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Tuesday, October 31, 2017

Tuesday Midday Livestock Market Summary - Cattle Futures Gain Support Tuesday Morning

Strong gains have redeveloped late Tuesday morning despite the sluggish early morning activity across most contracts. This overall buyer support is primarily seen in cattle futures with nearby contracts holding triple digit gains. Trade volume remains moderate at best with many traders focusing on end of the month positioning opportunities. Corn prices are lower in light trade. December corn futures are 2 cents per bushel lower. Stock markets are higher in light trade. The Dow Jones is 14 points higher while Nasdaq is up 27 points.
Strong gains have redeveloped across the live cattle complex with traders focusing on firm fundamental and technical support at the end of the month. The ability to hold these recent market gains through the end of October would not only create strong underlying buyer support midweek as traders focus on the month of November. But this would also impact additional fundamental market expectations for both cash cattle trade at the end of the week and boxed beef values. Cash cattle markets are still quiet Tuesday morning with bids and asking prices still generally undefined. Feedlot managers are expected to remain extremely aggressive following the sharp cash market rally and firm follow through futures market support early this week. Bids may not be seen until Wednesday or later, and many feeders are hesitant to state asking prices too early. Active trade will likely be pushed off until the second half of the week, and most likely sometime late Thursday or Friday. Beef cut-outs at midday are higher, $0.37 higher (select) and up $2.84 per cwt (choice) with light movement of 74 total loads reported (36 loads of choice cuts, 19 loads of select cuts, 8 loads of trimmings, 11 loads of ground beef).
Strong follow through buyer support is expected to hold following renewed commercial trade activity moving back into the market Tuesday morning. January and March futures have led the complex higher, holding gains of $1 to $1.50 per cwt through morning trade. The expectation that traders are focusing on additional strong buyer support across live cattle trade is helping to bring additional buyer support to the market Tuesday.
Strong buyer support has quickly moved into nearby lean hog futures trade with December contracts holding a $1 per cwt gain at midday Tuesday. This end of the month buyer activity may help to draw additional longer term support into the entire complex. Despite the support in December and February futures, the rest of the market remains stuck in a narrow, but positive range with prices steady to 15 cents per cwt higher at midday. Sluggish activity is expected to be seen through the remainder of the Tuesday session. Cash prices are higher on the National Direct morning cash hog report. The weighted average price added $0.11 at $64.91 per cwt with the range from $58.00 to $65.36 on 5,678 head reported sold. Cash prices are higher on the Iowa/Minnesota Direct morning cash hog report. The weighted average price added $0.10 at $64.75 per cwt with the range from $64.00 to $65.00 on 1,020 head reported sold. The National Pork Plant Report is unavailable at this time due to packer submission problems Tuesday morning. Lean hog index for 10/27 is at $69.09 up $0.15 with a projected two-day index of $69.08, down $0.01.

Electrolytes can save lives

by Geof W. Smith, D.V.M. 
College of Veterinary Medicine, North Carolina State University, Raleigh. 

When used correctly, electrolytes help calves overcome diarrhea, the number one cause of death in our youngest herdmates.

ONE of the keys to success when using oral electrolytes is to rec­ognize diarrhea early and begin treatment right away. If the first sign of diarrhea is that the calf "won't drink its milk," you are too late. If the calf is down and can't get up, you are way too late.

Seeing the actual manure when calves are housed on straw is often difficult, so it is impor­tant to watch calves closely when feeding. Calves should be "excited" to be fed and usu­ally drink milk aggressively. Drinking slowly might be an early sign of a calf not feeling well.

Look at the calves' eyes as well. If they are starting to sink (where you can see a space between the eyelid and the eyeball), that's an early sign of dehydration. If you can get calves started on electrolytes at the first sign of diarrhea, we can usually prevent them from becoming severely dehydrated or having their blood pH drop to dangerously low levels.

Mix It well 
Beginning at the first sign of diarrhea, oral electrolytes should be fed to calves at least once per day. My preference is to always mix oral electrolytes with water and feed separately from milk. If a farm feeds milk twice a day, electro­lytes can be offered in the middle of the day.

I often get asked whether or not you can feed oral electrolytes mixed with milk. This is a somewhat complicated question and depends on what electrolyte product you are using as well as what "milk" you are feeding.

The two concerns associated with feeding electrolytes and milk together are that: 1) bicarbonate might interfere with milk diges­tion in the abomasum and 2) high osmolality meals will slow the emptying of the stomach (abomasum) and promote bloat.

It is well established that concentrated (high osmolality) solutions will sit in the calrs stomach and are a major risk factor for bloat. This is why most experts recommend using a Brix refractometer to check the total solids of milk or milk replacer before feeding it.

When you add electrolytes directly to milk, the osmolality of the milk rises significantly. Whole milk has a relatively low osmolality (about 275 to 300 mOsm/L) as would most conventional (20:20) milk replacers. In con­trast, higher protein (25 to 28 percent) milk replacers can have much higher osmolalities (sometimes well over 600 mOsm/L). If you are feeding a high protein (accelerated growth) milk replacer, adding an electrolyte directly to the milk may push osmolality over 1,000 mOsm/L. This is a bad idea.

Osmolality of oral electrolytes can vary con­siderably. Some are in the 350 to 400 range, while others are well above 700 mOsm/L (because they contain higher levels of sugar). Don't mix these "high energy" electrolytes with any type of milk.

For farms that want to combine milk and electrolyte feeding, I suggest the following:

a. Use an oral electrolyte product that con­tains acetate or has bicarbonate concentrations less than 40 cubic millimeters per liter (mM/L).

b. Make sure the oral electrolyte has an osmolality less than 400 to 450 mOsm/L.

c. Use whole milk if possible or a conven­tional (20 percent protein) milk replacer that is nonmedicated (since antibiotics or other additives will also raise osmolality).

Calves should receive electrolytes at least once a day (or twice a day for the first day or two if the diarrhea is severe) and continue daily until diarrhea resolves. Although there isn't a lot of data on how long diarrhea actually asts in calves, most studies would suggest at least seven to eight days.

