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Thursday, August 31, 2017

Thursday Closing Livestock Market Summary - Lean Hog Futures Cautiously Extend a Long-Awaited Recovery

GENERAL COMMENTS
Light-to-moderate cattle business was reported in several states with most live and dressed deals steady/weak with the midweek decline ($104-$105 live, $164-$166 dressed). According to the closing report, the national hog base is $1.09 lower ($57.50-$64.50, weighted average $62.46). The corn market closed sharply higher (i.e., 12 cents plus) as buyers suddenly responded to nine-month lows. The stock market nailed its fifth straight monthly gain by closed 59 points higher basis the Dow and 60 higher basis the Nasdaq.
LIVE CATTLE
Expiring August went down in one final, fiery nosedive (i.e., off 102 points). But the rest of the complex finished no worse than mixed in light trade volume (i.e., up 22 to off 72). New spot October will make its debut on Friday near even par with cash, implying the weakest basis we've seen all summer. Beef cut-outs: modestly higher, up $0.19 (choice, $191.91) to $0.22 (select, $191.34) with light-to-moderate demand and offerings (61 loads of choice cuts, 25 loads of select cuts, 13 loads of trimmings, 16 loads of ground beef).
FRIDAY'S CASH CATTLE CALL:
Steady with the Wednesday/Thursday market test. While scattered business is possible Friday in clean-up action, we suspect that most of the week's cash business is already in the bag.
FEEDER CATTLE:
Feeder futures closed 17 to 117 lower with soon-to-be-spot losing ground to both expiring August and deferreds. Some of the selling energy may have been tied to the sudden late-month surge in cattle prices. CME cash feeder index: 08/30: $142.91, off $0.43.
LEAN HOGS:
Although lean futures managed to land another round of overdue price recovery, it was one of those late-fading sessions when bulls should have taken the picture around midsession. Contracts closed mostly 65 to 112 points higher, yet as much as 120 below session highs basis spot October. Late-month and pre-holiday short-covering/profit-taking seemed to be the major forces at work here Thursday. The carcass value settled nearly a buck lower with all primals reflecting slower pre-holiday demand. Pork cut-out: $83.58, off $0.97. CME cash lean index for 08/29: $74.59, off $1.09 (DTN Projected lean index for 08/30: $73.52, off $1.09).
FRIDAY'S CASH HOG CALL:
$1-$2 lower. Look for the late-week cash hog trade to remain on the defensive, further pressured by large country offerings and retreating carcass value.

Thursday Midday Livestock Market Summary - Strong Gains Sweep Through Hog Futures Thursday

GENERAL COMMENTS: 
Strong buyer support is moving into lean hog futures trade as buyers are focusing on a late month rally through the complex. This is helping to bring increased support to the market despite still weak market fundamentals. Cattle markets remain under pressure with feeder cattle futures leading the market lower at midday. Corn prices are higher in light trade. September corn futures are 8 cents higher. Stock markets are higher in light trade. The Dow Jones is 44 points higher while Nasdaq is up 55 points.
LIVE CATTLE:
Mixed trade is seen in live cattle futures at midday following moderate pressure which was seen through the live cattle market earlier in the session. This is creating some firmness in deferred futures, which is creating some market stability at the end of the week. August and October live cattle futures are holding at $105 per cwt which could create a market floor heading into the Labor Day holiday weekend. Cash cattle trade continues to develop with live trade developing in the North and South seen at $105 per cwt. This is $2 per cwt lower than last week's price levels. Bids are once again seen at $164 to $165 dressed, similar to where trade developed Wednesday. It is expected that trade through the rest of the week may develop near this range, and may trickle in through the rest of the week. Beef cut-outs at midday are higher, $0.46 higher (select) and up $0.41 per cwt (choice) with light movement of 61 total loads reported (31 loads of choice cuts, 12 loads of select cuts, 10 loads of trimmings, 8 loads of ground beef).
FEEDER CATTLE:
Moderate pressure is seen across feeder cattle trade with buyers unwilling to step into the complex at this point. The back and forth shift in the complex continues to limit upward at the end of the month and with concerns that further cash market pressure looming ahead of the holiday weekend. Feeder cattle futures are confined in a very tight trading range with prices from August to November trading from $142 to $143 per cwt with overall activity limited to outside market direction as well as the live cattle complex.
LEAN HOGS:
Strong buyer support is seen in lean hog futures as end-of-month buyer support is trying to make up for the pressure seen through the rest of the month of August. Buyers see the overall all lean hog market as oversold and are quickly stepping into the complex before the end of the market and the holiday weekend. Even though cash markets are still showing signs of pressure, the market continues to remain firm and likely will close firm late Thursday. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $1.04 at $62.51 per cwt with the range from $57.50 to $64.50 on 10,335 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $1.23 at $62.60 per cwt with the range from $57.50 to $64.50 on 7,665 head reported sold. The National Pork Plant Report reported 177 loads selling with prices fell $1.10 per cwt. Lean hog index for 8/29 is at $74.59 down $1.09 with a projected two-day index of $73.52, down $1.07.

Thursday Morning Livestock Market Update - Look for Hog Issues to Open Moderately Higher

