DTN Early Word Opening Livestock

 
Cattle: Steady-$2 HR Futures: Mixed Live Equiv: $136.45 + .17* 
Hogs: $1-2 LR Futures: 50-100 LR Lean Equiv: $ 80.70 -3.02**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle buyers and sellers have reached yet another Friday with the seal on order books essentially unbroken. That will have to change sometime over the next few hours. Look for opening bids close to $110 live in the face of firm asking prices around $115 to $116. Live and feeder futures should open on a mixed basis thanks to follow-through selling on one hand and short-covering on the other.

Hog buyers have a long list of reasons to wrap up the week with another round of lower bids. From plentiful market hogs to collapsing carcass value and limited chain speed on Friday (around 350,000 head) and Saturday (around 50,000 head), packers have virtually no need or desire to push higher. Lean hog futures should open at least moderately lower, pressured by follow-through selling and bearish fundamentals.

	BULL SIDE		BEAR SIDE
1)	Once again feedlot managers have forced short-bought packers into the Friday corner, and sellers have been very successful over the last month in applying late-week leverage.	1)	After opening significantly higher, cattle futures came unglued through the second half of the session. Such a dramatic reversal does nothing to gird the loins of feedlot managers holding for higher asking prices.
2)	Beef cutouts closed moderately higher on Thursday with box demand described as "moderate to fairly good."	2)	Net beef export sales last week dropped to a marketing year of 4,700 MT, down 65% from the previous week and 69% from the prior four-week average.
3)	Net pork export sales last week jumped to 21,100 metric ton (MT), up 7% from the previous week and 21% from the prior four-week average.	3)	The pork carcass value crashed more than $3 Thursday, especially hammered by failing demand for bellies, picnics and loins. Such wholesale weakness seems especially discouraging given this week's slow chain speed.
4)	Now that President Trump appears to working out an agreement with the EU, one that would lower tariffs and other trade barriers, some are speculating that his trade bark is worse than his trade bite. Could this mean that trade war worries will turn out to be exaggerated?	4)	Though gaining early, it didn't take long before bearish fundamentals drove lean hog futures sharply lower. Indeed, at one point, spot August notched a new contract low.

OTHER MARKET SENSITIVE NEWS

CATTLE:(foodmarket.com) -- McDonald's Corporation has announced results for the second quarter ended June 30, 2018.

"We're seeing good performance across our business as our customers tell us that they value and appreciate the moves we're making to elevate the McDonald's experience," said McDonald's President and Chief Executive Officer Steve Easterbrook. "We're pleased with the results of our international business and the progress we're making in the U.S. on executing on our Velocity Growth Plan priorities. We've now marked 12 consecutive quarters of positive comparable sales, and we are confident that we're executing the right strategy to achieve long-term, profitable growth."

Second quarter highlights:

Global comparable sales increased 4.0%, reflecting positive comparable sales in all segments

Due to the impact of the Company's strategic refranchising initiative, consolidated revenues decreased 12% (14% in constant currencies)

Systemwide sales increased 5% in constant currencies

Consolidated operating income decreased 1% (4% in constant currencies), primarily due to $92 million of strategic restructuring charges ($85 million related to the previously disclosed restructuring charge for the U.S. business). Excluding these charges, as well as unrelated strategic charges in the prior year, consolidated operating income increased 2% (decreased 1% in constant currencies) Diluted earnings per share of $1.90 increased 12% (9% in constant currencies), reflecting $0.09 per share of strategic restructuring charges. Excluding these charges, diluted earnings per share was $1.99, an increase of 15% (12% in constant currencies) over prior year earnings per share (excluding $0.03 per share of prior year strategic charges)

Returned $2.5 billion to shareholders through share repurchases and dividends In the U.S., second quarter comparable sales increased 2.6% driven by growth in average check resulting from both product mix shifts and menu price increases. Operating income for the quarter decreased 7% primarily due to the strategic restructuring charge. Excluding this charge, operating income increased 1% as higher franchised margin dollars were partly offset by lower Company-operated margin dollars.

Comparable sales for the International Lead segment increased 4.9% for the quarter, reflecting positive results across all markets, primarily driven by the U.K. and France. The segment's operating income increased 15% (9% in constant currencies), fueled by sales-driven improvements in franchised margin dollars.

In the High Growth segment, second quarter comparable sales increased 2.4%, led by strong performance in Italy and positive results across most of the segment, partly offset by continued challenges in South Korea.

In the Foundational markets, second quarter comparable sales rose 6.8%, reflecting positive sales performance across all geographic regions.

Steve Easterbrook concluded, "We remain focused on delivering the most enjoyable experience for every customer, every visit. Whether that is when they visit a modernised restaurant with inviting hospitality or through the convenience of having delicious food delivered to their home, we know that our fundamental day-to-day commitment to our customers is running great restaurants."

HOGS: (porkbusiness.com) -- The pork industry has been one of the hardest hit by retaliatory tariffs by both China and Mexico—the two largest export markets for U.S. pork.

Thursday, as President Donald Trump asked for patience on trade, USDA Secretary Sonny Perdue announced a $12 billion tariff relief package for farmers.

The National Pork Producers Council says it commends President Trump for taking steps to provide much-needed relief to American farmers in the crosshairs of global trade retaliation.

"President Trump has said he has the back of U.S. farmers and Friday demonstrated this commitment with an aid package to sustain American agriculture cut off from critical export markets as his administration works to realign U.S. global trade policy," said Jim Heimerl, NPPC President and a pork producer from Johnstown, Ohio.

"U.S. pork, which began the year in expansion mode to capitalize on unprecedented global demand, now faces punitive tariffs on 40% of its exports. The restrictions we face in critical markets such as Mexico and China -- our top two export markets by volume last year -- have placed American pig farmers and their families in dire financial straits. We thank the president for taking immediate action."

Recent reports say there is renewed hope that a separate trade deal with Mexico could happen by August 2018, as Mexico's president-elect, Andres Manuel Lopez Obrador, said he is ready to start a new stage in U.S.-Mexico relations and seeks a "common path" on trade, migration, economic development and security.

"While we recognize the complexities of resetting U.S. trade policy, we hope that U.S. pork will soon regain the chance to compete on a level playing field in markets around the globe," Heimerl adds. "We have established valuable international trading relationships that have helped offset the U.S. trade deficit and fueled America's rural economy."

John Harrington can be reached at harringtonsfotm@gmail.com

Follow him on Twitter @feelofthemarket

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