Wednesday Closing Livestock Market Summary

GENERAL COMMENTS

Cash cattle trade started to develop in feedlot country late Wednesday morning with a few deals in the North; dressed bids of $190 to $191 per cwt. There were a few live bids at $117. Generally, asking prices should become more focused Thursday as traders concentrate on ending the month and getting ready for the upcoming holiday weekend. The Fed Cattle Exchange Auction report Wednesday listed a total of 2,554 head, with 480 actually sold, 1,868 head listed as unsold, and 206 head listed as PO. The state-by-state breakdown looks like this: Kansas 384 total head, with 100 head sold at $119.00, 159 head unsold and 125 head PO ($119.50); Nebraska 1,428 total head, with 160 head sold at $120.00, and 1,268 head unsold; Texas 536 total head, with 220 head sold at $119.75, and 316 head unsold; Colorado 81 total head, all listed as PO ($117.00); Iowa 125 total head, all unsold; other states, no test. The weighted averages were: 1-9 day delivery 320 head, with a weighted average of $119.51; 1-17 day delivery 160 head, with a weighted average of $120.00. According to the closing report, the national hog base is $0.22 lower compared with the Prior Day settlement ($81.00-$87.50) weighted average $85.59. Corn futures moved lower Wednesday in light activity. July futures were 2 cents lower. The Dow Jones Index is 143 points higher with the Nasdaq up 87 points.

LIVE CATTLE

Moderate commercial buying in live cattle redeveloped at midday Wednesday, eroding early weakness and allowing contracts to clos $0.60 to $1.10 higher. This supportive move also pushed feeder cattle trade to triple-digit higher. June live cattle futures closed at $120.25 per cwt with increased market support potential at the end of the week. Beef cut-outs: lower, $2.59 lower (select, $212.67) to down $4.48 (choice, $229.43) with light demand and heavy offerings (77 loads of choice cuts, 48 loads of select cuts, 20 loads of trimmings, 19 loads of coarse grinds).

THURSDAY'S CASH CATTLE CALL:

Steady. Light trade started to develop Wednesday with a small number of cattle selling in the North at $190 to $191 per cwt on a dressed basis, while live cattle traded on the Fed Cattle Exchange from $119 to $120 per cwt. This could indicate market direction through the end of the week, although active bids and asking prices are still hard to pin down given the shifting moves in futures and wide variation of losses in boxed beef values. Active cash cattle trade may be delayed until late Thursday or Friday.

FEEDER CATTLE

Feeder cattle futures posted strong, triple-digit gains Wednesday despite starting sharply lower early in the session. The abrupt market turnaround could be the turning point in the week for the cattle complex ($0.60 to $2.10 higher). Even though sharp losses developed in beef values at midday, the start of light cash cattle trade seemed to ease most cattle traders minds a bit as traders in both live cattle and feeder cattle markets quickly replaced moderate to strong losses with firm gains at closing bell. The volatility through the week continues to drive widespread market shifts in all cattle markets, and could lead to even more market uncertainty not only at the end of the week, but also through the end of June. CME cash feeder index: 6/27: $146.86, up $0.44.

LEAN HOGS

Lean hog futures ended mixed following strong early gains in nearby contracts and early support in pork values ($0.47 lower to $1.45 higher). Active trade in the pork complex continued to spark increased buyer interest in summer contracts, once again moving July futures to contract highs. July futures rose to $87.92 per cwt as traders remain focused on the ability to quickly and efficiently move pork through the system this summer. Even as active commercial interest remains focused on nearby contracts, deferred futures moved lower as traders are still focusing on production gains and concerns that long-term demand may not continue to keep pace with production levels. Carcass values surged higher on moderate volume. Gains in all primals except hams left strong support in picnics and ribs to direct the overall cutout values. Pork cut-out: $103.54 up $1.23. CME cash lean index for 6/26: $91.10, up $0.48. DTN Projected lean index for 6/27 $91.50, up $0.40.

THURSDAY'S CASH HOG CALL

Steady to $1 lower. Light to moderate pressure through the last half of the week is expected to trickle into the cash markets as traders focus on upcoming holiday schedules. The support in pork values is likely to create some additional market momentum, but may not sustain higher cash values before the holiday weekend or end of the month. Expected slaughter numbers Thursday are 435,000 head with an estimated 21,000 head likely on Saturday.

