The early-week cattle market should be typically slow with packer efforts limited to the gathering of new showlists. Our guess is that the fed offering will be steady to somewhat larger than the previous week. Asking prices are likely to start out around $122 in the South and $190-plus in the North. Live and feeder futures should open on a mixed basis thanks to a cautious combination of spillover buying and long liquidation.
Hog buyers should resume buying efforts this morning with bids steady to $1 higher. The wholesale pork trade should be well supported given last week's holiday-shortened round of production as well as an extension of seasonal demand. Positive packers margins also promise to be cash supportive. Lean futures seem set to open moderately higher.
| BULL SIDE | | BEAR SIDE |
| 1) | Although the cash cattle market continued to lose ground last week, the bleeding was much slower, suggesting that feedlot managers have turned less panicky, reclaiming some leverage in the face of still outstanding packer margins. | 1) | Beef cut-outs took another hit yesterday as production continued to overwhelm post holiday demand. At $220.53, the choice cut-out fell to its lowest level since April 27. Box supplies were described as "heavy." |
| 2) | Net beef export sales for the week ending July 7 totaled 17,058 MT, up 52 percent from the previous week and 36 percent from the prior four-week average. Actual exports totaled 14,876 MT, unchanged from the previous week, but up 7 percent from the prior four-week average. | 2) | Although live cattle open interest has liquidated more than 50,000 cars from the spring high in total commitment, it remains 50 percent above early July 2016. In other words, the threat of long liquidation remains very real and dangerous.Given struggling cut-outs again last week, the last hurrah of early summer beef demand (i.e., the July 4th holiday) wasn't much to write home about (i.e., from Friday to Friday, the choice and select boxes lost another $5.89 and $5.91, respectively). The demand trail from here to Labor Day has been know to be pretty dusty. |
| 3) | The U.S. job market roared back to life last month with a better-than-expected 222,000 new positions created in June, much better than private expectation of around 179,000. The unemployment rate held at 4.4 percent. | 3) | Net pork export sales for the week ending July 7 dropped to 13,200 MT, down 50 percent from the previous week and 39 percent from the prior 4-week average. |
| 4) | The pork carcass value jumped to a new 2017 high on Friday ($104.96), more than a back higher than the prior day thanks largely to a $5.73 surge in the belly primal. More than $12 over the last cash index, the cut-out implies excellent packer margins.
| 4) | Though seasonal pork demand could retain a firm undertone for another 2-4 weeks, no one disputes that we're closer to a top than a bottom. Additionally, imploding beef prices this month could easily act as an anchor on midsummer pork demand, |
CATTLE: (University of Guelph) -- Ontario will soon be home to the most sophisticated sustainable livestock production research centre in Canada, thanks to a new facility planned by the University of Guelph and the provincial and federal governments.
The new $15.5-million Livestock Research and Innovation Centre (LRIC) — Beef Facility is set to open in about 18 months in Elora, Ont. The project involves U of G, Agriculture and Agri-food Canada, the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA), the Agricultural Research Institute of Ontario (ARIO) and the Beef Farmers of Ontario (BFO).
"This new facility will expand and elevate our hub for world-class bovine research in Ontario," Malcolm Campbell, U of G's vice-president (research) said during a ceremony today. Lawrence MacAulay, Canada's minister of agriculture and agri-food, and Jeff Leal, Ontario's minister of agriculture, food and rural affairs attended, along with U of G and industry officials.
"The state-of-the-art centre will be equipped with the latest, leading-edge technologies, and powered by University of Guelph's research excellence in agri-food. It is an exceptional example of the potency of university-government-industry collaboration."
Campbell added that the centre will drive fundamental research, helping fuel innovations that enhance livestock health and welfare and strengthen Canada's economy.
U of G will operate the facility under its partnership with OMAFRA.
Integrated and multidisciplinary, the centre will bring together scientists, students and stakeholders to study animal production and environmental and energy issues.
It will house leading-edge facilities for animal care and welfare, as well as for cow-calf, nutrition, genetics, forage and feedlot research.
Training and education at the centre will address the needs of the beef industry in Ontario and Canada.
The new facility will complement the $25-million Livestock Research Innovation Centre -- Dairy Facility that opened in Elora in 2015.
The new centre will replace beef facilities at the Elora Research Station that were built in 1969.
The Ontario government, through ARIO, committed $12.4 million to the project, and the federal government and Beef Farmers of Ontario (BFO) contributed $3.1 million in total.
"The federal government is proud to partner with the Province of Ontario to support research at a state-of-the-art beef research centre serving all of eastern Canada," MacAulay said.
"This investment will make the beef industry even stronger and more competitive, supporting jobs and economic growth in Ontario and across Canada."
Leal added: "Research and innovation are key contributors to helping our agri-food industry continue to grow and thrive -- that's why our government is proud to be partnering with the University of Guelph to create this world-class research hub. This innovative facility will help grow the beef sector and ultimately provide our farmers with the tools they need to succeed. Today's investment will support the growth of agricultural today and for the farmers of tomorrow -- bringing the good things grown in Ontario to consumers around the world."
HOGS: (National Hog Farmer) -- National Pork Producers Council renewed its request that the Trump administration begin negotiations on a free trade agreement with Japan.
Following Friday's announcement by the European Union and Japan that they have reached agreement in principle on a trade pact, the National Pork Producers Council renewed its request that the Trump administration begin negotiations on a free trade agreement with Japan.
"The United States must quickly finalize a trade deal with Japan if it wants to maintain that important market," says NPPC President Ken Maschhoff, a pork producer from Carlyle, Ill. "We can't stand by while countries around the world negotiate agreements that give them a competitive advantage over American products.
"We urge President Trump to make America great again by expanding our market access to Japan — an economically and strategically important ally — through an FTA."
Japan is the highest value market for U.S. pork exports. In 2016, Japanese consumers purchased almost $1.6 billion of U.S. pork products. Demand in Japan for U.S. pork is very strong despite tariffs and other import measures that limit market access for it.
NPPC has urged the administration to get a Trans-Pacific Partnership-type deal with Japan. Under that trade agreement, which the pork organization strongly supported, Japan's tariffs on pork, which are determined through a so-called gate price system, would have been nearly eliminated. Economist Dermot Hayes of Iowa State University estimated that U.S. pork exports to Japan would have increased exponentially under TPP, creating more than 5,000 new U.S. jobs.
With an EU-Japan trade pact in place, U.S. pork producers are concerned they will lose market share in the island nation.
"Producers are very dependent on exports," Maschhoff says. "Last year, were exported 26% of our total production, and those exports added more than $50 — representing 36% of the $140 average value of a hog in 2016 — to the price we received for each animal marketed. We can't afford to lose exports in our No. 1 market."