A frequently asked question is whether calves need a second feeding of electrolytes the following day. The reality is that they need electrolytes daily until the diarrhea has completely stopped. Since most electrolytes are about $2 per dose, think of this as a cheap insurance policy to make sure the calf doesn't go down and require IV fluids.

Don't skip the milk 
You will occasionally see recommendations to stop feeding milk while the calf has diar­rhea. The logic is that calves need to "rest their gut," and the thought is that continuing milk feeding will worsen the diarrhea. This concept is based on the principle that milk will supply nutrients in the intestines that the bacteria could use as an energy source.

Other arguments for withholding milk include a faster healing of the intestines, less opportunity for overgrowth of the intestines with harmful bacteria, and impaired digestion and utilization of milk and/or milk replacer. Despite these ideas, research has shown milk feeding does not prolong or worsen diarrhea.

A very good field study published several years ago demonstrated that calves with diar­rhea that were fed both milk and oral electro­lyte gained more weight than did calves from which milk was withheld for one to two days. In addition, there was no difference in the severity or duration of diarrhea.

A more recent study done on a dairy in Colo­rado enrolled 360 calves with naturally occur­ring diarrhea. One group of calves received two feedings of electrolytes only twice a day for two days and then 1 liter of milk mixed with 1 liter of electrolytes through Day 4 or until diarrhea resolved. The other group received another prod­uct mixed with half a gallon of milk twice daily for two days and longer if diarrhea persisted.

The calves in the group where milk feeding was continued gained more weight during the diarrhea period, had higher weaning weights, and a faster resolution of diarrhea. These stud­ies indicate that even high energy oral electro­lyte products with very high glucose concentra­tions do not provide enough energy to meet the maintenance and growth requirements of a calf.

Maintain calves on their full milk diet plus oral electrolytes when possible. If calves are depressed and refuse to suckle, milk can be withheld for one feeding and an oral electrolyte product substituted. However, milk feeding should always be resumed within 12 hours.

Follow the label 
The goals of oral fluid therapy are to replace fluids and electrolytes, correct acid base prob­lems, and provide nutritional support. Electro­lytes can be used in any diarrheic calf that has at least a partially functional gastrointestinal tract. If electrolytes are administered to a calf with ileus (no stomach or intestinal motility), the fluid pools in the rumen or abomasum resulting in bloat and acidosis.

In general, a calf with any sort of suckle reflex or that demonstrates any "chewing" action can tolerate oral fluids. Usually, when calves are "down" and can't stand, they need aggressive IV fluid therapy if they are going to survive.

Oral electrolyte solutions will continue to serve as the backbone of treatment protocols for diarrhea in calves because they are cheap and easy to administer. However, the producer should understand how to choose a product that will work optimally and use it correctly .

Tuesday Morning Livestock Market Summary - Follow-Through Buying Interest Should Sponsor Firm Openings for Meat Contracts

Feedlot country seems set for a typically quiet Tuesday with bids and asking prices poorly defined. Significant trade volume probably won't surface until the second half of the week. Live and feeder futures should open moderately higher, lifted by residual buying interest and technical bullishness.
Hog buyers opened the week Monday with firm bids, but generated no better than moderate trade volume. This probably means they will find it necessary to work with firm bids again Tuesday. That said, most expect slaughter hog numbers to steadily grow over the next four to six weeks. Lean futures are set to open moderately higher, supported by spillover buying and constructive fundamentals.
1)Cattle futures didn't lose a beat running after feedlot cash on Monday with a large handful of both live and feeder months setting new contract highs.1)New showlists distributed in feedlot country on Monday were generally larger than last week with only Colorado offering fewer ready cattle.
2)Last week's comprehensive beef cutout jumped as much as $2.72, the largest weekly advance since mid-May. Furthermore, beef sales reported another impressive round of out-front sales (1309 loads).2)Now that feedlots have been teased by at least one wave of sharply higher packer bids, the threat of delayed marketings and larger carcass weights becomes even greater (i.e., "yes, deferred premiums are worth waiting for").
3)The pork carcass value surged more than a buck higher on Monday with all primals reflecting better demand except the loin.3)The lower price of feed costs for the fourth quarter as well as better-than-expected margins will help to encourage producers to remain in expansion gear and guarantee processors with ample supplies throughout 2018.
4)Lean hog futures powered solidly higher Monday with February through June setting new contract highs.4)Look for cash hog prices to increasing falter as we move into November, showing evidence that demand is not increasing above current levels. At prices above a year ago by 30%, the wholesale pork trade should hurt demand going forward. In order to keep product moving, prices will need to ease, especially as demand for product is expected to ease in proportion to the extra live numbers.
CATTLE: (Sydney Morning Herald) -- A Chinese ban on Australian beef exports has been lifted, resolving one of the year's major friction points in the Australia-China trading relationship.
Trade Minister Steven Ciobo says the federal government has been notified that six Australian beef exporters, who made up a third of Australia's beef trade to China, can resume exporting.
Mr Ciobo had raised China's suspension of exports from the beef processors during a series of meetings in Beijing last month.
The suspension by Chinese customs and quarantine regulators in July was blamed on labelling concerns.
Australian trade officials said the issue had been resolved relatively quickly. In contrast, it had taken Germany five months to resolve a similar ban on pork over mislabelling, while Canada took 18 months to recover from a ban on pork imports, where there was concern over additives.
Australia's beef exports to China were worth more $670 million last year, making it Australia's fourth-largest market. The ban had coincided with the entry of US beef to China.
Mr Ciobo said: "This is terrific news for the six affected facilities, great news for their workers and suppliers."
He said he appreciated the "constructive engagement with the Chinese authorities".
The problem had been non-compliance with labelling regulations, but Mr Ciobo said it had been "resolved very quickly".
HOGS: (Western Producer Publications)--Japan's imports of Canadian pork are rising, said Tatsuo Iwama, ex-executive director for the Japan Meat Traders Association, which comprises 30 major Japanese meat traders.
"Canadian pork meets Japan's quality and price requirements," Iwama said.
Japan Ministry of Finance figures bear Iwama out. Imports of Canadian pork rose almost 20 percent last year compared to 2015, from more than 149,318 tonnes to almost 178,610 tonnes.
Imports of chilled Canadian pork increased more than 13 percent from almost 121,121 to almost 137,231 tonnes. Frozen product made an almost 47 percent import jump, coming in at more than 41,379 tonnes in 2016 compared to about 28,197 tonnes the previous year.
When Japan sources pork, it does so at a high-price tariff system, so importers take in a combination of high-end cuts, such as loin and tenderloin, and low-end cuts, such as shoulder and thighs.
"Whether chilled or frozen, loin is the most in demand, with frozen loin being used for bacon," Iwama said.
Canada Pork International Japan marketing director Shoji Nomura agreed with Iwama about the rising trend of Japan's imports of Canadian pork. Quoting ministry of finance statistics, Nomura pointed out a 2.5-fold increase in Canadian chilled pork imports in 2010-16. Totals rose to 137,231 tonnes from 54,425.
Various reasons explain the import increase, including recognitions of Canadian pork's good quality and of the Canadian pork industry's high-level food safety system, Nomura said.
The frozen-to-chilled pork ratio Japan imported from Canada in 2010 was 69.5 percent to 30.5 percent. In 2015, the proportion had almost reversed to 21.7 percent frozen and 78.3 percent chilled, Nomura said.
"Although volumes have not significantly changed, demand for back and spare ribs for barbecue is increasing little by little," he said.
Last year, the total value of Canadian pork sold to Japan marked a new record at $3.812 million.
To succeed in the Japanese market, Quebec pork producers must put out a custom-made product, generally raised, cut and packed according to the specifications of the Japanese customers, outgoing Quebec agent general Claire Deronzier said.
For example, some Quebec producers let their pigs rest 16 to 24 hours before slaughtering, compared to the industrial standard of two to five hours. "That makes for a more tender and juicy meat," Deronzier said.
Of Canada's major pork-producing provinces, only Quebec and Alberta maintain representative offices in Japan. Alberta works in collaboration with federal government, industry associations and private industry, said senior commercial officer at Alberta's Japan office Mary Beth Takao.
Alberta has long produced pork that the Japanese favour, partially owing to the province's barley feed, "which creates a beautiful flavour and clean white fat," Takao said.
Many Alberta producers are also raising the favoured Sangenton breed. "Many of the (processing) companies have also worked very hard to put in equipment that will meet the Japanese specifications," Takao said.
CANSET Canadian international trade statistics provided by Takao show Alberta's pork exports rose almost 10 percent overall last year to 251,001 tonnes, compared to 2015's 228,386 tonnes.
Since last year, CPI's Japan office has been promoting the Verified Canadian Pork program, in which each CPI member packer exporting to Japan participates. Costco Japan, which had a strong interest in this program, changed in April from U.S. to Canadian chilled pork throughout its chain after a January-February trial, Nomura said.
Costco Japan's 25 stores now sell Canadian Three Breed Cross pork (Landrace, Large White and Duroc), mostly from Olymel's plant in Vallée-Jonction, Quebec.
"In the first half of May, the chain achieved 130 percent sales of imported pork compared to the same period last year," Nomura said.