GENERAL COMMENTS:
Light to moderate trading developed in parts of cattle feeding country yesterday. Dressed sales in the North were mostly $3-4 lower at $165-166. Limited live biz was noted in Kansas at $105, roughly $2 lower than last week's weighted average. Opening bids this morning should start out near these same levels. Showlists are priced around $107 plus in the South and $170 plus in the North. We probably need to see at least another light to moderate round of trade volume, either today or tomorrow (possibly both). Live and feeder contracts should open some higher thanks to short covering and pre holiday positioning.
Expect hog buyers to resume procurement chores this morning with bids at least a dollar lower. Saturday's kill is expected to total close to 108,000 head. Lean futures seem staged to open moderately higher, supported by follow-through buying and bear spreaders taking profits.
BULL SIDEBEAR SIDE
1)Although modest progress scored by cattle futures was nothing to write home about, traders do seem to be respecting lateral trading ranges in place since early August. It seems cautiously hopeful of bottom building activity.1)Though the cash cattle trade was only lightly tested at midweek, the early trend was definitely lower. Since late July, such early cracks have proven to be pretty reliance of late-week bearishness.
2)The comprehensive boxed beef report showed a considerable week-to-week increase on total boxed beef sales, up 529 loads from the week prior, to 7,836 loads, six percent larger than a year ago and the largest weekly total since January 2015.2)For the week ending August 26, U.S.hatcheries set 224 million eggs in incubators, up 3 percent from a year ago. At the same time, chicks placed totaled 184 million chicks, up 3 percent from 2016.
3)It is not usual for the pork carcass value to see a second seasonal price increase heading out of September and moving into October (especially when the wholesale trade has been hit particularly hard through August).3)For the week ending August 26, Iowa barrows and gilts averaged 277.9 pounds, 1.3 pounds heavier than the previous week and 1.9 pounds greater than 2016.
4)Post-Labor Day demand for live hogs is honestly difficult to predict as two new packing facilities begin to operate in September. The two plants, adding about five percent to current shackle space, are both set to open the week after Labor Day. At the very least, such uncertain should work to check further selling interest in deeply discounted lean futures.4)The pork carcass closed moderately lower on Wednesday with all primal quoted lower except the ham.
OTHER MARKET SENSITIVE NEWS 
CATTLE: (cleburnetimesreview.com) -- From gas to food, Harvey's economic impact is already being felt.
Gas prices have inched up and agriculture markets have begun to ripple, according to the Dallas Morning News, with cotton crops and coffee stockpiles threatened by flooding.
But, what could be affected most is meat prices, especially beef, given Texas is the nation's top beef producer, according to the DMN. Flood waters are stranding cattle and other livestock within the 54-county area of the state's disaster zone, which has kept ranchers from assessing damage.
About 1.2 million beef cattle are in the disaster zone, comprising about 27 percent of the state's herd, according to the U.S. Department of Agriculture, but it's not known how many losses the hurricane caused since making landfall on Friday.
How the aftermath of the hurricane affects agricultural markets in North Texas and the Johnson County area will be different than how it will affect the coastal region, said David Kercheval, Field Representative for Trade and Business Development with the Texas Department of Agriculture and associate with the Texas Ranch Brokers in Grandview. But the hurricane's economic impact will be felt throughout the state.
"There will be a number of animals lost in the coastal area," he said. "Obviously the biggest number will largely be cattle. But it can affect other forms of livestock, including the poultry houses."
With the holiday season around the corner, such losses could affect prices on turkey, he said.
Crops such as cotton and sorghum will also be affected because of the flooding, and losses in feed crops may eventually cause a rise in meat prices, he said.
Because the coastal area is such an agricultural resource, every level of market, from futures speculation to retail may be affected, he said.
Unknowns may have impacted the 2.6 percent rise in cattle futures seen Monday on the Chicago Mercantile Exchange, the nation's largest futures exchange, according to the DMN.
It could take a month or more, Kercheval said, for the losses to be sorted out.
"The loss to agriculture is going to be substantial," he said, "possibly as big of a loss as we have ever seen."
The Texas and Southwestern Cattle Raisers Association has been working with state and local response agencies to coordinate relief and support efforts and has special rangers in the region to assist producers. The association also has a hurricane update page on its website at tscra.org/hurricaneupdate.
The Will Rogers Memorial Center in Tarrant County is sheltering for horses from the affected areas and can be reached at 817-713-3964, according to the TSCRA.
"A lot of people in this area have offered to help," Kercheval said, not just with livestock, but with other animals as well.
Several area animal shelters, including Cleburne's, took in dogs evacuated last week before the hurricane made landfall.
HOGS: (foodmarket.com) - China will pay farmers to turn animal waste into fertilizer and power, the Ministry of Agriculture said on Wednesday, as Beijing cracks down on agricultural pollution that has for years leaked into rivers and lakes, angering Chinese residents.
China will give farmers subsidies to build animal waste processing facilities to make fertilisers or to treat manure so it's safe for disposal, and to install biogas plants that use methane to generate electricity, according a government plan announced on Aug. 1.
The plan includes setting up recycling programs by 2020 in 200 major counties that have livestock farms. That's less than half the 586 major counties the government says have hog and poultry farms.
The agriculture ministry gave no details about the size of the subsidies, but the move could be a big step toward curbing chemical fertilizer use and cutting water pollution.
"We will help the farmers fully understand how organic fertilizer can improve energy efficiency and the environment," said Zhong Luqing, director of the fertilizer department at the ministry, at a briefing on Wednesday.
Biogas technology, which can help save on electrical costs, is too expensive for many farmers unless the government helps.
Those researching and using organic fertilizer will also get preferential treatment on loans, taxes, power use and land rent, Zhong said.
Getting rid of animal waste is a major headache for livestock producers worldwide, partly because of the strong odor and damage caused to the atmosphere by the release of harmful gases. Run-off containing animal wastes can also seep into the water table and contaminate rivers and lakes.
In China, how to better dispose of animal waste has become a particular problem due to the fast growth of poultry and hog farming over the past decade to meet demand for higher quality meat. Chinese livestock farms generate nearly 4 billion tonnes of waste annually, according to the agriculture ministry.
"We will strengthen policy support and increase subsidies to support farmers to use organic fertilizer ... especially large-scale farmers, family farms and cooperatives," Zhong said.
The plan is part of Beijing's effort to limit chemical fertilisers and pesticides, which have contaminated soil and water. China uses about one-third of the world's fertilisers.
Beijing has said it was targeting zero growth of chemical fertilizer and pesticide by 2020. It has urged farmers to use less chemical fertilizer and turn to animal manure instead.

