DTN Early Word Opening Livestock
Livestock Futures Are Staged to Open Moderately Higher
GENERAL COMMENTS:Cattle: Steady-$2 HR Futures: 50-100 HR Live Equiv: $146.55 -.93*
Hogs: Steady-$1 HR Futures: 50-100 HR Lean Equiv: $ 83.43 -.29**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Although cattle buyers and sellers could find terms of compromise Thursday, something tells us we are headed toward another Friday showdown. A spread of $8 (live basis) between bids and asking prices does not exactly suggest that deal-making, asking prices should remain firm at $115 live and $183 plus dressed. Live and feeder futures should open moderately higher, supported by residual buying interest and cash market premiums.
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Hog buyers will still be looking for live inventory Thursday, and the ongoing search will no doubt require firm to $1 higher bids. Saturday kill plans are expected to total close to 61,000 head. Lean futures exploded higher on Wednesday, and we assume the bullish momentum will still be in play Thursday. Look for the board to open at least moderately higher.
| BULL SIDE | BEAR SIDE | ||
| 1) | Nearby live cattle futures broke into technical significance at midweek with spot June landing its highest close since March 22. Such firmness should work to gird the resolve of feedlot managers in terms of higher asking prices. | 1) | Most live cattle contracts settled 100 points plus below session highs on Wednesday. Clearly, many commercials remain nervous about the eventual burden of peak summer tonnage and the dog-day demand of midsummer. |
| 2) | The seasonal cash hog rally seems to be accelerating. Even in the face of higher packer bids, negotiated receipts appear to be declining. | 2) | While a world of things can still happen to growing row crops, outstanding ratings and the corn market's current ability to ignore hot temperatures here and in other countries is more than a little curious. If the feed market remains difficult to rally, it will encourage the forces of expansion and heavier carcass weights. |
| 3) | Just when you think summer lean hog contracts are down for the count, they climb off the mat with new promise. June and July successfully closed above 100-day moving averages on Wednesday while August settled above its 40-day moving average. | 3) | For the week ending June 2, U.S. hatcheries set 235 million eggs in incubators, up 4% from a year ago. At the same time, broiler growers placed 185 million chicks, up 2% from 2017. |
| 4) | For the week ending June 2, Iowa barrows and gilts averaged 280.9 pounds, 1.5 pounds less than the previous week and .3 pounds less than 2017. | 4) | Even though hog supplies seem to be declining seasonally, we are still set to see significantly more numbers through the summer than last year. The implication of the March 1 Hogs & Pigs report is for an increase of hogs over the June-August marketing period by 3%, compared to roughly a 4% increase the industry just experienced during the March-May marketing period. |
CATTLE: (PRNewswire) -- Jefferies Financial Group Inc., formerly known as Leucadia National Corporation, announced that it has closed its previously announced sale of 48% of National Beef to Marfrig, reducing Jefferies' ownership in National Beef to 31%.
Jefferies received a total of about $1.1 billion in cash, including sales proceeds and related pre-closing distributions. The estimated pre-tax gain resulting from this sale, which will be included in the second quarter results of Jefferies Financial Group, is about $860-880 million, subject to typical post-closing adjustments.
Jefferies' CEO, Rich Handler, and President, Brian Friedman, noted, "The closing of this strategic transaction, designed to "right-size" Jefferies' investment in National Beef, is an important step in Jefferies Financial Group's transformation to a diversified financial services company."
HOGS:(North American Meat Institute) -- North American Meat Institute's President and CEO Barry Carpenter issued the following statement regarding Mexico's imposition of tariffs on U.S. pork exports:
Mexico on Tuesday levied 10 percent tariffs, which will increase to 20 percent effective July 5, on unprocessed U.S. pork products in retaliation for tariffs imposed on Mexican steel and aluminum exports to the U.S.
These retaliatory tariffs will disproportionately affect hardworking American pork packers and producers, who will bear the main burden of these measures in the form of lost revenue and restricted market access, particularly as U.S. pork production is slated to rise this year. These punitive retaliatory duties are especially concerning now that key competitors are gaining additional access to the critical Mexican market, risking the U.S. pork industry's ability to compete on a level playing field.
Mexico in 2017 was the largest volume market for U.S. pork exports, setting a sixth consecutive volume record totaling 800,000 metric tons. U.S. pork exports to Mexico were valued at $1.51 billion in 2017.
Thursday's retaliation reaffirms that there are no winners in trade disputes. The Meat Institute urges Mexico and the U.S. to work diligently to resolve any differences before additional tariffs and market access barriers take effect. Failure to do so will impose unnecessary hardships on American workers and consumers in both countries.
John Harrington can be reached at harringtonsfotm@gmail.com
Follow John Harrington on Twitter @feelofthemarket
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