Monday, October 30, 2017

Monday Closing Livestock Market Update - Triple-Digit Gains Dominate Cattle Futures Thanks to Explosive Cash News

The cash cattle market was typically quiet as the new week began with packers concentrating on the collection of new showlists. The offering appears to be generally larger with only Colorado showing fewer ready steers and heifers. According to the closing report, the national hog base is $0.45 higher ($58.50-$65.36, weighted average $64.79). Corn futures closed essentially flat at the conclusion of a lackluster trading session. The stock market closed lower with the Dow off 85 points and the Nasdaq down by 2.
Live futures bolted out of the starting gate this morning, running hard to catch up with the runaway cash market. With nearby contracts leading the charge, prices settled 57 to 420 points higher. December through June set new contract highs. Beef cut-outs: mixed, up $1.16 (select: $193.64) to off $0.28 (choice: $203.02) with light-to-moderate demand and offerings (42 loads of choice cuts, 35 loads of select cuts, 5 loads of trimmings, 15 loads of ground beef).
Steady to $2 higher. In all likelihood, bids and asking prices will remain poorly defined on Tuesday with significant trade volume possibly delayed until Thursday or Friday.
Mirroring the bullish reaction in the live market, feeder issues closed 107 to 140 points. Needless to say, the inflating premiums of deferred live contracts represent increasingly attractive targets for commercial players. Note the November through March set new contract highs. On an estimated run of 9,200 head (up from 6,671 last week and 7,179 in 2016), Oklahoma City sold feeder steers $2-$9 higher. Heifer mates were marked $3-$8 higher. Steer calves sold mostly $7-$12 higher. Heifer calves under 500 lbs. traded $5-$9 higher while their heavier sisters were tagged steady to $3 higher. CME cash feeder index: 10/27: $154.93, off $0.19.
Lean hog contracts closed solidly higher, advancing 27 to 80 higher. Early week buying energy was linked to the premium of the cash index, technical buying, and spillover bullishness from the cattle complex. Once again, February through set new contract highs. Carcass value jumped more than a dollar higher, supported by better demand for all primals except the loin. Pork cut-out: $78.57, up $1.01. CME cash lean index for 10/26: $68.94, up $0.66 (DTN Projected lean index for 10/27: $69.09, up $0.15).
Steady to $1 higher. Look for opening bids in the morning to be on a stead/firm basis.

Monday Midday Livestock Market Summary - Sharp gains have quickly developed and held across the entire market

