DTN Early Word Opening Livestock

Cattle: Steady-$2 LR Futures: 50-100 LR Live Equiv: $149.67 - .25* 
Hogs: Steady-$1 HR Futures: Mixed Lean Equiv: $ 78.55 + .97**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cash activity Monday morning will be limited to the distribution of new showlists. Ready numbers are likely to be larger, thanks to unsold cattle carried over and building totals of maturing fed calves. Live and feeder futures should open moderately lower, checked by defensive cash expectations and fears that beef demand may be close to a seasonal top.

Look for hog buyers to resume business Monday with bids steady to $1 higher. Both decreasing slaughter numbers and improving demand should work to support cash over the next several months. The big question remains: is the anticipatory premium of June lean futures too large, not large enough, or about right. Spot May is scheduled to expire at high noon (CDT). Lean futures should open on a mixed basis with nearbys probably outperforming deferreds.

	BULL SIDE		BEAR SIDE
1)	From Friday to Friday, the choice box advanced by another $2.67 last week. Furthermore, it seems likely that retailers and food managers will be working to fund the Memorial Day feature for at least one more week.	1)	In late-developing cash business Friday, live cattle prices sold $2 to $3 lower at mostly $122. Cattle buyers are likely to steadily gain leverage over the next 30 to 45 days as fed supplies increase.
2)	Gross beef processing margins have jumped well over $300 per head, lending packers plenty of incentive to fuel cash-supportive chain speed.	2)	While June live cattle was able to take out the highs of the previous two weeks, the spot month will start out Monday still corralled by multiple levels of overhead resistance.
3)	The pork carcass gained nearly a buck on Friday, supported by better demand for loins, picnic, ribs and bellies.	3)	During the week ending May 8, noncommercial traders increased their net-short position in lean hog futures by 3,700 contracts, now they are net-short 14,300.
4)	Despite a persistent supply of hog and pork supplies this spring, demand is fairly strong for now. If anything, supplies may be a bit short to meet current and expected demand heading into the Memorial Day holiday period.	4)	Speaker Ryan has set a May 17 deadline to be notified of a new NAFTA trade deal to give the current Congress a chance of passing it, while Mexico's top trade official on Thursday said time was running short to meet such a deadline.

OTHER MARKET SENSITIVE NEWS

CATTLE: (foodmarket.com) -- Despite having a population of just 23 million, Taiwan consistently ranks as one of the leading destinations for U.S. beef. In 2017, Taiwan was the U.S. beef industry's sixth-largest value market, with exports reaching a record $409.7 million.

It is an especially strong market for chilled (never frozen) beef cuts, with Taiwan's imports of chilled U.S. beef reaching $238 million last year on a volume of 26,054 metric tons (mt). The U.S. captured 72% of Taiwan's chilled beef market in 2017 -- the highest share of any Asian destination -- and market share continues to increase this year.

Taiwan's imports of U.S. beef are off to a blistering start in 2018, with first quarter volume running 20% ahead of last year's pace at 13,018 mt and value increasing 26% to $126.4 million. Chilled imports fared even better -- up 25% in volume (5,712 mt) and 31% in value ($74 million). The U.S. is the largest overall supplier of beef to Taiwan with 45% market share. U.S. beef increasingly dominates chilled imports, with chilled share reaching 74% in the first quarter of 2018.

"The average price per pound for U.S. beef entering Taiwan is higher than any international market except for the European Union, where we face additional costs due to the EU's import restrictions," explains Joel Haggard, U.S. Meat Export Federation (USMEF) senior vice president for the Asia Pacific region. Haggard is based in Hong Kong, but was recently in Taiwan to meet with importers and other key buyers.

"On the ground here in Taiwan, it's easy to see that consumers, and the retailers and restaurants that serve that consumer base, have developed a clear preference for chilled U.S. beef," he says.

While higher-end middle meats are popular in Taiwan, demand is particularly strong for secondary chilled beef cuts such as the clod heart, petite tender and top sirloin cap. The versatility of these cuts accommodates a wide range of menu options.

"Taiwanese steakhouses tout their wet-aged U.S. steaks, retailers highlight a range of cuts in their meat cases and even traditional night-market food outlets use chilled U.S. beef," Haggard says. "Taiwan looks really promising for future growth, as millennials and generation Z consumers love to eat beef, either as steaks, in Korean barbecue houses and hot-pot restaurants or even as burgers when they dine out -- and they dine out often."

When USMEF established its Taiwan office in 1999, surveys showed that more than one-fourth of the population didn't eat beef at all. But the island has developed a very strong appetite for beef -- and with no significant domestic beef cattle production, it relies almost entirely on imports, with Australia and New Zealand being its other major suppliers.

This year, USMEF established an awards program in Taiwan that complements the world-renowned Michelin Guide. The first USMEF Diamond Plus Precious Gourmet Selection awards ceremony, funded by the beef checkoff, honored 27 restaurants that have been dependable and faithful partners in providing high-quality U.S. beef cuisine to Taiwanese consumers. For a restaurant to qualify for the award, it must meet three requirements:

U.S. beef dishes must account for more than half of the total beef items on its menu.

All U.S. beef offerings must be USDA Choice grade or higher.

The grade and cut must be clearly marked on the menu.

"The recognition will encourage Taiwanese restaurants to use high-quality U.S. beef and describe the cuts more clearly on their menus," said Davis Wu, USMEF-Taiwan director. "It will also provide consumers with a clear and accessible way to learn about U.S. beef restaurants and choose their favorites. When a consumer sees the Diamond Plus Precious logo, they know they will enjoy the delicious taste of high-quality U.S. beef."

HOGS: (National Pork Board) -- For the first time in more than 20 years, the world's premier gathering of red meat industry leaders is coming to the United States, and the Pork Checkoff is a major sponsor of the event. Hosted by the International Meat Secretariat (IMS) and the U.S. Meat Export Federation (USMEF), the 22nd World Meat Congress will be held in Dallas May 30-June 1, 2018.

"We are excited to be a major sponsor of the 2018 World Meat Congress," said Bill Luckey, chair of the Checkoff's international marketing committee and a pig farmer from Columbus, Nebraska. "This conference provides a historic opportunity to gather critical insights and showcase the superiority of U.S. pork production to key international customers."

During the World Meat Congress, U.S. pork will be featured in the following ways:

•Prominently featured in several meals, including the opening receptions and a pork-themed luncheon;

•A booth where Pork Checkoff staff will feature the quality of U.S. pork and share the We Care® and sustainability story of U.S. pig farmers; an

•Keynote speakers chosen by Checkoff and USMEF leadership to discuss emerging issues.

"Exports will continue to play an important role in producer profitability during 2018, and offer the ability of our industry to sustainably grow in the future. As a significant World Meat Congress sponsor, we will build critical relationships that help us articulate key strategies to define new export markets and grow pork demand in existing ones," said Luckey.

According to USMEF, the World Meat Congress is a biennial event, held in a major meat-producing country. It brings together more than 700 of the world's meat industry thought leaders.

John A. Harrington can be reached at john.harrington@dtn.com

Follow John Harrington on Twitter @feelofthemarket

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