Light cash cattle trading developed in parts of
the North on Wednesday with live sales marked at $117, which was $1.50
lower than last week's weighted average basis Nebraska. We expect trade
volume to slowly expand Thursday and Friday. Look for asking prices to
surface around $122 in the South and $190 to $192 plus in the North.
Live and feeder futures seem likely to fall further on the opening,
pressured by follow-through selling and early signs of additional cash
weakness.
The cash hog trade should open Thursday with
bids steady to $1 higher. This week's slaughter is forecast at 1.834
million hogs. Harvest levels should trend upward after this week,
heading into the fall. Lean futures are expected to open moderately
higher, supported by residual buying as well as positive cash and
product news.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live cattle futures are approaching support levels near 100-day moving averages (e.g., 112.50 basis spot August). This reality plus substantial cash premiums could soon revive decent buying interest. | 1) | Aggressive long liquidation in cattle futures seems to be accelerating as the market moves into the third quarter. Furthermore, open interest still remains historically large, making the trade vulnerable to additional waves of selling potential. |
| 2) | With gross packer margins still well over $400 per head, cattle buyers should not be all that reluctant to support feedlot cash if beef producers can somehow find more backbone. | 2) | There seems to be little relief in the post-holiday beef trade: cutouts were quoted $.31 (choice) to $2.13 (select) lower with demand no better than "light to moderate." |
| 3) |
Lean hog futures successfully
nurtured bullish psychology over the holiday, at least enough to produce
another decent serving of new contract highs on Wednesday.
|
3) | Lean hog charts are beginning to look quite overbought with RSI oscillators in the low 80s (readings above 70 are typically suggestive of overbought conditions). |
| 4) | For the week ending July 1, Iowa barrows and gilts averaged 276.4 pounds, .5 lb. lighter than the previous week and .3 lb. smaller than 2016. | 4) |
While hog and pork
fundamentals should remain generally supportive for the next several
weeks or so, few disagree that the next big swing in both supply and
demand metrics will be negative.
|
OTHER MARKET SENSITIVE NEWS
CATTLE: (Omaha World Herald) -- Wal-Mart has
upgraded its beef to certified Angus as the fight for food shoppers'
cash intensifies.
For the past year, the nation's biggest grocer
worked with meat giants including Tyson Foods Inc. and Cargill Inc. to
secure a supply of Angus steaks and roasts at no additional cost to
consumers, said Scott Neal, Wal-Mart's senior vice president of meat,
seafood and quality control.
The higher-quality cuts have been available in
all of Wal-Mart's 4,700 U.S. stores since March, but the retailer hasn't
announced or advertised the shift yet.
The move is part of Wal-Mart's response to
rapidly intensifying competition: German discounters Aldi and Lidl are
expanding aggressively, and Amazon.com's purchase of Whole Foods Markets
Inc. threatens to upend the industry.
Wal-Mart also wants to entice shoppers by
offering curbside pickup of online grocery orders and improving the
quality of fresh foods like produce and meat that are a key draw for
customers.
"All purveyors of food are being forced to step
up their game," said Bill Lapp, president of consulting firm Advanced
Economic Solutions. "There is such disruption in the grocery store
sector that you have to do something."
With its marbled, tender cuts, Angus beef has
become synonymous with quality. Demand for the meat has skyrocketed in
recent years, with fast-food chains offering Angus burgers.
While U.S. beef consumption is down over the
past decade because of a 2014 drought that cut the herd to the smallest
since 1951, the USDA's Economic Research Service is predicting a rebound
thanks to increased supply.
Demand could also increase now that China has restarted imports of U.S. beef, lifting a ban in place since 2003.
"Beef is an absolute opportunity for us in terms
of where we can grow," Wal-Mart's Neal said in a phone interview. "Our
market share is not where we want it to be relative to the rest of the
store."
The retailer's "whole-muscle" beef product
offering is now entirely Angus, he said, adding that Angus rib-eye
steaks sell for just under $10 a pound. The change doesn't affect
Wal-Mart's ground beef, which comes from a broader supply of meat that
includes non-Angus sources.
Wal-Mart is calling its product "Verified Angus"
since "Certified Angus Beef" is a brand name owned by a cattle rancher
cooperative. Neal says Wal-Mart's Angus product adheres to similar
quality standards on measures including marbling, flavor and
consistency.
Angus beef "delivers the eating experience that
consumers are looking for," said Jason Nichol, who oversees Tyson's
relationship with Wal-Mart as senior vice president.
"We've been happy with the results to date."
Wal-Mart last upgraded its meat in 2011 when it
moved from offering primarily Select beef, the lowest of the three
government grades, to a blend of Select and Choice, the middle category.
The change took eighteen months as suppliers had to shift stocks from
other retailers. But it paid off, as Wal-Mart's market share in beef
increased by 4 percentage points, Neal said.
The price premium for Choice grade widened to a
record last month over Select in the wake of Wal-Mart's move, according
to Kevin Good, who tracks the beef market for researcher CattleFax in
Centennial, Colorado.
Wal-Mart "created more demand and competition for choice cuts," Good said. "Wide spreads create higher cattle prices."
HOGS: (Brownfield Ag News) -- The latest
quarterly Hogs and Pigs report shows the largest U.S. hog herd on record
and livestock market analysts say the industry is positioned to grow.
Iowa is the nation's top pork producing state, with 22.2 million hogs
and pigs on Iowa farms. That's up 7-percent from a year ago.
Lee Schulz, an economist with Iowa State
University Extension, projects profitability for many producers. "We're
looking at an annual estimate for 2017 right around that 15-dollars per
head," Schulz says. "That's very much driven by what we've experienced
here in the second quarter where profitability looks to be in that 16 to
17 dollar range."
Joe Kerns, president of Iowa-based Kerns and
Associates, says expansion right now isn't driven by the economics of
the industry. "It's everything to do with the ability to execute," he
says. "Whether you're in a particular state where permitting is one
issue and we have a construction industry that has finite resources. We
can't just expand and contract. If you want slats right now, you can't
save your soul form the devil in order to acquire them."
Kerns says that is evident by the variability in
the growth of the sow herd across several states. "Perhaps as expected
with the genesis of the new plant in Iowa…that Iowa added 30,000 sows,"
he says. "If you would take the same logic and apply it to the Eastern
side where the Coldwater facility is going to be operational here
shortly -- we don't see the same thing. You've got both Illinois and
Indiana with a bit of a decline in their sow numbers."
Kerns says he expects even more sow herd expansion through the remainder of the year.
No comments:
Post a Comment