Sharp gains have quickly developed and held across the entire market. October futures lead the complex higher moving $4.57 per cwt higher at midday. This aggressive support and spillover interest into other contracts is helping to push all cattle markets sharply higher. Lean hog futures remain firm with gains of 20 to 50 cents per cwt in most contract months. Corn prices are steady to higher in light trade. December corn futures are steady. Stock markets are lower in light trade. The Dow Jones is 77 points lower while Nasdaq is down 10 points.
Sharp gains in live cattle trade have been led through the morning by October live cattle futures holding gains above $4 per cwt. Currently front month futures are trading $4.57 per cwt as traders quickly try to narrow the premium held by the December contracts as the October futures gets ready to expire at the end of the month. Because October futures are in delivery, daily trading limits do not apply to these contracts, allowing for the gains over $4.50 per cwt. The rest of the complex is holding gains from $1 to $3 per cwt higher in moderate trade activity. Cash cattle markets remain quiet following moderate to active trade which developed late Friday. With prices surging %6 to $10 per cwt at the end of last week, it appears that feeders will become even more aggressive going into the month of November. Show list distribution and inventory taking is the main focus Monday with bids and asking prices likely to remain undeveloped through the day. Beef cut-outs at midday are higher, $1.91 higher (select) and up $0.14 per cwt (choice) with light movement of 37 total loads reported (18 loads of choice cuts, 13 loads of select cuts, no loads of trimmings, 6 loads of ground beef).
Strong and aggressive gains have quickly developed in all feeder cattle trade with buyers focusing on support from the live cattle market. Trade has been seen at or around $3 per cwt through most of the late morning, although buyer interest has slowed at midday with prices holding gains of $2 to $2.90 per cwt. The strong upward market move is focusing on the aggressive surge in cash cattle trade seen Friday and the expectation that additional buyer interest will continue to actively develop.
Moderate buyer support has stepped into the lean hog futures trade following extremely strong support across the cattle markets and firm cash buyer activity which is seen early Monday morning. Nearby gains are holding 60 cent per cwt rallies, while the rest of the complex remains lightly traded, but able to overcome early mixed trade with prices 15 to 35 cents per cwt higher. Very little additional market direction is expected to be seen through the Monday session with all eyes focused on the cattle market. Cash prices are higher on the National Direct morning cash hog report. The weighted average price added $0.79 at $65.13 per cwt with the range from $58.50 to $65.36 on 4,836 head reported sold. Cash prices are higher on the Iowa/Minnesota Direct morning cash hog report. The weighted average price added $1.23 at $64.91 per cwt with the range from $58.50 to $65.25 on 1,786 head reported sold. The National Pork Plant Report reported 132 loads selling with prices gaining $1.32 per cwt. Lean hog index for 10/26 is at $68.94 up $0.66 with a projected two-day index of $69.09, up $0.15.

Monday Morning Livestock Market Update - Cattle Futures Set to Surge Higher on Opening

Even the most dedicated bulls in the room were shocked late Friday by the way feedlot sales soared higher. Steers and heifers sold from $117 to $119 on a live basis in most areas, $6 to $8 higher. At the same time, dressed sales were marked at $182 to $185, $7 to $10 higher. The late hour made it difficult to assess total volume, but we assume Livestock Mandatory Reporting will document moderate to fairly good movement later Monday. Activity Monday will be typically limited to the distribution of new showlists. Our guess is that the new offering will be about steady with last week. Live and feeder futures should open higher as the nearby contract aggressively chases the new cash reality.
The cash hog market seem staged to open with bids steady to $1 lower. Last week's kill popped back over 2.5 million head, if only because of the odd boast of last Sunday's kill. Nevertheless, it will be interesting to see how well the wholesale pork trade holds up under the additional tonnage. Lean futures seem set to open a firm basis thanks to the premium of the cash index and spillover buying from the cattle complex.
1)The cash cattle trade exploded late Friday with live sales rocketing $6 to $7 higher in most areas. In a flash, the extraordinarily large board premium has vanished, and with it the threat of delayed country marketing. Indeed, such a surge speaks highly of manageable supplies and decent beef demand.1)Forced to pay sharply higher for live inventory last week, beef packers are starting the week with much tighter margins. They will be looking for ways to regain leverage (e.g., reduced chain speed, lower bids).
2)During the week ending Oct. 24, noncommercials continued to increase their net-long position in live cattle futures, hiking the total by 6,600 to 119,600.2)The December/ February live cattle spread is pushing out over $5, and continues to imply remarkable strength into the first quarter of next year despite the prospects of larger and larger meat supplies into early spring. Such an extremely bullish move could prove to be entirely too risky.
3)At the same time, big specs increased their net-long position in lean hog futures by 2,300 contracts to 46,000.3)Given the way the cash market began to falter late last week, the unusual fall rally may now be history with a more typical bearish price resuming as we move toward Thanksgiving.
4)The U.S. economy unexpectedly maintained a brisk pace of growth in the third quarter. Gross domestic product increased at a 3% annual rate in the July-September period after expanding at a 3.1% pace in the second quarter.4)Non-holiday hog slaughter over the next six weeks should easily record a steady increase and significantly tax seasonal pork demand.
CATTLE: (the -- The American Farm Bureau Federation is calling on the Trump Administration to move forward with improvements to the North American Free Trade Agreement but to ensure the United States remains part of the deal, Bruce Cochrane reports.
The American Farm Bureau Federation is one of a group organizations that's come together to raise the alarm over the potential negative consequences for agriculture of withdrawal from NAFTA, one of several such US based ad hoc coalitions representing food and agricultural trade groups, manufacturers and agriculture and food commodity organizations.
American Farm Bureau Federation Senior Director for Congressional Relations Dave Solmonsen says, since the beginning of the year, there has been a very active effort to promote trade focusing on NAFTA.
"We want to continue to grow our opportunities in the North American market and we need to stay in the agreement but also we do want these negotiations that began in August and now are expected t continue into the first quarter of 2018 to succeed, to make some necessary changes to NAFTA.
"Several parts of US industry and parts in agriculture want to see some changes, want to see improvements in the agreement to make it work better for everybody so that's what we really want to do but, at the same time we want to make sure that we stay in the agreement.
"Before NAFTA, US agriculture was selling to Canada and Mexico together about 8.9 billion dollars a year in ag products and now we're almost 40 billion dollars a year in exports.
"All three countries have grown together but you put Canada and Mexico together it's almost a third of all US agricultural exports so again the thing is to try and keep that going."
Mr Solmonsen acknowledges it's a good time to modernize the agreement but everybody knows the positives NAFTA has brought.
HOGS: (Rabobank) -- Looking into Q4 2017, global pork supply is expected to increase further, mainly driven by China, the US, Canada, and Brazil. While China's pork imports have slowed down recently, they are likely to pick up again later this year, according to RaboResearch's latest global Pork Quarterly.
"The most significant story in global pork markets has been the substantial decline in China's imports in recent months, which creates a risk of over-supplied global markets," says Chenjun Pan, RaboResearch Senior Analyst -- Animal Protein. "However, we do expect China's imports to pick up somewhat over the rest of the year." While the Rabobank Five-Nation Hog Price Index suggests a stronger pricing trend, the major importing countries will likely maintain steady import growth.
China's pork farming structure has been impacted by stricter environmental policy enforcement. Despite the exit of many small farms, we maintain our forecast for 2017, with production increasing by 2%. Prices will continue the downward trend, after holding at strong levels in summer. Pork imports were down by 27% in the first eight months, but may rebound over Q4 2017.
China's import demand has been one area of distortion in global pork markets over the past one to two years, and a diversion in prices for certain cuts has been another. "Pork bellies have reached record levels in the US and some other markets, driven by strong demand, especially from foodservice," says Justin Sherrard, RaboResearch Global Strategist -- Animal Protein.
Other highlights from the Pork Quarterly Q4 2017 include:
EU: exports continue to decline-- While high prices in 1H 2017 contributed to declining exports as they reduced the EU's competitiveness in trade flows, they also triggered an expansion in the sow herd. The slight dip in production in 2017 is likely to reverse in 2018. The EU will seek export opportunities for additional production.
US: prices under pressure as production grows-- US pork production will continue to expand over the remainder of the year. Prices are expected to soften under supply pressure. Strong currencies will put extra pressure on the export business (see Figure 2). With weaker demand from China offset by stronger demand from Mexico, we still expect total exports for 2017 to be higher than in 2016.
Brazil: export to China declined significantly-- Brazilian pork exports increased around 18% by value in the first nine months of the year. By volume, they declined around 4%, particularly due to the slowdown in Chinese pork imports. Given favourable feed costs, we expect Brazilian production to continue rising in Q4 2017.

