers to enjoy their favorite menu items delivered right to their home, work or beyond, McDonald's is marking the milestone with Global McDelivery Day, by surprising customers who order McDelivery on July 26th with special deliveries and fun McDonald's moments.
"We are excited to bring this new level of convenience to more of our customers around the globe, delivering on our commitment to transform the customer experience in and out of our restaurants," said McDonald's President and CEO Steve Easterbrook. "Global McDelivery Day is our way of celebrating the expansion of delivery while highlighting McDonald's ability to give our customers the great tasting food they love at McDonald's, where they want to enjoy it."
Across the world, Global McDelivery Day will come to life at 11 a.m. local time with delightful moments for customers, and in select cities and countries where McDelivery is available through UberEATS, McDonald's fans will have access to the free, limited edition McDelivery Collection of fun, fashionable items to enjoy with McDelivery. In the U.S., model Chrissy Teigen will be delivering McDelivery Collection gear for several group deliveries in New York City. In Canada, consumers who find the mysterious McBench can get McDonald's delivered right to their spot and in Italy, celebrity Belen Rodriguez will surprise fans with a special McDelivery orders. In Japan, customers will have the option to "Order a Smile" to receive a personalized thank you message from crew members and in the Netherlands, McDonald's is delivering to fans who have posted on social media about why they need a McDelivery.
In addition to countries where McDonald's utilizes end-to-end owned delivery service models, this global benchmark was reached in partnership with various third parties for ordering and fulfillment — with UberEATS being McDonald's largest global McDelivery partner.
"We are excited to celebrate our global expansion with McDonald's," said Jason Droege, Head of UberEverything. "UberEATS is happy to make food delivery easy at the push of a button whether you're enjoying a McNuggets picnic with a side of fresh air or hanging back at home with a Big Mac and matching pillowcase."
Globally, McDonald's is one of the largest providers of delivered food in the world, with over two decades of delivery experience and annual systemwide delivery sales of nearly $1 billion across various markets in Asia and the Middle East.
"With 75% of the population in our top markets in the world less than three miles from a McDonald's, we are well positioned to meet the untapped demand of delivery for our customers," Easterbrook added.
Delivery is just one of the ways that McDonald's continues to raise the bar for its customers. Last year, McDonald's made changes to its menu including removing artificial preservatives from several menu items including Chicken McNuggets. McDonald's is transforming the customer experience through more modern restaurants featuring self-order kiosks and table service with the Experience of the Future and with mobile ordering and pay which will roll out later this year to 20,000 restaurants around the world, including the U.S.
For more information about McDelivery and the special deliveries on Global McDelivery Day, go to McDeliveryatMcDonalds.com or follow along with the day's surprises on Twitter with the #GlobalMcDeliveryDay hashtag. For information on cities and restaurants that the McDelivery Collection will be available from, go to McDeliveryatMcDonalds.com.