Wednesday Midday Livestock Market Summary

GENERAL COMMENTS: 

Mixed trade is starting to develop in live cattle trade as lack of selling pressure has been seen through the complex. Despite the sharp losses in beef cutout values, the potential for cash cattle trade to develop through the day could help to stabilize the cattle market through the last half of the week. Hog markets have rallied higher following a strong move higher in pork values. Corn prices are lower in light trade. July corn futures are 2 cents lower. Stock markets are higher in light trade. The Dow Jones is 157 points higher while Nasdaq is up 71 points.

LIVE CATTLE:

Live cattle futures are mixed at midday after traders were unable to bring additional pressure back into the complex following early losses. The narrow market moves through the complex could bring about additional stability midweek as cash markets appear to be starting to develop in several areas. Cash cattle trade started to trickle into the market through the North at $190 and $191 per cwt. At this point there are just over 200 head report sold in Nebraska and 250 head sold in Iowa, which is not enough to establish a trend. But this could create additional movement through the rest of the week. Bids are seen at $117 per cwt live basis early Wednesday. Activity on the Fed Cattle Exchange Auction report today listed a total of 2,554 head, with 480 actually sold, 1,868 head listed as unsold, and 206 head listed as PO. The state by state breakdown looks like this: KS 384 total head, with 100 head sold at $119.00, 159 head unsold and 125 head PO ($119.50); NE 1,428 total head, with 160 head sold at $120.00, and 1,268 head unsold; TX 536 total head, with 220 head sold at $119.75, and 316 head unsold; CO 81 total head, all listed as PO ($117.00); IA 125 total head, all unsold; other states, no test. The weighted averages are as listed: 1-9 day delivery: 320 head, with a weighted average of $119.51; 1-17 day delivery 160 head, with a weighted average of $120.00. Beef cut-outs at midday are lower, $2.07 lower (select) and down $4.19 per cwt (choice) with active movement of 99 total loads reported (45 loads of choice cuts, 28 loads of select cuts, 18 load of trimmings, 8 loads of ground beef).

Feeder Cattle:

Moderate pressure is holding through the feeder cattle market as traders continue to focus on weaker cattle markets midweek with front month August contracts holding a $1 per cwt loss at midday. The lack of support through the complex is limiting trade interest in deferred markets, although the inability to bring buyers back to the table may leave prices eroding quickly lower through the rest of the week. If these market lows continue to be seen at the end of June, traders could focus on additional market softness during early July, concerned that open interest and additional commercial liquidation may develop over the next couple of weeks.

LEAN HOGS:

Sharp gains in pork values has helped to spark additional nearby commercial buyer support through the futures market Wednesday morning. This pushed July and August futures to triple digit gains once again with July contract moving $1.10 per cwt higher and trading at $87.60 per cwt. The ability to set new contract highs continues to bring additional market interest back into not only nearby futures trade, but also the rest of the complex. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.81 at $85.00 per cwt with the range from $81.00 to $86.50 on 6,709 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $1.29 at $85.15 per cwt with the range from $81.00 to $86.50 on 1,044 head reported sold. The National Pork Plant Report reported 209 loads selling with prices adding $1.76 per cwt. Lean hog index for 6/26 is at $91.10 up $0.48 with a projected two-day index of $91.50 up $0.40.

Wednesday Morning Livestock Market Summary

GENERAL COMMENTS:

Although the cattle market seemed to start the week on a renewed note of optimism, psychology has quickly soured thanks to crashing futures and imploding beef cutouts. Such a false start could make it tough for feedlot managers to hold the cash line over the next several days. FCE internet business later this month could spark country trade volume in one direction or the other. Live and feeder futures are expected to open significantly lower, checked by residual selling interest, long liquidation and signs of struggling beef demand.

Expect the cash hog trade to open Wednesday with bids steady to $1 higher. This week's slaughter should be around 2.18 million head, up slightly from last week. Carcass weights trended seasonally lower last week. Weights are below last year as well as the five-year average, and are expected to trend lower over the next eight weeks. Lean futures are likely to open mixed as traders cautiously position ahead of the June Hogs & Pigs scheduled to be unveiled Thursday.

