DTN Early Word Opening Livestock
Late-Week Cattle Futures Set for Mixed Opening
GENERAL COMMENTS:
Cattle: Steady w/midweek Futures: Mixed Live Equiv $130.08 - .44*
Hogs: Steady-$1 HR Futures: Mixed Lean Equiv $ 90.03 - .50**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Trade volume looks no better than moderate in most areas of feeding country, but it's tough to say we will see more business sometime Friday. Our guess is that activity in the South is pretty much done for the week, but time will tell. Unsold steers and heifers are priced around $122 in the South and $192 plus in the North. Live and feeder futures should open on a mixed basis thanks to follow-through buying on one hand and long liquidation on the other.
Hog buyers tried to slow spending earlier this week, but soon learned that strategy just wouldn't bare much fruit. Accordingly, cash bids have been steadily firming in recent days and we expect another round of greater spending Friday. Assumingthe Saturday kill will be close to 150,000 head, the weekly kill should be close to 2.3 million. Lean futures are likely to open with uneven price action with nearby holding up better than deferred.
| BULL SIDE | BEAR SIDE | ||
| 1) | According to the World Board, beef's trade balance in 2017 will be much more price friendly, projecting beef imports at 2.735 billion pounds, 9% to 10% below 2016, and exports are projected at 2.715 billion, 6.5% greater than the prior year. | 1) | The wholesale beef trade remains in retreat. Cutouts closed moderately on Thursday with the choice box sliding to its lowest level since Nov. 25. |
| 2) | For the week ending Jan. 28, cattle carcass weights generally continued to slip lower: all cattle averaged 820 pounds, 2 lbs. lighter than the prior week and 12 lbs. under 2016; steers averaged 884 lbs., 5 lbs. smaller than the previous week and 14 lbs. lighter than last year. Heifers actually gained a pound, averaging 823 lbs., 9 lbs. below 2016. | 2) | Thursday's rally in cattle futures didn't prove much. Indeed, the cattle board remains on the defensive. The breach of trend support, coupled with the failure to fill the gap and move above that resistance, may add to the risk of long liquidation and new selling -- signaling potential additional sales opportunities. |
| 3) | Actual pork exports last week totaled 22,100 metric tons, up 2% from the previous week. The primary destinations were Mexico (7,700 MT), Japan (3,700 MT), South Korea (2,900 MT), China (2,000 MT), and Canada (1,500 MT). | 3) | Net pork export sales last week dropped to 13,600 MT, down 45% from the previous week. Increases were reported for Mexico (2,600 MT), Japan (2,600 MT), South Korea (2,500 MT), Canada (2,200 MT), and Australia (1,400 MT). |
| 4) | The World Board has increased its estimate of the 2017 hog prices average from $38 to $41 to $42 to $45. With production and trade assumptions holding essentially steady, the World Board has turned more bullish on pork demand in the year ahead. | 4) | The pork carcass value closed moderately lower Thursday, pressured by weaker demand for loins, butts, picnics and hams. |
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CATTLE:(foodmarket.com) -- Grocery sales last weekend for Super Bowl were reported favorably with positive movement out of the meat case. Looking forward, the month ahead is typically a sluggish one for retail.
Valentine's Day is primarily a foodservice holiday, with restaurants and especially fine-dining establishments getting a boost in sales and traffic. When most consumers think of Valentine's they think of cards, candy, and hearts—in the food industry we think of steak and lobster tails. Consumers splurging on an evening out, and ordering premium cuts of meat, gives a much needed boost to the overall food space, even if retail doesn't benefit from V-day dollars to the same degree as foodservice.
For those consumers looking to spend the holiday at home, they'll find abundant features on meat and poultry as grocers strive to boost sales in an otherwise slow period.
In the beef complex, steaks are featured nearly 13% below a year ago, at an overall average of $6.51 per lb. Porterhouse steaks average $6.42 per lb. compared to $8.59 per lb. a year ago. T-bone steaks average $5.99 per lb., down from $7.47 this week last year. A bone-in strip can be picked up for $5.71 per lb. on average, while bone-in rib steaks are highlighted at $7.39 per lb. Tenderloin roasts are featured at $10.99 per lb., down about 30 cents per lb. London Broils are offered at $4.70 per lb. on average this week.
Lobster tails are priced roughly $2 higher than a year ago, at $25.56 on average.
Boneless center-cut pork chops are on feature for $2.92 per lb. this week, on par with year ago levels. Pork tenderloins are highlighted at $3.36 per lb., compared to $3.84 a year ago.
Boneless skinless chicken breasts are on sale for an average $3.28 per lb., down about 5% from a year ago. Much of the dark meat complex remains featured at levels sub $2.00 per lb., making it an attractive option for budget-minded shoppers.
Beef features account for 27% of total protein ad volume this week, followed by pork with 25% and seafood with 24%.
HOGS: (Brownfield.com) -- Policy analyst Jim Wiesemeyer says the top concern among agricultural interests about the Trump Administration is trade policy.
"They fear that agriculture could be collateral damage if there's any 'give' in forthcoming bilateral trade agreement talks -- Canada, Mexico, or a new NAFTA, or with some of the countries that were in the withdrawn Trans-Pacific Partnership Agreement," said Wiesmeyer, in an interview with Brownfield Ag News Wednesday. "They feel that they could have less market access as a result of that."
There's concern about President Trump's plan to renegotiate NAFTA because trade negotiations take time and bring with them uncertainty, according to Wiesemeyer, a senior vice-president with Informa Economics focusing on farm and trade policy. That might, however, be short term pain, long term gain, he said.
"We could potentially get more pork exports into Japan, hopefully a lot more U.S. dairy products into now relatively closed Canada, some more U.S. farm products going from the U.S. into Mexico," said Wiesemeyer.
Those with concerns fear Trump's trade policies will result in reduced market access, but Wiesemeyer says the Trump camp has made assurances that the policies will be used to negotiate better deals.
Wiesemeyer spoke at the Missouri Pork Expo.
John Harrington can be contacted at john.harrington@dtn.com
For more from John Harrington, see www.feelofthemarket.com
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