Wednesday, July 26, 2017

Wednesday Closing Livestock Market Summary

GENERAL COMMENTS
Cash cattle trade has started to develop Wednesday afternoon, with light trade seen in the South at $117 per cwt. This is $3 per cwt lower than last week. Trade is also seen in the North with live trade seen at $117 per cwt and dressed trade at $188 per cwt. Both prices are generally $2 per cwt lower than last week's price levels. Bids are also seen at $117 on a live basis and $186 to $187 dressed in other areas where sales have not yet been reported. Asking prices remain at $120 in the South and $192 through the North. Activity on the Fed Cattle Exchange Auction report Wednesday listed a total of 2,119 head, with 772 actually sold, 944 head listed as unsold and 403 listed as PO. The weighted average was $117.68. The state-by-state breakdown looks like this: KS 378 total head, with 130 head sold at $117.50, 105 head unsold, 143 head listed as PO ($117.75); NE 962 total head, with 369 head sold at $117.50-$117.75, 593 head unsold, and 0 listed as PO; TX 554 total head, with 235 head sold at $117.75, 112 head unsold, and 207 head listed as PO ($117.75); CO 134 total head, with 0 head sold, 134 head unsold; IA no test; other states (OK,SD,) 91 total head, with 38 head sold (SD) at $118.25, 0 head unsold, and 53 head (OK) listed as PO ($117.00). The delivery date/weighted average breakdown is as listed: 1-9 day delivery: 1,372 head total, 403 head sold with a weighted average price of $117.72; 1-17 day delivery 600 head total, 369 head sold with a weighted average price of $117.63; 10-17 day delivery 147 head total, with no sales; 17-30 day delivery, none. According to the closing report, the national hog base is $0.32 lower compared with the Prior Day settlement ($77.00-$83.00) weighted average $81.75. The corn futures moved higher in light activity. September futures were 4 cents higher Wednesday. The Dow Jones Index is 82 points higher with the Nasdaq up 7 points.
LIVE CATTLE
Late day buying flooded the market near the closing bell, offsetting pressure that had held through most of the trading session ($0.12 to $1.12 Higher). Trade volume during the first hour and last hour of trade Wednesday remained extremely light, allowing buyers to quickly step into the complex with very little resistance, and moving prices quickly and effortlessly higher. August futures posted a $1.12 per cwt rally in the closing minutes of trade, settling at $114.30 per cwt. It is uncertain just how much support will redevelop at these price levels early Thursday based on the end of the day price moves seen Wednesday, and cash cattle movement development seen already in the week. Beef cut-outs: lower, $1.06 lower (select, $197.87) to down $0.55 (choice, $207.07) with light to moderate demand and offerings (75 loads of choice cuts, 32 loads of select cuts, 1 load of trimmings, 36 loads of coarse grinds).
THURSDAY'S CASH CATTLE CALL:
Steady to $2 lower. The development of light to moderate trade in parts of the North at $2 lower than last week, has started out market activity Wednesday afternoon. This could help to draw additional support, although it is uncertain if feedlot managers will settle for this level given the last day bounce in futures prices seen at the end of the session. No sales have developed in the South, but bids have been seen at $117 through much of the day.
FEEDER CATTLE
Moderate to wide trading ranges seen early Wednesday quickly shifted into a narrowly mixed price range following strong late day buying in live cattle futures ($0.15 lower to $0.40 higher). Strong pressure was seen in nearby feeder cattle futures at midday, focusing on an underlying lack of support through the entire cattle market and sluggish trade, quickly regained market composure at closing bell. This allowed prices to close within a narrow trading range, as August and September futures posted single-digit losses, while the rest of the complex posted moderate gains. Firm gains in front month live cattle futures is helping to draw additional buyer support back into the complex midweek. CME cash feeder index: 7/25: $151.57, unchanged.
LEAN HOGS
Firm gains developed during the session midweek, helping to spark additional underlying commercial interest through the complex ($0.12 to $0.80 higher). Follow through buyer support stepped back into the complex early Wednesday morning, moving front month futures to triple-digit gains as traders continued to look for underlying support from outside markets. But the inability to draw support from additional traders limited gains through the session, although gains were able to hold. August futures closed 55 cents per cwt higher at $82 per cwt as prices continue to march higher after moving nearly $2 per cwt, above short-term support levels over the last couple of trading sessions. Increased focus will continue to be placed on cash market movement through the end of the month, as well as shifts in pork values. Carcass values tumbled sharply lower, as all primals posted moderate to sharp losses except belly markets Wednesday. Pork cut-out: $100.58 up $1.82. CME cash lean index for 7/24: $90.44, down $0.69. DTN Projected lean index for 7/25 $89.84, down $0.60.
THURSDAY'S CASH HOG CALL:
Steady to 50 cents lower. Continued light pressure is expected to slowly develop through the week with packers focusing on the ability to limit spending through the end of the week. Even though initial bids are called steady to 50 cents per cwt lower, most bids are expected to remain steady early Thursday morning. The recent support in futures trade and continued stability in cutout values is helping to bring overall fundamental stability to the cash market. Thursday's slaughter expectations are set at 440,000 head with 63,000 likely to be seen Saturday.

