DTN Early Word Opening Livestock

Cattle: Steady-$2 LR Futures: 50-100 LR Live Equiv: $146.92 - .19* 
Hogs: Steady-$1 HR Futures: Mixed Lean Equiv: $ 81.53 + .74**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Look for a few bids and asking prices to slowly surface in parts of cattle-feeding country Wednesday. Yet significant trade volume will probably be delayed until Thursday or Friday. Feedlot managers will be aggressively pumping the brakes, hoping they can somehow find a way to stabilize the stumbling cash trade. Given outstanding processing margins, packers wouldn't mind holding country bids near steady if they could depend on stabilized wholesale prices at the same time. Live and feeder contracts are likely to open moderately lower, checked by follow-through selling and uncertain late-spring/early-summer beef demand.

The cash hog market should reconvene Wednesday with steady/firm bids. It's a good bet that chain speed will steadily decline for the next four to six weeks. Our guess is that weekly slaughter totals could drop as low as 2.2 million by late June. Lean futures should open on a mixed basis thanks to a combination of residual thinking and pork demand uncertainty.

	BULL SIDE		BEAR SIDE
1)	Though they may be slow to show it, cattle buyers have returned from Memorial Day with a bigger appetite and extraordinary margins. More specifically, packers need to fund the first full slaughter week of June.	1)	While the verdict on beef movement over the holiday weekend is not yet completely clear, the early reports are not exactly dazzling. Cutouts on Tuesday were no better than mixed with box supplies described as "moderate to heavy."
2)	Out-front boxed beef sales (i.e., with 22 days delivery or more) exploded last week, totaling 1,335 loads, the most aggressive round of sales since mid-April.	2)	New showlists distributed in feedlot country look generally larger, with Nebraska and Kansas especially showing more ready steers and heifers.
3)	The pork cutout closed moderately higher on Tuesday with better demand evident for picnics, ribs, hams and bellies.	3)	During the week ending May 22, noncommercial traders increased their net-short position in lean hog futures by 3,900 contracts, now net-short 18,600.
4)	Summer lean hog futures surged with triple-digit gains Tuesday. Nearby bulls still have confidence in the seasonal potential of tightening market hog numbers and improving seasonal demand.	4)	Any hope that Commerce Secretary Ross, traveling to Beijing this week, could successfully convince the Chinese to drop tariffs on U.S. pork was pretty much wrecked Tuesday when the Trump administration announced it was moving ahead with steps to protect U.S. intellectual property by punishing China with broad investment restrictions, litigation at the World Trade Organization and hefty tariffs on $50 billion worth of Chinese goods.

OTHER MARKET SENSITIVE NEWS:

CATTLE: (Nikkei Asian Review) -- Australia lifted a 17-year-old ban on Japanese beef imports Tuesday, Japan's agriculture ministry announced the same day.

The ban was imposed in September 2001 following an outbreak of bovine spongiform encephalopathy, commonly known as "mad cow disease" in Japan. As Australians eat a lot of beef, the lifting of the ban promises to spur Japanese exports.

Tokyo has been pressing for a resumption of beef exports since 2004. Under the terms of the agreement, exports to Australia must be processed at facilities authorized by Japan's Ministry of Health, Labor and Welfare. According to the agriculture ministry, Australians consume 20.9kg of beef per person annually, more than three times as much as Japanese.

At a news conference following a cabinet meeting on Tuesday, Agriculture Minister Ken Saito said, "Australians have high income levels and there are high numbers of Japanese restaurants in urban areas. This is a good environment to receive Japanese beef." The government is considering ways to introduce Australian consumers to preparation methods and the unique characteristics of Japanese beef, he said.

HOGS: (National Pork Producers Council) -- The National Pork Producers Council on Tuesday called for a swift resolution of the United States-China trade dispute, paving the way for increased U.S. pork exports to the world's largest pork-consuming nation. According to Iowa State University Economist Dermot Hayes, U.S. pork producers have lost $2.2 billion on an annualized basis due to events leading up to and following China's 25 percent punitive tariffs in retaliation for U.S. tariffs on aluminum and steel.

"U.S. pork has invested significantly to ramp production to capitalize on growth opportunities around the world, including China and other markets throughout the Asia-Pacific region," said Jim Heimerl, a Johnstown, Ohio pig farmer and president of the National Pork Producers Council. "We applaud the administration for making the expansion of agriculture exports a cornerstone of the discussions with China. We hope the next round of trade talks with China results in improved market access to a critical export market for U.S. pork and other farm products."

"Since March 1, when speculation about Chinese retaliation against U.S. pork began, hog futures have dropped by $18 per animal, translating to a $2.2 billion loss on an annualized basis," said Iowa States' Hayes. "While not all of this lost value can be attributed to trade friction with China, it is certainly the main factor." The market disruption caused by export market uncertainty comes at a time when U.S. pork is expanding production to record levels. Five new pork processing plants have recently opened or will soon begin operations, increasing U.S. pork production capacity by approximately 10 percent from 2015 levels by next year. Exports accounted for more than $53 of the average $149 value of a hog last year and support over 110,000 U.S. jobs. The United States has, on average, been the top global supplier of pork over the last ten years.

"We produce the safest, highest-quality and most affordable pork in the world," Heimerl added. "We are dependent on exports and are one of the few sectors of the U.S. economy that can immediately reduce the trade imbalance with China, where pork represents approximately ten percent of the consumer price index.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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