DTN Early Word Opening Livestock
Live and Feeder Issues Staged for Mixed Open
GENERAL COMMENTS:
Cattle: Steady Futures: Mixed Live Equiv $132.78 + .37*
Hogs: Steady-$1 HR Futures: 25-50 HR Lean Equiv $ 88.74 + .57**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Both buyer and sellers are in a state of shock Tuesday following Monday's sudden implosion in cattle futures. In a flash, the board seemed to mock tall cash premiums by digging even deeper discounts. Whether such a reaction represents an excess remains to been seen, but some apparently saw December's larger than expected placement as just the first step in feedlot population mounting over the next several quarters. Our guess is that bids and asking prices will remain poorly defined until Thursday or later. The annual cattle herd inventory will be released Tuesday afternoon at 2 p.m. CST. Our guess is that total numbers as of Jan. 1 will be close to 94 million head, 2% to 3% greater than last year. Similarly, the 2016 calf crop should be confirmed to be 2% to 3% greater than 2015. Expect live and feeder futures to open on a mixed basis linked to residual selling on one hand and short-covering on the other.
Anticipate generally steady bids in the cash hog trade when business resumes Tuesday. This shift seems slow but sure: producer margins are improving and processing margins are tightening. Needless to say, this change stands toaccelerate in the second half of the year once new chain speed at first strains to find available market numbers. Lean futures seem likely to open some higher, supported by the premium status of the cash index and well-supported wholesale pork prices.
| BULL SIDE | BEAR SIDE | ||
| 1) | New showlists distributed by cattle feeders on Monday were generally smaller than the previous week, especially in Texas. | 1) | Cattle futures were hammered with triple-digit losses on Monday, creating enormous board discounts and implying impossibly strong basis levels. Feedlot leverage and asking prices can hardly ignore these realities. |
| 2) | The beef carcass value continued to recover Monday, building upon the $2 plus hike experience last week. | 2) | The new annual herd inventory set to be unveiled Tuesday afternoon is expected to confirm substantial growth in cattle numbers, locking in much greater beef production over the next several years. |
| 3) | The pork cutout closed moderately higher Monday, supported by stronger demand for loins, ribs and bellies. | 3) | The struggling corn seems to be at a loss in the face of enormous supplies. If the market's only answer is to increase the attractiveness of livestock feeding, on feed numbers and carcass weights will increasingly compound tonnage going forward. |
| 4) | Even though cattle futures crashed and burned on Monday, lean hog futures held essentially steady like the Rock of Gibraltar with traders clearly impressed with short-term fundamentals. | 4) | February is typically a weak demand month for meat. Additionally, rhetoric and actions out of the White House have added an element of instability to the markets as trade policy seems to be a rapidly changing target from one day to the next. |
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
CATTLE: (foodmarket.com) -- Tokyo aims to resume beef exports to Australia by year-end, hoping to overturn a ban on Japanese beef in place since 2001 after the discovery of mad cow disease, also called bovine spongiform encephalopathy (BSE).
Japan has been in talks with BSE-free Australia since 2004 to resume exports of its gourmet "wagyu" beef, known internationally for its delicate flavor. ] Regulator Food Standards Australia New Zealand (FSANZ) found in 2015 that beef and beef products imported from Japan are safe for human consumption, and the Australian government is likely to issue a final draft report that would support lifting the ban later this year, an official with Japan's Ministry of Agriculture, Forestry and Fisheries said.
Australian officials could then inspect Japanese facilities around September-November before resuming imports, the official said.
"We are aiming to finalise the talks and realise exports by the end of the year," he added.
Japan's global beef exports hit a record 13.5 billion yen ($118 million) in 2016, the official said.
As exports of cars and electronics stall, Japanese Prime Minister Shinzo Abe wants to increase agriculture exports by a third in the next three years to 1 trillion yen ($8.74 billion), using the country's gourmet culture to cast itself as a purveyor of high-quality food
HOGS: (KMAland) -- The U.S. saw a record number of hogs slaughtered in 2016.
Packing capacity was at 2.5 million. This means more pork. What is the answer of getting rid of it?
Greg Hora is President-Elect of the Iowa Pork Producers Association. He says new markets are important for moving all of this extra U.S pork.
"As you look at some of our friendly trading partners. We market about 85% of our pork to 20 countries which leaves about 170 other countries around the world that we have some opportunities with."
He says you have to friendly relationships with countries.
"We have very favorable relationships with Canada, Mexico, South Korea, and the China market because that is where our large population of the world is coming from along with economic improvements."
Hora says this ensures customers understand what U.S. producers are growing is a safe healthy product.
John A. Harrington can be reached at john.harrington@dtn.com
Follow John Harrington on Twitter @feelofthemarket
(BAS)
Copyright 2017 DTN/The Progressive Farmer. All rights reserved.