Wednesday, August 30, 2017

Wednesday Closing Livestock Market Summary - Lean Hog Futures Finally Catch a Bounce

GENERAL COMMENTS
Light-to-moderate cattle trading surfaced in parts of the North with most dressed deals marked at $165-$166, $3-$4 lower than last week's weighted average basis Nebraska. A few live sales were reported in Kansas at $105, about $2 lower. According to the closing report, the national hog base is $0.92 lower ($60-$65, weighted average $63.53). The corn market continues to erode thanks to generally benign growing conditions in the late rounds before harvest. Most issues settled 3-4 cents in the red. The stock market closed higher with the Dow up 27 points and the Nasdaq better by 66.
LIVE CATTLE
At the conclusion of a fairly choppy session, live futures finished modestly higher, generally up 2 to 30. Besides the modest price progress, the session's light volume seemed to suggest that bears were at least temporarily calling off the dogs. Of course, that could quickly change if packers suddenly buy cattle Thursday/Friday much lower than they did at midweek. Beef cut-outs: mixed, up $0.33 (select, $191.12) to off $0.05 (choice, $191.72) with light-to-moderate demand and light offerings (65 loads of choice cuts, 18 loads of select cuts, 30 loads of trimmings, 25 loads of ground beef).
THURSDAY'S CASH CATTLE CALL:
Steady with the midweek market test. Look for country business to slowly build through the balance of the week at prices steady/weak with Wednesday's trade.
FEEDER CATTLE:
For the most part, feeder issues closed moderately higher, up 22 to 72. We could see additional firmness through the balance of the week as spot August works to converge with the cash index. CME cash feeder index: 08/29: $143.34, up $0.15.
LEAN HOGS:
Lean contracts closed mostly 30 to 112 higher thanks to short-covering and the correction of oversold charts. Nearby contracts gained somewhat on deferred, probably thanks more to the unwinding of bear spreads than the placement of new bull spreads. Nothing happened Wednesday of technical consequence. The carcass value closed moderately lower, pressured a bit by all primals except the ham. Pork cut-out: $84.55, off $0.32. CME cash lean index for 08/28: $75.68, off $1.08 (DTN Projected lean index for 08/29: $74.59, off $1.09).
THURSDAY'S CASH HOG CALL:
$1 lower. Look for hog buyers to stay in the same bearish groove in the morning, bidding lower and assuming the numbers will be there.

Wednesday MIdday Livestock Market Summary - Sluggish Trade Leads to Moderate Losses Midweek

GENERAL COMMENTS: 
Moderate losses continue to hold in livestock futures as traders continue to focus on the lack of support in cash market activity through the end of August. This inability to draw buyer interest back into the market will likely limit prices from moving higher through the end of the session. Corn prices are lower in light trade. September corn futures are 2 cents lower. Stock markets are higher in light trade. The Dow Jones is 3 points higher while Nasdaq is up 43 points.
LIVE CATTLE:
Additional price pressure continues to develop through the live cattle futures with 40 to 50 cent losses quickly developing across the complex. While firm support is seen in the soon to expire August contracts. Trade volume remains sluggish across the market as traders are focusing on the continued pressure in cash cattle trade and follow through pressure in feeder cattle markets. Even though beef values remain firm, the lack of strong underlying support across the entire market through the complex is likely to limit widespread market support through futures trade. Cash cattle is starting to develop across the north through the morning Wednesday morning with dressed business seen at $165 to $166 per cwt and $105 live bases. This is $3 to $4 per cwt lower than last week dressed basis. The live trade is reported to be for delayed delivery. The Fed Cattle Exchange Auction report today listed a total of 1,777 head, with 1,140 actually sold, 456 head listed as unsold, and 181 listed as PO. The state by state breakdown looks like this: KS 286 total head, with 286 head sold at $105.00-$105.25, zero head unsold, zero head listed as PO; NE 1,049 total head (195 head live, 854 head dressed, FOB feedlot), with 854 dressed head sold at $166.00, 195 live head unsold, and zero, head listed as PO; TX 402 total head, with 0 head sold, 221 head unsold, and 181 head listed as PO ($105.00); CO no cattle reported; IA no cattle reported; other states (MO) 40 total head (Holsteins), with zero head sold, 40 head unsold, and zero head listed as PO. The delivery date/weighted average breakdown is as listed: 1-9 day delivery: 633 head total, 231 head sold, with a weighted average price of $105.10; 1-17 day delivery 55 head total, 55 head sold, with a weighted average price of $105.00; 10-17 day delivery no cattle listed; 17-30 day delivery 195 head total, zero head sold. Beef cut-outs at midday are higher, $0.56 higher (select) and up $0.17 per cwt (choice) with light movement of 86 total loads reported (42 loads of choice cuts, 10 loads of select cuts, 16 loads of trimmings, 18 loads of ground beef).
FEEDER CATTLE:
Narrow gains have held in front month August futures while moderate pressure continues to hold through the rest of the complex. This is leading to additional market weakness with September through January futures holding 50 to 80 cent losses. The overall lack of support in the complex continues to limit most buyers from showing any sense of support over the near future despite follow through support in beef values.
LEAN HOGS:
Light trade is seen through lean hog futures trade with October through February futures holding narrow to moderate gains with the focus on oversold positions moving back into the complex. The overall tone of the complex still remains weak which is limiting any long term support in deferred contacts and keeping prices under pressure. Overall volume is light and is expected to remain sluggish through the rest of the complex. Cash prices are unreported due to confidentiality on the National Direct morning cash hog report. Cash prices are unreported due to confidentiality on the Iowa/Minnesota Direct morning cash hog report. The National Pork Plant Report reported 168 loads selling with prices fell $0.23 per cwt. Lean hog index for 8/28 is at $75.68 down $1.08 with a projected two-day index of $74.59, down $1.09.