Friday, October 27, 2017

Friday Closing Livestock Market Summary - Waiting for Cash News, Cattle Futures Close Late-Week Session With Mixed Prices

As of 3:30 CDT Friday afternoon, the cash cattle trade remained unestablished. While live bids in the North had slowly improved, they remained at least $3 below asking prices (i.e., $116 plus). The bid/asking price spread in the South seemed even larger (i.e., $5 or more). We assume that buyers and sellers would still get together to some extent late Friday afternoon or early evening. According to the closing report, the national hog base is $0.63 lower ($58.50-$65.50, weighted average $64.41). Corn futures closed several cents lower, checked by harvest pressure in light volume. The stock market closed higher with the Dow up 33 points and the Nasdaq positive by 144.
While most live contracts closed 35 to 85 points lower, Spot October and December settled in the green thanks to ideas that late-week cash business could end up significantly higher. October closed at $115.37, its best finish since July 21. Beef cut-outs: higher, up $0.57 (select: $192.40) to $0.93 (choice: $203.30) with light to moderate demand and light offerings (39 loads of choice cuts, 20 loads of select cuts, 10 loads of trimmings, 12 loads of ground beef).
Steady/firm with Friday's averages. Monday's call is near impossible with Friday's cash still up for grabs. Generally speaking, look for the firm trend to continue. Needless to say, activity on Monday will be primarily linked to the distribution of new showlists.
For the most part, feeder futures settled 7 to 70 lower. New spot November took the biggest hit, no doubt pressured in part by the large discount of the cash index. CME cash feeder index: 10/26: $155.12, up $0.72.
Powered by generally positive fundamentals and spillover buying from the cattle complex, lean hog futures enjoyed a generally progressive week (e.g., from Thursday to Thursday, the February contracts worked 205 higher). So contracts were probably due for a break (not to mention overbought oscillators). Contracts settled 10 to 60 lower. Note that spot December closed the week nearly 450 points below the cash index. The carcass value closed modestly higher as higher butts and bellies overshadowed lower picnic sales. Pork cut-out: $77.56, up $0.19. CME cash lean index for 10/25: $68.28, up $0.96 (DTN Projected lean index for 10/26: $68.94, up $0.66).
Steady to $1 lower. Look for hog buyers to start out next week with steady/soft bids.

Friday Midday Livestock Market Update - Firm Pressure Seen Across Livestock Trade

Moderate to firm losses have snuck into the livestock market due to extremely sluggish market activity at the end of the week. This is allowing for market positioning following a strong market gain in both cattle and hog futures. The correction in the market is not creating any sense of panic selling at this point, as traders are now looking forward toward next week as well as the month of November. Corn prices are lower in light trade. December corn futures are 3 cent per bushel lower. Stock markets are higher in light trade. The Dow Jones is 38 points higher while Nasdaq is up 135 points.
Live cattle futures are trading mostly lower with front month October contracts the only contract month posting a firm gain at midday. This buyer support in the October contract comes as traders try to roll out of the front month futures before contracts expire, even though trade and market interest remains extremely light. The remainder of the complex is holding losses of 40 to 80 cents per cwt as traders are taking a more thoughtful approach to the market which has yet to see any cash market activity for the week. The expectation is that live cattle futures will hold the current range into closing bell due to the light volume seen across the complex through most of the morning. Cash cattle remain extremely quiet Friday morning with a few bids redeveloping through the South with price at $111 per cwt. Interest and activity is going to pick up over the next few hours as packers are expected to still need to gain access to a moderate amount of cattle for next week's runs. Asking prices remain firm at $116 and higher live basis in the South and $180 and higher in the North. Beef cut-outs at midday are higher, $0.44 higher (select) and up $1.18 per cwt (choice) with light movement of 55 total loads reported (24 loads of choice cuts, 15 loads of select cuts, 8 loads of trimmings, 9 loads of ground beef).
Feeder cattle futures remain firmly lower, although the overall sluggish market activity in the complex has kept traders extremely lackluster at the end of the week. Due to the overall light market interest and sluggish volume, traders are taking advantage of position squaring opportunities following the market rally which developed over the past several days. It is uncertain just how much of this pressure will carry into closing bell as most contracts are already well off of session lows at midday.
Firm pressure is slowly developing across he lean hog futures complex Friday morning as traders continue to be driven more by an overall lack of market interest at the end of the week rather than any change in fundamental or technical factors. Prices are holding losses of 50 to 80 cents per cwt, as some traders have started taking advantage of position taking opportunities ahead of the weekend break. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.19 at $65.37 per cwt with the range from $59.00 to $66.50 on 4,332 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 135 loads selling with prices gaining $0.33 per cwt. Lean hog index for 10/25 is at $68.28 up $0.96 with a projected two-day index of $68.94, up $0.66.