	BULL SIDE		BEAR SIDE
1)	Although late summer cattle slaughter is scheduled to be more than ample, most expected July chain speed to be moderate relative to June before cracking back up in August.	1)	Beef carcass value collapsed on Tuesday with the choice box quoted as much as $4.66 lower. It would appear that the best of early summer demand is in the rear view mirror.
2)	Bullish hopes that continued lighter cattle carcasses from 2016 and increases in weekly beef export sales may keep enough seasonal demand in play to clear expanding fed cattle inventories do not seem unfounded.	2)	Cattle futures quickly surrendered Monday's advance Tuesday, pretty much exposing it as a dead cat bounce with little technical significance.
3)	The pork cutout jumped solidly higher Tuesday with all major primals making decent contributions (especially the fresh cuts and ribs).	3)	The pork cutout may seem hot now, but in just two weeks or so it will begin experiencing successive price decreases through to September. Even if the bellies continue to move upward, the forecast weakness in the other primals should temper the entire cutout.
4)	While hog buyers tried to limit bids on Tuesday, they didn't manage to move many numbers. The seasonal trend is for cash hog prices to strengthen over the next few weeks.	4)	Not only are most analysts expecting the USDA to confirm a 2% to 3% increase in the breeding herd when the Hogs & Pigs report is unveiled on Thursday, most number-crunchers are assuming that previous farrowing estimates will be increased.

OTHER MARKET SENSITIVE NEWS

CATTLE:(Hoosier Ag Wednesday) -- U.S. Secretary of Agriculture Sonny Perdue will travel to China this week, joining with U.S. Ambassador to China Terry Branstad, to formally mark the return of U.S. beef to the Chinese market after a 13-year hiatus. In events in Beijing and Shanghai on Friday, June 30, 2017 and Saturday, July 1, 2017, Perdue will meet with Chinese government officials to celebrate the return of American beef products to the enormous market after shipments were halted at the end of 2003. On Friday in Beijing, Perdue and Branstad will ceremonially cut prime rib that originated in Nebraska and was shipped by the Greater Omaha Packing Company. "I will be proud to be on hand for the official reintroduction of U.S. beef to China," Perdue said. "This is tremendous news for the American beef industry, the agriculture community, and the American economy in general. We will once again have access to the enormous Chinese market, with a strong and growing middle class, which had been closed to our ranchers for a long, long time. There's no doubt in my mind that when the Chinese people taste our high-quality U.S. beef, they'll want more of it."

China has emerged as a major beef buyer in recent years, with imports increasing from $275 million in 2012 to $2.5 billion in 2016. The United States is the world's largest beef producer and in 2016 was the world's fourth-largest exporter, with global sales of more than $5.4 billion.

HOGS: (Agrinews) -- U.S. pork exports continue to be a focus of attention and concern as U.S. pork supplies and prices stay plentiful.

"It's exports," said Dr. Dermot Hayes, professor of economics and finance at Iowa State University and the Pioneer Hi-Bred Chair in Agribusiness at ISU.

Hayes is a livestock economist, as well, focusing on the swine market.

"If we produce more, the price should be down," he said at the World Pork Expo National Pork Board-sponsored PORK Academy seminar on U.S. exports and international trade.

While lower weights or domestic consumption could be an answer for pork supplies that are plentiful and prices that are remaining steady, Hayes said exports are the key to the puzzle.

"We have more pork coming at us, and we still see some decent prices. If your supply is growing by 3 percent and your demand is growing by 4 percent, then that can happen," he said.

As of April 2017, U.S. pork exports were up 15 percent, and between 25 percent and 30 percent of U.S. pork production is exported.

Hayes has traveled to and studied the China market for three decades, and he was preparing to travel there following the World Pork Expo.

"I'm interested in China because the numbers are big," he said.

While U.S. pork is largely kept out of the Chinese market over the U.S. use of ractopamine, Hayes said the U.S. is benefiting from Canada and the European Union increasing exports to China.

"We are getting the backfill," he said, adding that the U.S. is benefiting in a way that surprised him.

Hayes has long talked about the trade benefits to the U.S. if the U.S. industry dropped the use of ractopamine, a feed additive that promotes leanness, which is banned in China.