Dairy Outlook: Class III milk price should hit $17 by October

Dairy Outlook: Dairy exports in the first half of the year were the highest in three years.
Bob Cropp, University of Wisconsin-Madison dairy economist, says milk prices will climb to $17 by October after dipping in July.
The July Class III price fell 99 cents from June to $15.45, but is expected to increase about a dollar to $16.45 by the end of August. The price is expected to climb into the $17s in September and October, according to Cropp.
“Slower growth in milk production, good domestic sales of butter and cheese, and higher dairy exports strengthen dairy product prices, which pushed milk prices higher in August,” he explains.
CME 40-pound cheddar blocks were as high as $1.78 per pound in early August before dropping to $1.66. By late August, the price had climbed back to $1.75 and will average higher for the month of August than the July average of $1.65.
CME butter averaged $2.61 per pound in July and was $2.73 in early August, but then softened some and hit $2.64 by late August. Stronger cheese prices more than offset lower dry whey prices, giving the boost to the August Class III price.
USDA estimated July milk production to be 1.8% higher than a year ago.
“This marks the third straight month the increase has been less than 2%, which is supportive of higher milk prices,” Cropp notes.
Strong exports
U.S. dairy exports in the first half of the year were the highest in three years due to record exports of nonfat dry milk/skim milk powder and whey products, and a 24% year-to-date increase in cheese exports. June exports compared to a year ago were as follows: nonfat dry milk/skim milk powder up 7%, cheese up 32% and butterfat up 254%, but total whey exports were 10% lower. On a total solids basis, June exports were equivalent to 14.4% of milk production and 14.3% for the year-to-date compared to 13.1% a year ago, according to Cropp.
“Improved exports have been aided by an increase in world demand and much-improved world prices that are now higher than U.S. prices,” he says.
Butter prices have held due to lower production, good sales and higher exports. In June, butter production was 4.8% lower than a year ago and 1.7% lower year to date. As a result, stocks of butter declined from May to June and were 5.5% lower than the previous year, Cropp notes.
“Seasonal improvement in butter and cheese sales, along with expected continued improvement in exports, should add further strength to the Class III price for September and October, reaching into the $17s,” he says.
Compared to a year ago, the increase in milk production is considerably lower in the Northeast and Midwest, with mixed changes in the West. Compared to July a year ago, Northeast milk production was slightly lower in New York,  Pennsylvania and Ohio, with Michigan up just 2.9%. In the Midwest, July milk production was 4.2% higher in South Dakota, up 2.1% in Iowa, up 3.1% in Minnesota, and just 0.7% higher in Wisconsin. In the West, California continues to experience lower milk production, with July down slightly at 0.2%.
USDA has lowered its forecast for 2017 milk production for each of the past five monthly forecasts due to an expected lower increase in milk per cow, reducing the impact of more cows. USDA is forecasting an average of 0.8% more cows but just a 0.7% increase in milk per cow, resulting in 2017 milk production 1.6% higher than last year. Wet weather has dominated both the Northeast and Midwest, with the exception of South Dakota, which has experienced a drought; therefore, harvesting quality hay has been hampered, which could impact milk per cow in these two major milk-producing regions.

Wednesday Morning Livestock Market Summary - Livestock Contracts Geared for Lower Opening

GENERAL COMMENTS:
The cash cattle trade should begin to take on some definition at midweek. The FCE internet business could push in one direction or the other (look for results posted on the cash cattle page later Wednesday morning). Yet its limited volume hasn't been too significant in recent weeks. Our guess is that asking prices will start out around $108 plus in the South and $175 plus in the North. It's possible that significant trade volume will be delayed until Thursday or Friday. Live and feed futures should open moderately lower, pressured by follow-through selling and pre-holiday long liquidation.
Between Tuesday's large run of negotiated hog sales and sharp break in the carcass value, it's a good bet that hog buyers will stay focused in terms of lower cash bids Wednesday morning. Pork processors clearly like their work. Just look at Tuesday's monster kill of 450,000 head (a new daily record if it holds up under revision). Yet why should they raise bids if they don't need to. Preliminary ideas point to a Saturday kill around 108,000 head. Lean futures seem staged to open moderately lower, checked by spillover selling and sour fundamentals.
BULL SIDEBEAR SIDE
1)Lower beef cutouts continue to drive accelerated out-front business. Last week's box business with delivery specs of 22 days or more totaled a robust 1,160 loads, the third busiest week since mid-April.1)If there was any doubt that Monday's rally in cattle futures was nothing but a dead cat bounce, such skepticism was quickly smashed Tuesday when the board crashed with triple-digit losses. Beyond question, the trend remains lower.
2)Spot beef sales on Tuesday enjoyed decent pre-holiday buying interest with box demand described as "moderately to fairly good."2)If the basis actually continues to strengthen thanks to defensive futures, cattle feeders may be hard pressed this week to plant their feet and hold for steady prices.
3)Crashing cash hog prices through the second half of August is often caused by oversold finishing floor, which can result in a decent post-Labor Day rally.3)The pork carcass closed sharply lower on Tuesday, once again pounded by imploding belly demand (i.e., the belly primal lost another $9.27).
4)Lean hog futures look extremely oversold and due for a bounce. Given such extreme discounts, this bear market could be close to simply running out of sellers.4)In closing lower and lower, day after day, lean hog futures are beginning to look bottomless. While no market goes down forever, the severe market tone is understandable discouraging would be spec buyers.
OTHER MARKET SENSITIVE NEWS 
CATTLE: (Times of India) -- JBS SA, the world's largest meatpacker, said on Monday that a majority of the company's nine-member board of directors believe Chief Executive Officer Wesley Batista should stay, in response to a plan by a plan by state development bank BNDES to remove him
In a securities filing, JBS said a plan by BNDES investment arm BNDES Participacoes SA is not in the best interest of the company's shareholders because the removal of Batista would be premature and would hamper the meatpacker's financial and operational stability
The filing did not detail the names or number of JBS's nine board members endorsing Batista's stay as CEO Batista and BNDESPar are ramping up their efforts to sway JBS investors ahead of a Sept. 1 shareholder meeting on the fate of Batista, who has led the food processor since he took over from his younger brother Joesley in January 2011
Reuters reported on Aug. 25 that some shareholders have recently grown skeptical of Batista's argument that he is uniquely able to complete two upcoming asset sales and list a U.S. food subsidiary next year. Last week, proxy advisory firm Institutional Shareholder Services Inc recommended shareholders sue Batista and against board's plans to increase pay
Shares jumped for a fifth day, adding 3.7 pct to 9.20 reais - the best five-day streak of gains since March 2016. That spree of rises have helped propel a 19 pct rise in the stock over the past month
HOGS: (foodmarket.com) -- New Hope Liuhe Co Ltd has expanded its hog herd this year, it said on Tuesday, the latest meat producer in the world's top pork consumer to boost output even as a domestic glut grows and prices languish at two-year lows.
The news came as the listed unit of China's top animal feed producer New Hope Group said first-half profit fell 20.9 percent to 1.1 billion yuan ($166.8 million) as fears about bird flu hurt business.
New Hope Liuhe said it will have more hog production going online in the next two years in provinces including Sichuan, Shandong and Jiangsu, after increasing its herd by more than 2.6 million hogs in the first half, according to the filing.
The company managed to keep its profit in the first half of the year from hog products around last year's level by expanding herds to offset falling pork prices, according to the filing.
H7N9 bird flu affected poultry farming and weighed on profit from poultry products, and was the main reason for the drop in the company's interim net profit, the filing said.
To alleviate impact from bird flu, New Hope Liuhe has pushed into processed meat and fresh meat in the first half, it said.
Earlier this month, China's top hog farmer Guangdong Wens Foodstuff Group Co Ltd also reported the expansion of its hog herds and processed meat sector as it reported a 75-percent of fall interim profits.
Wens increased its hog herd by 2.74 million in the first half. It produced 17 million hogs in 2016.
Pork belly prices in China have languished at two-year lows of around 27 yuan per kg since June as suppliers rushed to cash in on last year's record prices for the meat, a staple form of protein at the heart of Chinese cuisine.
Concerns also linger about slowing demand for meat as China's growing middle class eat more beef and fish.