2017 cow slaughter on track to maintain herd size

The data reveal that cow slaughter in 2017 is on track to hold the nation’s cowherd at level with or slightly larger than 2016. However, as weaning wraps up, will more cull cows come to town?

Based on data between 1987 and 2016, the equilibrium slaughter rate runs around 9.3%. In other words, bigger slaughter, as a percentage of the cowherd, means a smaller cowherd in the following year, while a rate slower than 9.3% spells likely expansion. The data are fairly reliable with only a few outliers (1993, 2015 and 2016). 
Within that analysis, it’s important to monitor slaughter rate on a quarterly basis. That enables us to look ahead to January 1 with some sense of certainty about net changes in cow inventory through the year. Accordingly, this week’s data reflects two items.
First, the average monthly beef cow slaughter rate during the previous 30 years is applied to the 2017. For example, the average January slaughter rate in the previous 30 years has run right around 0.82%; the respective monthly averages are subsequently applied to the 2017 annual base. The annual total – 2.91 million – is equivalent to 9.3% of the 2017 starting inventory.    
Second, the data also reflect what’s actually occurred to date in 2017. Through the third quarter, beef producers have culled 2.034 million cows, compared with an expected steady-state slaughter equaling 2.094 million head.  Therefore, slaughter is running 60,000 cows behind the historical expectation for equilibrium.
Thus far, it appears beef producers have indeed reached somewhat of an equilibrium point in terms of cow inventory; growth is occurring, albeit at a very tepid rate. As such, it’s likely we’ll end up with a January 1, 2018 inventory similar to slightly larger compared with 2017.

Friday Morning Livestock Market Summary - Livestock Futures Staged for Firm, Late-Week Opening

Cattle buyers are running out of time to start/complete procurement chores before adjourning for the week. Most sense that live inventory is going to cost more with "how much more" the only real question. Indeed, if today's business turns out to be no better than steady, it will be seen as a major disappointment. Look for open bids around $111 in the South and $174-175 in the North, well below asking prices of $116-118/$180-185. Look for at least moderate trade volume to surface sometime between late morning and mid afternoon. CME officials announced no delivery activity on Thursday. Live and feeder futures should open moderately higher thanks to following buying and cash optimism.
While October's cash hog rally continued this week, it definitely slowed. Indeed, yesterday's business averaged somewhat lower. We don't think opening bids this morning will be any better than steady. Saturday's kill is estimated at 201,000 head. If this guess is close, the weekly slaughter total could notch a new record around 2.54 million head. Lean futures also appear ready to open some higher, supported by spillover buying and late week short covering.
1)Live cattle premiums went from "real fat" to "near obese" on Thursday as the first four contracts soared with triple digit gains (Feb and Apr once again notched new contract highs. Given such a tall wall, feedlot asking prices should have all the rigidity of steel wrapped in concrete.1)Given the dangerously combination of the $9 plus Dec premium, cheap feed, and feedlot red ink, a serious decay in feedlot currentness and leverage over the next 30 days seems inevitable.
2)Net beef export sales last week jumped to 16,900 MT, up 25 percent from the previous week and 7 percent from the prior four-week average.2)Although out-front boxed beef sales popped nicely last week, forward sales had been dropping in the preceding two to three weeks. If slaughter levels pick up once again in November, packers will need to get more volumes across the sales categories.
3)Net pork export sales last week jumped to 18,100 MT, up 58 percent from the previous week (but down 15 percent from the prior four-week average). At the same time, actual exports totaled 23,000 MT, up 9 percent from the previous week and 10 percent from the prior four-week average.3)While spillover buying from the cattle complex has lifted deferred lean hog futures to new contracts highs, concerns linger whether domestic and export pork interest will be able to clear the anticipated large hog supplies in the months ahead.
4)The pork carcass value popped more than a dollar higher on Thursday, supported by better demand for processing items and fresh cuts.4)Lean hog futures are seriously overbought with oscillators at multi-month highs. For example, June hogs closed yesterday with an RSI reading of 77 (the overbought threshold is 70).
CATTLE: ( -- The seasonal transition in retail meat features is moving along more briskly as cooler temperatures are arriving and likely here to stay.
The change in focus from grilling cuts to more roasts and heavier meals has been underway for a few weeks but is now more evident in the weekly advertisements.
Portions of the Midwest had the first frost of the season midweek, and several inches of snow are even predicted for the upper Midwest today and overnight into Friday. The colder temperatures are forecast to move eastward with frost and even some freeze warnings seen for portions of the Mid-Atlantic region as the week draws to a close, according to the National Weather Service.
Cooler temperatures typically result in a boost in sales of roasts and other items making up heavier meals that are usually prepared in the oven, crock pots or slow cookers. As the opportunities for backyard grilling decline, many of the gas and charcoal grills will be stored away for the winter.
For those who are willing to brave the colder temperatures and extend the grilling season, there could be some late-season bargains for steaks, ribs and pork chops as grocers may need to move the extra inventories.
Beef was again the leader in the number of items featured this week with the category capturing 28.1% of the protein items advertised, according to the Urner Barry Retail Activity Index. Seafood snuck past pork and chicken for second place at 23.1%, followed by pork at 20.9% and poultry close behind at 20.6%.
This week's Urner Barry retail beef index was $5.82 per pound, up from $5.66 last week. Pork came in at $3.65 versus $3.86 last week, while chicken was at $2.71 this week, down slightly from $2.75 a week ago.
The advertisements for next week's beginning of the month features are expected to have a wide selection of meat and poultry cuts likely again led by beef. The average retail price for beef roasts overall this week was $4.85 a pound, up from $4.67 a year ago. Pork roasts averaged $2.43 a pound, slightly below the year-ago figure of $2.45.
HOGS: ( -- The U.S. pork industry will likely expand through 2025, but growth hinges on increasing exports, according to a recent report from Rabobank.
Senior Analyst Sterling Liddell said in the report that he expects the industry to grow "steadily" and see increased efficiencies with rising carcass weights and pigs-per-female as key drivers of the expansion.
The hog and pork sectors in the past decade moved from sluggish output and tight margins to a production recovery phase that was incentivized by positive margins, Rabobank said. Contributing to this was the rise and fall of feed costs, the breakout of Porcine Epidemic Diarrhea virus (PEDv), the ensuing recovery and the aftermath, increased consumption, and the rise in global demand.
Increased processing capacity and efficiency "removes a bottleneck that periodically limits the flow of pork to consumers," Liddell said.
Expansion in the industry will be based broadly on pork exports from the U.S., which need to increase by 400,000 metric tons to remain in a profitable expansion mode, as domestic consumption per-capita is expected to only grow slightly, he said.
Rabobank said in the report it expects exports to China will increase by 100,000 tons by 2025 and shipments to Mexico to rise by 200,000 tons.
"The challenge will be to find an additional 100,000 tonnes of export in the global market," the bank said.

