Friday cattle traders are moving into the third
consecutive of late-week showdowns. Fridays have proven pretty lucky for
feedlot managers this month, and it will be interesting to see if
sellers can once again demonstrate superior leverage over packers
sometime between late morning and late afternoon. Opening bids will
probably be renewed at $121 in the South and $192 in the North. We
expect feedlot managers to dig in their heels regarding asking prices of
$125 in the South and $200 to $203 in the North, at least through the
noon hour. Look for live and feeder futures to open on a mixed basis as
traders cautiously jockey ahead of cash news.
Look for cash hog buyers to wrap-up late-week
procurement with basically steady bids. This week's country trade has
clearly been less encouraging than last week and perhaps that fact was
tied to last week's surprising large slaughter. Some argue that the
recent increase in live weights support the idea that finishing floors
had to be swept clean last week in order for producers to become more
current. Is a resumption of an impressive cash rally just around the
corner? Furthermore, the week's smaller kill (probably around 3.8
million head) could help spark better pork demand next week. Lean
futures should open lower, pressured by residual selling and softer
carcass value.
|
BULL SIDE |
|
BEAR SIDE |
| 1) |
For the week ending April 14,
cattle carcasses fell hard: all cattle averaged 810 pounds, 6 pounds
lighter than the previous week and 7 pounds heavier than last year;
steers averaged 867 pounds, 5 pounds smaller than the prior week and 19
pounds bigger than 2017; heifers averaged 801 pounds, 8 pounds below the
previous week and 6 pounds heavier than a year ago. |
1) |
Net beef export sales last week totaled 18,500 MT, down 7% from the previous week and 9% from the prior four-week average. |
| 2) |
Actual beef exports of 15,700 metric tons (MT), up 3% from the previous week and 2% from the prior four-week average. |
2) |
While the composite beef
carcass value is currently 3% (i.e., roughly $6) higher than last week,
the year-over-year increases in the comprehensive cutout is likely to
rapidly fade in the weeks ahead as the rocketing strength seen last
spring is not expected to resurface this year. |
| 3) |
Net pork export sales last
week jumped to 26,400 MT, up 47% from the previous week and 32% from the
prior four-week average. At the same time, actual pork exports
increased to 25,000, up 55% from the previous week and 20% from the
prior four-week average. |
3) |
The stubborn realities of
significantly large discounts in summer live cattle futures on one hand
and struggling premiums in summer lean hog futures seem to feed into
each other (i.e., both reflect the possibility of a burden of red meat
supplies through the summer quarter). |
| 4) |
Would-be longs in lean hog futures
may be getting somewhat discouraged as premiums sag, but seasonal
players know there's still plenty of time for a decent second quarter
rally. The index for June lean hogs tends to chop around until the end
of April before trending higher into expiration.
|
4) |
The pork carcass was further pressured on Thursday, checked by softer demand for bellies, hams and ribs. |
CATTLE: (Agriculture) -- After a 13-year ban,
American beef is back on the menu in China. The embargo was imposed in
2003 when mad cow disease was traced to an animal in Washington state.
As the door to beef trade once again opens to the world's second-largest
buyer of beef, an Iowa start-up is working to fill the country's
growing appetite.
"China imports 800,000 tons of beef annually,
primarily from Brazil, Australia, and Argentina," says Justin Kean,
executive VP of business development, Global Agriculture Company, Ltd.
(GAC). "It is the fastest-growing economy in the world, and its middle
class is leading the pace. Yet, the country doesn't have the natural
resources to keep up with demand. The U.S. has the ability to sell more
beef to China's growing economy."
Through exclusive partnerships with a number of
buyers (including the largest state-owned food producer in eastern
China's six provinces), GAC recently exported six containers (228,000
pounds) of U.S. beef.
"Bright Food Group is responsible for feeding
over 400 million people, which includes a global luxury hotel chain and
China's largest e-commerce food company," he says. "This first shipment
is the largest single shipment of whole-cut beef sent to China from the
U.S. in 14 years, and it is nearly 22% of the year-to-date quantity
exported to China. The group is eager to purchase more."
GAC President Tim Johnson says the inaugural delivery will build market confidence in China.
"This is just the beginning of a sustainable
U.S. beef supply to China," he says. "Our buyer wants to reach 2,000
containers annually. We are only scratching the surface of what we can
export to China."
HOGS:(Farmers Weekly (UK)) -- Higher pig numbers
and weaker exports could put EU pig prices under pressure over the
coming months, particularly if African swine fever (ASF) continues to
spread in Europe.
Global banking group Rabobank says it expects EU
production to reach record levels in 2018, as herds gradually increase
in Germany, Spain, Poland, Denmark and the Netherlands.
In its quarterly update on the pork market the
bank says rising supply is a reflection of better returns seen over the
past year, but could put pressure on prices. It also highlights a range
of uncertainties including trade disputes, disease risks and feed
availability issues which could hit global trade.
The report says ASF could disrupt traditional
trade flows if its spreads into the commercial pork production areas of
the EU, with Germany and Denmark believed to be most at risk.
Restrictions on pork exports -- which can last
for years -- are imposed in a buffer zone once ASF is confirmed in
either wild pigs or on a holding.
The threat is sufficiently serious that Denmark
has recently announced that it is constructing a 70km fence along the
German border, designed to keep wild pigs from moving freely between the
two countries.
Germany has also stepped up hunting of its wild boar population to control the spread of ASF.
The report suggests that a stronger euro reduced EU pork exports during 2017, with shipments to China particularly hit hard.
Chinese exports are expected to remain weak
throughout Q2 2018 with the US-China trade war not expected to generate
much additional trade in the coming months because China's own market is
already oversupplied.
Record hog numbers in the US, along with 25%
tariffs on exports of any pigmeat shipped to China, are expected to
weigh down the American market, with futures prices falling as a result.
According to AHDB figures, the UK exported
7,711t of pork to the US in 2017 -- but this accounted for only 2% of US
pork imports.
Trade analyst Bethan Wilkins said: "While an
increasing US domestic supply may be detrimental for UK export
prospects, as falling US prices reduce the competitiveness of imported
product, the high-welfare niche occupied by UK product could help
support trade."