Tuesday, August 29, 2017

Tuesday Closing Livestock Market Summary - Cattle Bears Quickly Move to Reclaim Monday Rally

GENERAL COMMENTS
The cash cattle trade went untested Tuesday with neither bids nor asking prices evident. According to the closing report, the national hog base is $.79 lower ($62.00-66.00, weighted average $64.49). Corn futures just keep fading. Most issues lost another 2 cents plus thanks to lackluster buying interest. Equities closed generally higher with the Dow up 56 points and the Nasdaq better by 18.
LIVE CATTLE
Traders didn't waste much time proving that yesterday's rally was nothing but a dead cat bounce. Live contracts settled 92 to 227 lower, falling back toward the bottom of the lateral price range of late summer. October did manage to close slightly above its moving average low. But that really not much of an accomplishment to write home about. Beef cut-outs: significantly higher, up $.27 (choice, $191.77) to $2.17 (select, $190.79) with moderate to fairly good demand and moderate offerings (60 loads of choice cuts, 26 loads of select cuts, 15 loads of trimmings, 19 loads of ground beef).
WEDNESDAY'S CASH CATTLE CALL:
Steady to $2 lower. Look for cash potential to take on better definition at midweek, though significant trade volume may be delayed until Thursday

Tuesday Midday Livestock Market Summary - Widespread Losses Sweep Through Livestock Markets Tuesday

GENERAL COMMENTS: 
Sharp losses have quickly developed across all trade Tuesday morning with pressure developing through cattle and hog futures. The lack of fundamental support is likely to limit commercial buyer interest through the rest of the trading session. Corn prices are lower in light trade. September corn futures are 2 cents lower. Stock markets are higher in light trade. The Dow Jones is 19 points higher while Nasdaq is up 13 points.
LIVE CATTLE:
Strong losses have developed in live cattle futures with traders focusing on pulling back from early-week gains. The overall lack of support in the complex is causing many traders to question just how firm the buyer interest was that stepped into the market Monday. This will have significant impact to any cash business that moves into the market as well as further meat trade later in the week. Traders will need to create a sense of market stability through the end of the month and through the holiday weekend in order to bring some additional buyer support back into the market in order to bring longer-term support that will have a lasting impact. Cash cattle activity remains quiet Tuesday morning with bids still undeveloped. Asking prices are still hard to find in most areas although it is expected that cattle will start out at $108 to $110 live and $173 and higher dressed. It is expected that trade will be delayed until Wednesday or later, although both sides will likely want to get things wrapped up sooner than later in front of the holiday weekend. Beef cut-outs at midday are higher, $1.77 higher (select) and up $0.04 per cwt (choice) with light movement of 73 total loads reported (35 loads of choice cuts, 17 loads of select cuts, 9 loads of trimmings, 12 loads of ground beef).
FEEDER CATTLE:
Front month August futures remains higher although the overall lack of trade volume in the soon to expire contract is limiting trade activity. The rest of the contract are holding triple-digit losses Tuesday morning with traders quickly backing away from the gains seen early in the week. Even though not all of the gains have been erased, the lack of support in the market is creating some uncertainty in the market as traders are focusing on trader interest as all nearby feeder cattle futures are trading at $144 per cwt. This narrow trading range may limit further market moves in the near future.
LEAN HOGS:
Triple-digit pressure shows the overall lack of support seen in the lean hog complex through the morning as traders remain focused on lack of interest in both cash trade and weakness in pork values through late August. Even though aggressive losses are not seen in deferred contracts, the lack of support in all contracts is concerning to the entire market. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $0.11 at $64.94 per cwt with the range from $62.00 to $66.00 on 2,861 head reported sold. The National Pork Plant Report reported 228 loads selling with prices fell $1.28 per cwt. Lean hog index for 8/25 is at $76.76 down $1.47 with a projected two-day index of $75.68, down $1.08.

Tuesday Morning Livestock Market Summary - Livestock Futures Staged for Mixed Opening

