The cash cattle trade could be rather slow
today, limited to clean-up deals in parts of the North. Frankly, we were
surprised when mandatory reported more than 10,000 head traded on
Thursday. That level of business flew under our radar. Whatever. WTD
trade volume in all areas my now be sufficient to essential call it a
week. What unsold steers and heifers remain unsold seem to priced around
$128-129 live and $207-plus. Live and feeder futures should open on a
mixed basis thanks to follow-through selling on one hand and late-week
short covering on the other.
The cash hog trade should kick off this morning
with near steady bids. Processors had been somewhat successful this week
in improving margins, mostly through the lowering of the cost of live
inventory. Despite yesterday's moderate bounce in carcass value, sources
in the wholesale biz generally believe the pork trade will remain on
the defensive through the end of the March. The Saturday kill is
estimated to total close to 119,000 head. Lean futures are also likely
to open mixed with spot April possibly losing more ground to the summer
months.
| BULL SIDE | BEAR SIDE | ||
| 1) | Net beef export sales totaled 20,200 MT last week, up 3 percent from the previous week and 32 percent from the prior four-week average. | 1) | Disappointed by the inability of Wednesday's rally to close near overhead chart resistance, cattle futures quickly fell back down the hill, apparently more fearful of cash vulnerability around the next few corners than impressed with cash strength right in front of them. |
| 2) | Japan is expected to lift its additional safeguard tariffs on U.S. frozen beef shipment the end of March, dropping the 50 percent tariff to 38.5 percent. This decrease is expected to make the U.S. more competitive with other countries, but it isn't as low as Australia's tariff with the island nation. | 2) |
How much longer can feedlot managers
ignore the deepening discounts of live futures? Each time a board rally
fails, country fear increases a little that CME bears may eventually be
proven right.
|
| 3) |
Summer lean hog contracts seem to be
turning the corner this week, more eager to anticipate market numbers
that typically tighten through the second quarter. More specifically,
June through August seem eager to move back into the $80s.
|
3) | Spot April lean hog futures dropped hard again on Thursday, aggressively eroding to keep up with the sinking cash index. There seems to be little confidence in the cash market over the next month. |
| 4) | Net pork export sales last week surged to 31,600 MT, up 59 percent from the previous week and 22 percent from the prior four-week average. At the same time, actual pork exports totaled 24,700 MT, up 5 percent from the previous week, but unchanged from the prior four-week average. | 4) | Hams are still in the final trades of making it to Easter so a breakdown is not expected immediately. Look for losses on hams next week, possibly sharp. |
OTHER MARKET SENSITIVE NEWS
CATTLE: (Radio Iowa) -- An official with the
beef production plant, which became the first to ship beef to China when
that market reopened last summer, says sales to the country are going
well.
Jerry Wiggs is the senior director of export
sales and marketing for Greater Omaha Packing Company. "Like any new
market, it has its challenges," Wiggs said. "However, if I do a
comparison of where I was in the first eight months of, say, shipping to
Europe, compared to where we are eight months into shipping beef to
China, we are probably a 1,000-percent more…shipping into China than
what we were into the European Union."
Many cattle producers in southwest Iowa supply
animals to the Omaha facility. According to Wiggs, there's great
potential for U.S. beef in China because of its growing middle class
population.
"I've been to China now three times in the last
six months and it is amazing the growth that is going (on) over there,"
Wiggs said. Mexico is one of Greater Omaha Packing's biggest customers.
Wiggs claims the disputes over NAFTA and the border wall, so far, have
not hurt their business with Mexico. One of the company's fastest
growing markets for beef, according to Wiggs, is the Middle East --
especially Saudi Arabia..
HOGS: (Pork Magazine) -- The U.S. Department of
Agriculture National Agricultural Statistics Service (NASS) reports U.S.
and Canadian hog inventories were up by 2% for all hogs and pigs in
December 2017, at a total of 87.6 million head. This is 2% higher than a
year earlier and 6% higher than 2015.
At 7.45 million head, the U.S. and Canadian breeding herd inventory was up 1% from a year earlier as well.
Market hog inventory for the two countries was
80.1 million head, up 3% from last year and up 6% from 2015, NASS
reported. The semi-annual pig crop, at 80.8 million head, was up 2
percent from 2016 and up 5 percent from 2015. Sows farrowing during this
period totaled 7.47 million head, up 2 percent from last year and up 3
percent from 2015.
The U.S. inventory of all hogs and pigs was 73.2
million head on December 1 of last year, which was up 2% from December
1, 2016 but down slightly from the previous quarter on September 1,
2017. The breeding inventory, at 6.18 million head, was up 1% from last
year, and up 1% from the previous quarter. Market hog inventory, at 67.1
million head, was up 2% from last year. The pig crop, at 33.4 million
head, was up 3%
It appears the industry is growing at a slighter
faster pace north of the border. Canadian inventory of all hogs and
pigs on January 1, 2018 was 14.3 million head. This is 3% higher than
January 1, 2017 and up 5% from January 1, 2016. The breeding inventory,
at 1.27 million head, was up 1% from last year and up 3% from 2016.
Canadian market hog inventory, at 13.1 million
head, was up 3% from last year and up 5% from 2016. The semi-annual pig
crop, at 14.3 million head, was up 1% from 2017 but down 3% from 2016.
Sows farrowing during this period totaled 1.26 million head, up 3% from
last year.
New packing plants will help handle the
additional volume of pigs in both countries, but export markets will be
pivotal in maintaining profitability for pig farmers.
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