Thursday, October 26, 2017

Thursday Closing Livestock Market Summary - Nearby Live Cattle Contracts Surge Forward With Triple-Digit Gains

Cattle buying inquiry improved some Thursday, at least in terms of numbers of bids thrown on the table. Still, these token bids were never in any danger of provoking selling interest. For example, common live bids of $111 were at least $5 below most asking prices. According to the closing report, the national hog base is $0.42 lower ($59-$66.50, weighted average $65.14). Corn futures settled fractionally lower as traders pretty much ignored the threat of adverse harvest weather. Equities closed mixed with the Dow up 71 points and the Nasdaq off by 7.
Live contracts closed sharply higher with the first four months scoring triple-digit gains. February and April once again notched new contract highs. The bullish activity was powered by fund-buying, aggressive short-covering and cash optimism. Beef cut-outs: mixed, up $202.37 (choice: $202.37) to off $0.48 (select: $191.91) with moderate to good demand and offerings (85 loads of choice cuts, 26 loads of select cuts, 3 loads of trimmings, 21 loads of ground beef).
$1-$3 higher. Higher bids are expected to surface sometime before the weekend break, at least long enough for packers to cover short-term slaughter needs.
Following the bullish lead of their live counterparts, feeder futures advanced by 42 to 122 points. The mounting premiums of deferred live contracts as well as the listless behavior of the corn market as it plows through the harvest period clearly worked to excite commercial buying interest here. CME cash feeder index: 10/25: $154.40, off $0.18.
Supported by follow-through buying and export optimism, lean issues settled 15 to 92 higher. For the second consecutive session, February through June won new contract highs. Spot December scored its highest close since July 7. The carcass value bolted more than a buck higher, supported by both processing items and fresh cuts. Pork cut-out: $76.35, off $0.11. CME cash lean index for 10/24: $67.32, up $1.22 (DTN Projected lean index for 10/25: $68.28, up $0.96).
Steady. Opening bids in the morning should be near steady since packers seem to be reasonable covered in terms of Saturday and early week kill needs.

Thursday Midday Livestock Market Summary - Live Cattle Futures Lead Complex Higher


Strong market support is seen in nearby live cattle futures. This is helping to draw additional trade volume to the complex. Light but firm support is seen in both feeder cattle and lean hog markets as traders try to keep pace with the rest of the livestock complex as it moves higher. Corn prices are steady to higher in light trade. December corn futures are 1/4 cent per bushel higher. Stock markets are mixed in light trade. Dow Jones is 73 points higher while Nasdaq is down 2 points.
Strong triple-digit gains have developed across the live cattle futures complex with the main focus on October through February contracts. This is helping to spark additional commercial buyer support through the entire market although traders focus on December futures moving above $120 per cwt. This may have additional implications to the rest of the complex as the December futures take over as spot month contracts following the expiration of October futures. Cash cattle activity is starting to become more focused with bids becoming evident in all areas. Bids are seen at $111 live basis and $174 dressed basis. There is very little interest by feeders to aggressively move into the market at this point, potentially delaying trade until late Friday. Asking prices are seen at $116 and higher live basis in the South and $180 and higher in the North. Beef cut-outs at midday are mixed, $0.18 lower (select) and up $2.25 per cwt (choice) with active movement of 101 total loads reported (69 loads of choice cuts, 18 loads of select cuts, no loads of trimmings, 14 loads of ground beef).
Firm buyer support continues to be seen in feeder cattle futures at midday with gains holding 60 to 80 cents per cwt. This is a abrupt change from the narrowly mixed market structure seen early in the session. Strong triple-digit gains seen in live cattle futures has helped to bring renewed support back to the feeder cattle complex, although at this point, most buyer activity remains sluggish at best.
Lean hog futures have broken out of the narrowly mixed trading ranges seen over the last couple of hours with firm buyer support developing in nearby contracts. This is helping to draw additional price support into the complex with nearby futures trading 40 to 60 cents per cwt higher at midday. Deferred futures remain more sluggish with prices 10 to 20 cents per cwt higher. Additional uncertainty may develop surrounding the pressure in morning cash price levels. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.19 at $65.37 per cwt with the range from $59.00 to $66.50 on 4,332 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $0.13 at $65.61 per cwt with the range from $63.50 to $66.50 on 1,925 head reported sold. The National Pork Plant Report reported 111 loads selling with prices gaining $1.23 per cwt. Lean hog index for 10/24 is at $67.32 up $1.22 with a projected two-day index of $68.28, up $0.96.