GENERAL COMMENTS:
The cash cattle trade will probably stay grounded this morning with bids and asking prices poorly defined. While both sides will be carefully monitoring the board for suggestions of pre-holiday value, our guess is that feedlot managers will start out pricing ready steers and heifers around $108-110 in the South and $173-plus in the North. Live and feeder contracts seem set to open some higher, boosted by further short covering and cautious technical buying.
Look for hog buyers to keep hammering away at the cash market today. To be sure, they'll put it back in the toolbox when it ceases to move country inventory. But as long as lower bids actually work to fund large and profitable kills, packers will stick with a winning game plan. Lean futures should start out moderately lower, pressured by follow-through buying and negative fundamentals.
BULL SIDEBEAR SIDE
1)Bottom building promise certainly improved on Monday with most live and feeder cattle futures closed with triple-digit gains. While many issues just seem to be flirting with the top of the August trading range, November feeders surged and closed well above its 40 and 100-day moving averages.1)Though beef cut-outs closed modestly higher on Monday, the bounce was not very inspirational given how much the wholesale trade has imploded over the last 30-45 days. Furthermore, early week box supplies were described as: moderate to heavy."
2)If live futures can continue to firm, the soften basis should lend feedlot managers greater cash leverage.2)Although soon-to-be-spot October live scored its highest close since August 15, the settlement was nearly 150 points below the session high. Furthermore, the close at $108.37 remained well below the 40-day and 100-day moving averages, while the short-term and longer-term trends remain negative.
3)October lean hogs remain at a trading value below the low end of the most recent 5-year trading range. While bears could prove to be right as rain, the fall market now seems quite vulnerable to a bullish surprise (e.g., the spring pig crop turns out to be too small to satisfy accelerating chain speed.3)Nearby lean hog futures continue to collapse with bearish traders apparently determined to main nearby deep discounts to the spot cash trade. Lead October settled at its lowest point since last December.
4)Once the board gets past Labor Day, October lean hogs more times than not tends to turn higher into contract expiration.4)The pork carcass value closed moderately lower yesterday, once again weight by retreating belly demand. Specifically, the belly primal lost another $6.31.
OTHER MARKET SENSITIVE NEWS 
CATTLE: (Texas A&M) -- COLLEGE STATION -- The 54 Texas counties declared a disaster area due to Hurricane Harvey contain over 1.2 million beef cows, according to a U.S. Department of Agriculture inventory report.
"That's 27 percent of the state's cowherd," said Dr. David Anderson, Texas A&M AgriLife Extension Service livestock economist in College Station. "That's a conservative estimate of beef cow numbers because 14 of those counties only have cattle inventory estimates."
Anderson noted since it is late August, a lot of calves in the affected areas are either close or ready to be marketed. The disaster area also includes a large number of livestock auction markets and Sam Kane meat processing.
Anderson also commented on the recent USDA Cattle on Feed report.
National placements were reported up 2.7 percent. The average of the pre-report estimates was up about 6.1 percent from last year, Anderson noted.
"I think it is likely that placements in earlier months pulled cattle ahead, as has happened on the marketing side of the ledger in the first half of the year," Anderson said. "Placements in July were lower than June, for the first time since 2007. It makes for an interesting placements chart with the counter seasonal move."
The number of cattle on feed was reported to be 104.3 percent of a year ago.
"Another interesting point is the increasing number of cattle on feed more than 120 days," he said. "This will bear watching. We have placed more lighter weight cattle in recent months, but we certainly don't need slower marketings."
Higher placements in Minnesota, Nebraska and South Dakota indicated more cattle moving to Corn Belt feeders, but on the other side of that, Iowa placements were below a year ago, Anderson said.
HOGS: (NPPC) -- President Trump at a rally last week in Phoenix hinted that he may withdraw from the North American Free Trade Agreement (NAFTA), stating: "I've told you from the first day that we will renegotiate NAFTA, or we will terminate NAFTA. I don't personally think you can make a deal without termination, but we're going to see what happens."
The NAFTA comments are the first from Trump since renegotiation talks on the 23-year-old deal between the United States, Canada and Mexico began Aug. 16. If the agreement is terminated, the U.S. economy will suffer, especially the agriculture industry and U.S. pork producers, NPPC has pointed out. Iowa State University economist Dermot Hayes calculated that if Mexico placed a 20 percent duty on U.S. pork -- a likely response to a U.S. withdrawal from NAFTA -- and allowed other countries duty-free access, the U.S. pork industry eventually would lose the entire Mexican market. That would result in a loss of 5 percent of U.S. pork production at a cost of $14 per hog; the cumulative impact on the U.S. pork industry would be $1.7 billion.
NPPC outlined the benefits of NAFTA in a white paper released earlier this year. The organization has urged the Trump administration to "modernize" NAFTA and to maintain the zero-tariff rate on pork trade with the U.S. pork industry's No.2 (Mexico) and No. 4 (Canada) export markets.

Monday, August 28, 2017

Monday Closing Livestock Market Summary - Cattle Futures Blast Open the Week With Triple-Digit Gains

GENERAL COMMENTS

Feedlot country hosted a normally quiet Monday with the distribution of new showlists about the only item on the agenda. The late month offering appears to be mixed, larger in Kansas, smaller in Texas and Colorado, and about steady in Nebraska. Overall, the number of ready steers and heifers appears to be about stead with last week. According to the closing report, the national hog base is $1.20 lower ($63.00-67.75, weighted average $65.61). Corn futures closed 2 cents plus lower tied to a lack of buying interest and ideas of a smaller yet fully adequate harvest. The stock market closed mixed with the Dow off 5 and the Nasdaq up 17.
LIVE CATTLE
Spot August closed only 25 points higher, but the rest of the live complex exploded by 110 to 177. The triple-digit advance was apparently sparked by news released on Friday that July placement activity was smaller than expected. Interestingly, soon-to-be-spot October closed smack-dab in the crosshairs formed by the 40-moving average on one hand and the 100-day moving average on the other. A move above this technically sensitive area could trigger new buying energy. Beef cut-outs: modestly higher, up $.18 (choice, $191.50) to $.32 (select, $188.62) with moderate demand and moderate to heavy offerings (70 loads of choice cuts, 24 loads of select cuts, 21 loads of trimmings, 15 loads of ground beef).
TUESDAY'S CASH CATTLE CALL:
Steady to $2 lower. Bids and asking prices will probably remain poorly defined tomorrow with serious business perhaps delayed until midweek or later.
FEEDER CATTLE
Feeder futures also opened the week with an impressive surge forward. Those most issues settle well off session highs, prices still finished 105 to 317 in the green. While September and October remain checked by 40 and 100-day moving averages, November managed to spike and close above both levels of resistance. On estimated receipts of 5,100 head (up from 4,342 last week but down from 6,035 in 2016), Oklahoma City sold replacement steers and heifers mostly $2-5 higher (instances $7-$8 higher on lighter feeders). CME cash feeder index: 08/25: 142.61, off .63.
LEAN HOGS
Market bears just can't seem to stop in this market. Such persistence is even more impressive give the board's deep discounts to cash. Contracts settled off 20 to 145 with the first four issues collapsing by triple-digits. Spot October sank to the lowest level seen since last December. The carcass value closed moderately lower as further belly weakness (i.e., off $6.21) offset butt, ham, and rib strength. Pork cut-out: $86.10, off $.31. CME cash lean index for 08/24: 78.23, off 1.17 (DTN Projected lean index for 08/25: 76.76, off 1.47).
TUESDAY'S CASH HOG CALL:
$1-2 lower. Look for cash buyers to remains on the defensive when biz resume in the morning, mindful of generous hog supplies and struggling product demand.