Wednesday Midday Livestock Market Update

GENERAL COMMENTS: 
Light-to-moderate pressure has developed in cattle trade at midday following early support that quickly moved into the market. This may pressure any additional support through the rest of the afternoon. Lean hog markets remain higher, but have pulled away from early gains. Corn prices are higher in light trade. September corn futures are 2 cents higher. Stock markets are higher in light trade. The Dow Jones is 133 points higher while Nasdaq is up 4 points.
LIVE CATTLE:
Mixed futures trade is seen at midday as early buyer support quickly evaporated. Strong market gains backed away from the market when traders moved from the sidelines and back into the market. But the ability to keep prices mixed in a narrow trading range is likely to allow prices to focus on market stability through the end of the session. Futures trade is hovering from 30 cents lower to 30 cents higher at midday, allowing traders to adjust positions within the narrow range. Cash cattle activity is starting to develop with light-to-moderate trade seen in the North at $117 live basis and $188 dressed basis. These prices are generally $2 lower than last week's level. Bids can be seen through the South at $117 and $186 to $187 in the North. Activity on the Fed Cattle Exchange Auction report today listed a total of 2,119 head, with 772 actually sold, 944 head listed as unsold, and 403 listed as PO. The weighted average was $117.68. The state-by-state breakdown looks like this: KS 378 total head, with 130 head sold at $117.50, 105 head unsold, 143 head listed as PO ($117.75); NE 962 total head, with 369 head sold at $117.50-$117.75, 593 head unsold, and 0 listed as PO; TX 554 total head, with 235 head sold at $117.75, 112 head unsold, and 207 head listed as PO ($117.75); CO 134 total head, with 0 head sold, 134 head unsold; IA no test; other states (OK,SD,) 91 total head, with 38 head sold (SD) at $118.25, 0 head unsold, and 53 head (OK) listed as PO ($117.00). The delivery date/weighted average breakdown is as listed: 1-9 day delivery: 1,372 head total, 403 head sold with a weighted average price of $117.72; 1-17 day delivery 600 head total, 369 head sold with a weighted average price of $117.63; 10-17 day delivery 147 head total, with no sales; 17-30 day delivery, none. Beef cut-outs at midday are mixed, $0.59 lower (select) and down $0.07 per cwt (choice) with light movement of 85 total loads reported (39 loads of choice cuts, 21 loads of select cuts, no loads of trimmings, 25 loads of ground beef).
FEEDER CATTLE:
Firm pressure has quickly developed across feeder cattle futures with nearby losses holding from 60 to 80 cents per cwt. The inability to hang onto firm gains as additional trade volume stepped back into the market resembles the moves seen each trading session during the week. Increased pressure may continue to develop across the market, although volume is likely to be sluggish in all markets, allowing traders to look for end-of-the-week activity and potential market support at the end of the month.
LEAN HOGS:
Light gains are still holding in lean hog futures at midday, although trade volume remains extremely light. The strong gains seen early in the session in front-month August futures have eroded to narrow support less than 20 cents per cwt as buyers have quickly retreated to the background as they look for additional news and increased market support later in the week. There may be some stability seen in the complex, but very narrow trading ranges could allow for sluggish trade activity through the rest of the session. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.53 at $81.54 per cwt with the range from $77 to $82.75 on 6,457 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $0.28 at $82.51 per cwt with the range from $82.50 to $82.75 on 3,567 head reported sold. The National Pork Plant Report reported 221 loads selling with prices gaining $0.42 per cwt. Lean hog index for 7/24 is at $90.44 down $0.69 with a projected two-day index of $89.84, down $0.60.