"I was pessimistic about what would happen if we didn't drop ractopamine. I didn't see this happening, but we are kind of getting the benefits of the Chinese market without actually shipping a lot of product there," he said.

China imports some 3 million tons of pork annually. Hayes said countries such as Spain are stepping up production to supply that market.

The U.S. remains the world's low-cost producer of pork, along with the Brazilian state of Mato Grosso. But with foot and mouth disease in the hog population in Mato Grosso, Hayes said that is keeping the Brazilian pork from entering some major markets.

Even with added costs for the Chinese market, Hayes said the U.S. still can produce pork more economically than the Chinese can.

"If I took the price and added on 15 cents a pound for transportation, then 20 cents a pound for the duty and then 12 cents for value-added, we can still get pork into China at a price that is lower than their production costs," he said.

But ractopamine remains the roadblock.

"If we didn't have this ractopamine issue, we would be very competitive against Chinese carcasses," Hayes said.

As the U.S. and others, including South America, continue to expand their breeding herds, Hayes said certainty in trade and in foreign markets is vital.

"If all of the Americas is expanding and Europe starts to expand, we better have a market for all of this product," he said.

Prices for domestic Chinese pork have been falling, and Hayes said some groups who focus on the China market have suggested that the country is cutting back production due to environmental and housing concerns and high land costs, which will keep production stifled.

However, with concern over the Trump administration's talk on trade and tariffs against China, fears of a trade war could prompt protectionism and an expansion of the Chinese sow herd. A swing toward a protectionist China could be devastating for the U.S. and the rest of the world's pork producers.

"If it goes toward protectionism, the Chinese are going to rebuild their herd, and we've got 3 million tons of surplus on the world market," Hayes said.

If not, he said he expects China's pork imports to stabilize around 3 million to 5 million tons per year, in addition to variety cuts.

Tuesday Midday Livestock Market Summary

GENERAL COMMENTS: 

Cattle futures remain sharply lower with triple-digit losses quickly developing Tuesday morning. This lack of support in the complex has added to the market pressure. Hog markets are lightly traded with narrow moves limiting activity and keeping volume light. Corn prices are higher in light trade. July corn futures are 2 cents higher. Stock markets are lower in light trade. The Dow Jones is 21 points lower while Nasdaq is down 51 points.

LIVE CATTLE:

Sharp losses are seen in cattle trade with triple-digit losses seen in all live cattle markets. Even though live cattle futures are posting losses from $2 to $2.70 per cwt losses, the expanded trading limits available due to Monday's gains could create even wider market swings before the end of the session. There continues to be some significant market shifts available to the complex and this could shift the tone of the market through the end of the week. Cash cattle markets remain generally quiet Tuesday with a few bids trickling into Iowa at $119 live basis through the morning. Asking prices are undeveloped in all areas at this point. It is expected that additional bids will develop either later in the day or earlier Wednesday, but active trade may not be seen until sometime Thursday or Friday. Beef cut-outs at midday are lower, $1.40 lower (select) and down $2.36 per cwt (choice) with light movement of 60 total loads reported (25 loads of choice cuts, 20 loads of select cuts, 8 load of trimmings, 7 loads of ground beef).

Feeder Cattle:

Sharp losses have continued to develop through feeder cattle markets which is limiting overall support through the entire market. With expanded trading limits during the session, traders remain concerned that traders will have the opportunity to extend losses beyond the $4.50 per cwt gains seen Monday and create even more bearish selling pressure as the week continues. This could not only create added volatility into the market but uncertainty through the entire cattle complex.

LEAN HOGS:

Narrow trading ranges are holding in lean hog futures with the hog complex trading between 20 cents lower and 30 cents higher at midday. The lack of direction in the complex given the aggressive losses across the cattle complex appears to be focusing on firm fundamental support still able to develop across the complex. This may help to draw buyer support back into the complex through the rest of the week. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.79 at $84.99 per cwt with the range from $82.00 to $86.00 on 3,632 head reported sold. Cash prices are unreported on the Iowa/Minnesota Direct morning cash hog report. The National Pork Plant Report reported 167 loads selling with prices adding $1.23 per cwt. Lean hog index for 6/23 is at $90.62 up $0.45 with a projected two-day index of $91.10 up $0.48.