Monday Midday Livestock Market Summary - Cattle Futures Surge Higher Monday

GENERAL COMMENTS:

Strong triple-digit gains have quickly moved back into cattle futures with live cattle futures moving $2 per cwt higher while feeder cattle futures holding support over $3 per cwt during Monday morning activity. This support is helping to bring about increased buyer interest across the market with traders looking for additional follow-through activity later in the week. Hog futures remain weak with triple-digit losses still concerned about fundamental and technical pressure developing. Corn prices are lower in light trade. September corn futures are 2 cents lower. Stock markets are mixed in light trade. The Dow Jones is 21 points lower while Nasdaq is up 10 points.

LIVE CATTLE:
Nearby futures have moved as much as $2 per cwt higher during morning trade with the support from strong feeder cattle trade leading the surge higher and drawing aggressive commercial support back into the market. Although volume remains relatively sluggish at this point, there is still some uncertainty as to just how much upward momentum will be able to develop in nearby contracts. October futures are testing price levels at $109 per cwt, while December contracts have moved above $110 per cwt easily through morning trade. If follow-through buying can redevelop through the week and live cattle markets can string together a two-to-three-consecutive-day trend, this will go a long way in helping to establish buyer support through early September. Cash cattle markets remain quiet Monday morning and limited to inventory taking and show list distribution. Bids and asking prices are still unavailable at this time, and will likely remain that way until near midweek. Beef cut-outs at midday are higher, $0.53 higher (select) and up $0.19 per cwt (choice) with light movement of 65 total loads reported (34 loads of choice cuts, 13 loads of select cuts, 10 loads of trimmings, 9 loads of ground beef).

FEEDER CATTLE:
Aggressive triple-digit gains have quickly moved back into all cattle markets. The feeder cattle trade is leading the move higher with gains of $2 to $3 per cwt seen in nearby futures. As September through November futures now trading above $146 per cwt and showing the ability to gain additional underlying support with commercial and investment support willing to move back to the table through the end of the month, this could help to instill longer-term stability through the entire complex.

LEAN HOGS:
Strong pressure continues to be seen in lean hog futures trade despite support seen midmorning in pork values and cash prices in the Midwest. But the overall underlying pressure in technical and concerns that overall fundamental softness will continue to be seen through the end of the month is weighing on nearby and futures traders. This is pushing all nearby contracts with losses holding losses near $1 per cwt across most contracts. Cash prices are higher on the Iowa/Minnesota Direct morning cash hog report. The weighted average price gained $0.21 at $67.26 per cwt with the range from $63.00 to $67.75 on 945 head reported sold. The National Pork Plant Report reported 113 loads selling with prices gaining $0.42 per cwt. Lean hog index for 8/24 is at $78.23 down $1.17 with a projected two-day index of $76.76, down $1.47.

Monday Morning Livestock Market Summary - Hog Futures Staged to Open Week with Further Price Pressure

GENERAL COMMENTS:

Feedlot managers will be looking for a way to stabile the cash cattle trade this week. So far, the late summer market has been a rough ride. Frankly, late August just before Labor Day tends to be a tough time to find cash brakes. At any rate, the question won't be seriously framed today as packers limit efforts to the distribution off new showlists. We suspect the late month offering will be about steady with last week. Our guess in that asking prices will start out around $108-110 in the South and $173-175 in the North. Live and feeder futures should open on a mixed basis tied to short covering on one hand long liquidation on the other.
Expect cash hog buyers to return to work this morning with yet another rounds of lower bids. Given ample country offerings and defensive pork demand, steady cash erosion has clearly been the path of least resistance. Lean futures should open moderately lower, pressured by follow-though selling and defensive fundamentals.
BULL SIDE BEAR SIDE
1) The August 1 on feed report released Friday turned out to be friendlier than anticipated. Specifically, July placement activity was only 3 percent larger than 2016. The average trade guess called for last month's in-movement to be up by 6 percent. 1) Meat demand immediatey before the Labor Day weekend is typically lackluster since retailers and food managers have featuring plans in place and fully funded. Additionally, cattle buyers could be even more apathetic than they've been in recent weeks given the short kill schedule following the late summer holiday.
2) Live and feeder cattle futures opened significantly lower on Thursday but managed to close moderately higher. Many contracts settled 200 points or more above session lows. Could this be the beginning of bottom-building interest? 2) Though the recently monthly feedlot inventory could have been worse, its general impact potential looks bearish, necessitating the slaughter of more fed cattle in the last third of the year. The DTN feeding model now suggest that big lots now have scheduled 1.73 million head to finish in November, 11 percent more than 2016 and 7.5 percent greater than the 5-year average.
3) It's possible the new plants coming on line next month will need to bid up the price of hogs as producers have more options in selling? Even if hogs do not get bid higher, packers may still need to support pricing from going lower at the current pace.Long liquidation in live cattle futures appears to be slowing. For the week ending August 22, the net-long position held by noncommercials declined by just 600 to 93,000 contracts. 3) The pork carcass value remained on the defensive Thursday. The belly primal lost another $6.41 with the rib primal in the red The wholesale pork trade closed another tough week on Friday by posting another round of substantial softness in carcass value (i.e., faltering by 0.77 with all primals losing ground except the loin). From Friday to Friday, the pork cut-out retreated by $4.08 with the belly primal crashing as much as $31.47.by $2.27.
4) Although spot wholesale pork prices have been on the defensive, trade sources report that out-front demand seems to be improving. Cold storage stocks have probably reached a seasonal low, and storage levels are set to grow over the next four months, hopefully taking at least a little sting out of the expected hike in late year pork production. 4) For the week ending August 22, noncommercial traders were net sellers of lean hog futures, reducing their net long position by 6,300 contracts, which now stands at 53,500.