Thursday Morning Livestock Market Update - Look for Cattle and Hog Futures Seem Set This Morning to Open With Mixed Prices

Cattle buying interest should gradually start to improve with opening bids around $111 in the South and $175 in the North. Asking prices should be stated around $116 in the South and $180-plus in the North. Unless we see an early narrowing between bids and asking prices, significant trade volume will probably be delayed until Friday. CME officials announced on Wednesday 10 loads retendered against October at $1 (all at West Point). These 10 loaded were reclaimed. Live and feeder futures should open on a mixed basis as specs and commercial slowly position ahead of the development of cash business.
Hog buyers should resume work this morning with bids steady to $1 higher. The spread between the pork cut-outs and the nation lean base is just shy of $11, implying packer profits close to $15 per head, That's smaller than early fall margins but still decent. Saturday's kill should total close to 200,000 head. Lean futures seem likely to open mixed as well with nearby probably outperforming deferreds.
1)Though nearby live contracts lost some ground on Wednesday, they easily held on the lion's share of Tuesday's surge, Furthermore, the unrelenting premium of December will certainly encourage bullish feedlot managers to dig in their heels in terms of higher asking prices.1)Although the aggressive fed cattle harvest levels of late September likely tempered the expected seasonal increase on carcass weights, weights are expected to continue increasing throughout October.
2)Open interest in live cattle futures have jumped to the highest level seen since late September, underscoring the bullish significance of recent technical progress.2)For the week ending October 21, U.S. hatcheries set 215 million eggs in incubators, up 2 percent from a year ago. At the same time, chicks placed totaled 172 million chicks; up 2 percent from 2016.
3)Lean hog contracts issues to barrel higher at midweek with Feb through Jun actually setting new contract highs. Between accelerating kill capacity and strong domestic and foreign demand, the trade seems confident about new year's market to handle increasing tonnage.3)If we hit a record hog slaughter this week (even though it was boosted by the unusual Sunday kill), boosted the total over 2.54 million head, it could pressure the wholesale pork trade next week.
4)For the week ending October 21, Iowa barrows and gilts averaged 281.7pounds, 0.3 pound lighter than the previous week and 0.1 pound smaller than 20164)Furthermore, there's a good chance that early December hog kill could reach as high as 2.6 million head.
CATTLE: (Bloomberg News) -- McDonald's is preparing to up the ante in the fast-food price wars. The world's largest restaurant chain, facing heavy competition in the U.S., will launch a new value-priced menu nationally next year. The lineup will offer items for $1, $2 and $3, the company said on Tuesday.
The rollout will provide a long-awaited replacement to the Dollar Menu, which was popular with customers but less so with McDonald's franchisees. The company has experimented with various discounts -- including McPick 2 for $5, which let customers choose two items -- in a bid to find something that wasn't too hard on the profit margins of restaurant operators.
Almost 100 percent of franchisees have signed up to participate in the new value program, McDonald's said. The stakes are high to get the formula right. Wendy's and Burger King, McDonald's closest competitors, have heavily promoted their discounted menus. And many U.S. consumers have retained a thrifty attitude in the years since the last recession.
But McDonald's is adding the new menu from a position of strength. It has seen U.S. restaurant traffic grow for two consecutive quarters, following years of declines. With the new value lineup, the company is trying to lock in those gains, said Michael Halen, an analyst at Bloomberg Intelligence.
"You have to have some everyday value because a decent portion of that business is very price-sensitive," he said.
HOGS: (Bloomberg News) -- After years of fighting for an Obama-era rule that would help farmers sue the mammoth companies they work for, advocacy groups for America's small poultry, pork, and beef growers may have been dealt a final blow by the U.S. Department of Agriculture.
The fight was about whether small farmers can sue if they feel they've been mistreated by big companies. Poultry farmers, for example, often get their chicks and feed from big meat producers, which in turn pay the farmer for the full-grown product. If a farmer wants to sue a company for retaliating against him because he complained about his contract—say, by sending him sick chicks or bad feed—the farmer needs to show the company's actions hurt not only him, but the entire industry.
Under President Obama, that high bar would have been lowered. Under the interim final rule, a showing of harm to only one farmer would suffice to support a claim. The Trump administration last week threw out the Obama-era rule in a move hailed by lobbyists for the big agriculture companies.
"I can't tell you how disappointed I am," says Mike Weaver, a West Virginia poultry farmer and president of the Organization for Competitive Markets, who voted for Donald Trump. "Rural America came out and supported the president, and if it weren't for us, he wouldn't be where he is now. What they did was wrong, and it shouldn't have happened that way."
Farmer groups—including the National Farmers Union, Rural Advancement Foundation International-USA, Farm Aid, R-CALF USA, the U.S. Cattlemen's Association, and the Organization for Competitive Markets—supported the Obama-era rule. Many farmers and ranchers thought Trump would allow it to take effect, citing his support for small business and rural Americans. Industry lobbyists, such as the National Cattlemen's Beef Association, the National Pork Producers Council, and the North American Meat Institute, hoped the Republican president would undo the rule, citing fears over increased litigation from farmers. They also thought they'd found a champion for their cause in Trump, who had vowed to cut federal regulation.
"When Trump was coming in with the mantra of reduced regulation," says Jeremy Scott, a protein research analyst at Mizuho Securities USA LLC, "there was relief." In the end it was industry, not farmers, that guessed correctly. National Chicken Council President Mike Brown publicly praised the USDA decision.
Meanwhile, farmers and ranchers are left with few options to challenge huge companies over allegedly anti-competitive behavior. "This gives the meatpacking industry the ability to do whatever they wish in terms of retaliation against an individual," says Jay Platt, a cow-calf rancher in Arizona, who also voted for Trump. "It leaves the cattle producer absolutely punchless."
In addition to Democrats on Capitol Hill, at least one member of Trump's own party sees it that way, too. "They're just pandering to big corporations. They don't care about family farms," Senator Chuck Grassley, an Iowa Republican, told reporters upon hearing the news of the USDA decision. "This is an example of a swamp being refilled."
Although the Trump administration has faced litigation opposing other attempts to undo Obama-era regulations, lawsuits are unlikely to succeed in this case because the USDA took public comment on the possibility of withdrawing the rule, which itself was based on an interpretation of existing federal law, before doing so.
"If there's some ambiguity, the agency responsible for carrying out the rule is given deference," says Cary Coglianese, a law professor at the University of Pennsylvania and director of the Penn Program on Regulation. "It may have been reasonable to interpret the statute the way the Obama administration did, but that doesn't mean the Trump administration's isn't reasonable."
For now, farmer groups are looking at other avenues. Weaver has sent a letter asking Trump to issue an executive order reversing the USDA's decision. He still lays part of the blame, however, with the Obama administration, whose rural agenda was largely stymied by Congress.
"Obama had the opportunity to do the right thing, and he didn't," says Weaver. "He made a lot of promises to the farmers about the things he was gonna do and never followed through on them."