Wednesday Morning Livestock Market Summary

GENERAL COMMENTS:
The cash cattle market could start to take on some definition at midweek in terms of a few preliminary bids and asking prices. Buyers and sellers will be watching for clues from the FCE internet trade later the morning. Live and feeder futures should open lower, pressured by follow-through selling and uncertain cash potential.
Look for the cash hog trade to open with bids steady to .50 lower. Lean futures are expect to begin with a firm undertone, supported by residual buying and midweek short-covering.
BULL SIDEBEAR SIDE
1)Beef cutouts closed higher on Tuesday with the select box surging more than a buck higher for the second consecutive session. Furthermore, after being described as "heavy" all last week, box supplies now seem more manageable, described as "light to moderate."1)Live and feeder futures tried to bounce higher early Tuesday, but reversed through the session thanks to long liquidation and technical selling. The board continues to exhibit expectations of lower cattle and beef prices going into late summer and fall.
2)
With live cattle open interest down 15% from early May highs and at the lowest since the latter part of March, long liquidation is at least much less of a bearish threat than earlier this spring.
2)As spot August live sinks toward long-term support around $112 to $112.50, the strengthening basis is likely to strip feedlot managers of cash leverage.
3)Frozen pork supplies as of June 30 were down 5% from the previous month and down 4% from last year. Stocks of pork bellies were down 29% from last month and down 65% from last year. Given record production, these numbers imply strong foreign demand.3)
Total frozen poultry supplies as of June 30 were up 4% from the previous month and up 4% from a year ago. Total stocks of chicken were up 3% from the previous month but down 1% from last year. Total pounds of turkey in freezers were up 7% from last month and up 12% 2016.
4)This week's hog kill should be about the same as last week at 2,214,000 head. Given attractive processing margins, packers have plenty of incentive to ramp up slaughter totals if the hogs are available. Apparently, extra hogs are not out there yet.
4)The short-term and long-term market trends in lean hog futures remain bearish and the market structure is also bearish, with the August contract trading at a significant discount to the cash hog market.
OTHER MARKET SENSITIVE NEWS 
CATTLE: (food.market.com) -- USDA provided several key updates last week when it released the July Cattle inventory report along with its monthly Cattle on Feed report. The mid-year cattle inventory report provided the first estimate of the 2017 calf crop, which at 36.3 million head was 3.5 percent larger than the 2016 calf crop. The year-over-year increase in the calf crop's size was slightly larger than in 2016, when the U.S. calf crop increased 2.9 percent compared to the prior year. This is the third consecutive year that the calf crop size has increased after bottoming out at 33.5 million head in 2014. The calf crop increase continues to point to larger slaughter cattle supplies in both 2018 and 2019, despite the downturn in profitability experienced by U.S. cow-calf operations.
Year-to-year comparisons of other data included in the cattle inventory report are not possible since USDA did not publish the mid-year report last year because of budget pressure. Despite that shortcoming, the report does provide some key insights into developing changes in the industry. The July 1 all cattle and calves inventory estimate was 102.6 million head, which was the first time the July inventory was above 100 million head since 2011. The beef cow inventory of 32.5 million head was 6.6 percent larger than two years ago and was the largest July inventory since 2008. Both of these estimates are consistent with the expansion observed on the January inventory report.
Although it's not clear from the report that beef industry expansion has come to a grinding halt, it does suggest expansion interest is waning. For example, the number of beef heifers being held by producers for herd replacement on July 1st was 2 percent smaller than in 2015 and, when expressed as a percentage of the beef cow inventory totaled just 14.5 percent. In contrast, when the beef industry was expanding rapidly this ratio climbed above 15 percent. Additionally, the ratio of female (cow and heifer) slaughter relative to steer slaughter has been above a year ago 5 out of the last six months, the exception occurring in February. The increase in female relative to steer slaughter suggests herd expansion has slowed, if it has not actually come to a complete halt.
USDA's Cattle on Feed report confirmed that the on feed inventory remains well above last year. Early in 2017 the on feed inventory was very near a year earlier, but net placements on feed have been substantially above the prior year every month except February. The placement build-up means that, despite a good marketing pace throughout 2017, pushed the on feed inventory up with a July 1 inventory that was 4.5 percent above the prior year. The combination of a larger cattle on feed inventory and larger placements both point to fed cattle marketings during the last half of 2017 remaining above 2016's.
Commercial cattle slaughter was 6.5 percent larger during the first half of 2017 than in 2016. But cattle weights were lower than a year earlier, averaging 1.7 percent below the January-June 2016 average. As a result, beef production during 2017's first half increased just 4.8 percent compared to the same period in 2016. The on feed inventory and placement pattern both point to beef production remaining above a year earlier throughout the rest of 2017, although the year-over-year increases are expected to moderate.
Recent eastern Corn Belt calf prices, although based on seasonally small summer calf marketings, have been modestly higher than a year ago. Prices in Kentucky markets reported by USDA for 500-600 pound steers averaged in the mid-$150s during the first half of July, compared to the mid-$140s a year earlier. Prices are likely to remain near that range, with seasonal weakness expected in October when calf marketings increase. Last year prices for 500-600 pound steers in Kentucky dropped into the $112 to $120 range in October and early November. Prices for 500-600 pound Kentucky steers this fall are expected to be somewhat stronger than in fall 2016, but feed grain price movement between now and fall could have an effect on prices. If feed prices remain near recent levels, prices in Kentucky markets for 500-600 pound steers could average in the $120s to the $130s.
HOGS: (Rabobank) -- Global pork trade is facing new dynamics, driven by price developments, new trade deals, and more challenging business environments, according to RaboResearch's latest Global Pork Quarterly.
"While China's pork imports have begun to slow down, other traditional importing countries have reported significant growth," says Chenjun Pan, RaboResearch Senior Analyst -- Animal Protein. "Looking to the second half of 2017, global pork supply is expected to increase further, and competition for global consumers will intensify." This potential softening bias on prices contrasts with the stability of the Rabobank Five-Nation Hog Price Index thus far in 2017. In the first five months of 2017, China's pork imports were flat, which contrasts with the significant growth seen in 1H 2016. The recovery of local production and strong international prices is believed to be responsible for slower imports. In China, pork prices have declined by 30%, from the record levels of last year. As a result, Chinese traders are taking a more cautious approach to imports in 2017.
Rabobank holds the view that China's pork production will increase by about 2% in 2017. Hog production recovery was faster than expected in 1H, as many producers shared a positive view of the market and made rapid herd replenishments. While the expansion of hog production should continue in 2H 2017, it has been slowed by the price plunge in Q2.
"The emergence of these new trade dynamics will be the most important market development in the second half of this year," according to Justin Sherrard, RaboResearch Global Strategist -- Animal Protein.
Tight supply and firm demand have maintained upward pressure on prices and starting to challenge exporters. In this context, the recently announced trade pact with Japan, offering tariff reductions, is good news for European exporters.
US pork exports still face uncertainty due to potential trade policy changes and a strong currency, but have been better than expected thus far in 2017. With weaker demand from China offset by stronger demand from Mexico, total exports are expected to increase by about 10%, compared with 2016. Increasing US exports are becoming even more important as production continues to expand.
Brazil faces great challenges due to political turmoil, and exports in recent months have declined significantly. However, even with these challenges, Brazil's pork market is still expected to deliver a positive result, due to lower supply, favourable feed prices, and a favourable exchange rate.