OTHER MARKET SENSITIVE NEWS

CATTLE: (kbtx.com) -- With the national beef herd continuing expansion in 2017, there was some uncertainty among beef producers as to what beef prices were going to do, but a stronger than expected demand for beef has generated some optimism. Derrell Peel is a livestock marketing specialist for Oklahoma State University.
"So in 2014 and 2015 when beef supplies were very limited and beef prices were at record levels many consumers did not consume as much beef as they normally would. They got priced out of the market and I think that there's a residual effect in that now beef is a little bit cheaper, it's still relatively high, but it's a little bit cheaper and so we're kind of making up for lost time. We didn't eat as many steaks during those days and I think we're going back and eating more of those higher cuts."
Peel says that three years of rebuilding the beef herd and continued expansion this year have brought beef prices down.
"Last fall we did get into a situation in the fall of 2016 where the market really over corrected to the down side. I think it was kind of the market coming to grips with the idea that we had more supplies, not only out there in 2016, but coming ahead of us. So it took a little while for the market to kind of adjust to that, and then we've kind of rebounded from that over correction to a little more balanced level, something that's a little more sustainable going forward."
Peel says that this year's cattle prices for ranchers so far are better than expected.
"Well, in 2017 I would say that the demand has pretty well offset the increase in supplies. We are seeing an increase in beef production in 2017, but as I said we've actually seen stronger than expected prices and I think you attribute most of that to demand."
Peel expects a relatively stable cattle market if beef demand remains strong. "As we go forward, we'll see an additional increase in beef production in 2018, and so again that demand is going to be key. All else being equal we would expect somewhat lower prices. Not the dramatic kinds of decreases we've seen at times in the past 15 or 18 months, but pressure on there probably in the plus or minus 5 percent range on a year over year basis."
HOGS: (siouxcityjournal.com) -- The first hogs have been slaughtered at Sioux City's new pork plant as officials continue to test equipment ahead of a Sept. 5 opening.
Mayor Bob Scott said Seaboard Triumph Foods processed about 100 hogs at the Sioux City plant Wednesday.
"They're going slowly to test their equipment... the pork producers were in town and we met with them last night and they said they saw them kill a hundred hogs," Scott told the Journal editorial board Thursday.
The 925,000-square-foot plant, which will start with a single shift and up to 900 production workers, will have the capacity to process about 10,500 hogs per day initially. Two-thirds of the animals will come from the plant owners, a joint venture between Guymon, Oklahoma-based Seaboard Foods and St. Joseph, Missouri-based Triumph Foods. The rest would be purchased on the open market from independent producers.
The $300 million plant, announced in May 2015, has been under construction for nearly two years in Sioux City's Bridgeport West Industrial Park.
"We are testing equipment to make sure that everything is going smoothly on the line and calibrating equipment," Seaboard Triumph Foods spokesperson Tori O'Connell said Thursday. "We have a lot of state-of-the-art technology in there — a very technologically advanced facility — (and we're) making sure those machines are set to proper specs."
O'Connell confirmed commercial production is set to begin on Sept. 5, the day after Labor Day.
To operate its first shift at full capacity, Seaboard Triumph needs about 900 hourly workers, along with 200 office staff.
While metro Sioux City's unemployment rate remains at historic lows, Scott said he has heard the company has been making steady progress on the hiring front.
"I had breakfast with Terry Holton and Mark Campbell — the two CEOs of the parent companies — and they told me that day, which was three or four weeks ago, that they had 521 or so employees they were going through the process of getting physicals for," Scott told the Journal editorial board.
Company officials have said they intend to start with a few hundred workers and quickly ramp up to about 1,100 for the first shift. A second shift, anticipated to begin in late spring or early summer of 2018, would require hiring an additional 900 production workers, bumping total employment to around 2,000.
With a second shift, the slaughter capacity would grow to about 21,000 hogs per day, or 6 million per year.

Friday, August 25, 2017

Friday Closing Livestock Market Summary - Cattle Futures Closed Mostly Higher Thanks To Late-Week Short-Covering

GENERAL COMMENTS

The cash cattle trade was very quiet Friday with buyers and sellers apparently content with the trade volume generated on Wednesday and Thursday. We could see a certain number of unsold cattle carried over into Monday, resulting in some increase in the size of showlists. The National hog base closed off $1.13 compared with the Prior Day settlement ($64.00-$68.00, weighted average $66.73). From Friday to Friday livestock futures scored the following changes: Aug LC off $0.42; Oct LC up $1.02; Aug FC up $0.87; Sep FC up $2.90; Oct LH off $3.05; Dec LH off $2.37. Corn futures closed 2-3 cents lower, pressured by a lack of buying interest and growing confidence and prospects for a fully adequate harvest later this fall. The stock market closed mixed with the Dow up 30 and the NASDAQ off 5.

LIVE CATTLE
Futures closed steady/higher, up 0-92. Late-week activity seemed rather lackluster, perhaps a function of nervousness ahead of the August 1 Cattle on Feed report. The feedlot inventory turned out to be somewhat friendlier than expected: on feed up 4%; placed in July up 3%; marketed in July up 4%. Specifically, last month's placement activity was smaller than expected. The average trade guess was up 6%. Beef cutouts: weak (Choice, $191.32 off $0.43, Select $188.30 off $0.36) on light to moderate demand and offerings (69 loads of choice cuts, 21 loads of select cuts, 27 loads of trimmings, 23 loads of coarse grinds).

MONDAY'S CASH CATTLE CALL:
Steady to $2 lower. Monday's activity will be typically limited to the distribution of new showlists. We look for ready numbers to be steady to somewhat larger. Keep in mind that packers will be buying for a shorter kill schedule following Labor Day. Such a reality could limit their willingness to support live prices.
FEEDER CATTLE
Futures closed mostly higher, up 102 to off 22. Feeder issues came in to the week generally oversold, and most contracts enjoyed a fairly decent corrective balance. Indeed, we are closing the week with the board much closer to the cash index than it was last Friday. CME cash feeder index: 08/24: $143.24, off $0.18.

LEAN HOGS
Futures closed lower, off 5-70. Late-year supply fears continue to pressure lean futures pretty much throughout the week. Moderate losses today seemed tied to further cash erosion and struggling carcass value. In closing at 63.07, spot October settled at its lowest point seen since December 2. Pork cutout: $86.41 (FOB Plant) off $0.77. CME cash lean 08/23: $79.40, off $1.09 (DTN Projected lean index for 08/24: $78.23, off $1.17).

MONDAY'S CASH HOG CALL:
$1-$2 lower. Look for cash hog buyers to remain on the defensive when business resumes on Monday, mindful of both generous country offerings and struggling pork product demand.