DTN Early Word Opening Livestock

Cattle Paper Set to Open Moderately Higher

(DTN file photo)

Cattle: Steady-$2 LR Futures: 25-50 HR Live Equiv $141.71 - .76*

Hogs: Steady-$1 LR Futures: Mixed Lean Equiv $ 80.25 - .63**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

The general impasse at the internet auction Wednesday bore sure witness to the strong determination of both cattle buyers and sellers. Still, we are picking out some signs of less ambitious asking prices (e.g., $128 on the South; $205 to $207 in the North). Look for fairly active trade to surface late Thursday or sometime Friday. Live and feeder futures should open moderately higher, supported by follow-through buying and pre-cash short-covering.

Look for the cash hog trade to open with bids steady to $1 lower than Wednesday. Early spring pork tonnage continues to make for tough sledding in the cash market. The Saturday kill is expected to total close to 78,000, pushing the weekly total to 2.3 million. Lean futures are expected to trade mixed in the early rounds, checked by long liquidation and boosted by limited short-covering.

BULL SIDE BEAR SIDE
1) The ability of live and feeder cattle futures to bounce off session lows on Wednesday and close near the highs of the day possibly suggests that bottom-picking interest is increasing. 1) The wholesale beef trade continued to struggle at midweek with the choice box losing nearly another $2. Furthermore, Wednesday box demand (i.e., typically the busiest time in the week) was described as no better than "light to moderate."
2) The determination of feedlot managers to pass lower packer bids in the face of board premiums and struggling beef cutouts seems to speak highly of country confidence and the ongoing reality of tight fed supplies. 2)

For the week ending April 1, U.S. hatcheries set 222 million eggs in incubators, up 3% from a year ago. At the same time, chicks placed totaled 182 million, up 2% from 2016.

3) The national lean hog base held near steady on Wednesday even as trade volume seemed to increase. This could be a sign that country supplies are starting to become more manageable. 3) For the week ending April 1, Iowa barrows and gilts averaged 283.3 pounds, .9 lbs heavier than the prior week and .9 lbs lighter than 2016.
4) Though the pork cutout could struggle for another week or so, carcass value should be trending higher by the third week of April all the way through to July, even with these additional hogs revealed. 4) The pork carcass value closed moderately lower Wednesday with all major primals losing ground except the belly.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Bloomberg News) -- President Donald Trump is a well-known fan of U.S. beef. He's hawked Trump-branded steaks, and his standard order at the 21 Club in Manhattan is a well-done burger topped with American cheese.

So beef may be on the table when the U.S. president and Chinese leader Xi Jinping discuss trade during this week's summit at Trump's Florida resort.

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More than six months after China promised to end a ban on American beef imposed in 2003 after a case of mad-cow disease, U.S. producers still aren't selling to Chinese consumers, according to a letter from three trade groups representing the beef industry. That's a missed opportunity for companies such as Cargill Inc. in the biggest overseas market for U.S. agriculture, expected to reach $22.3 billion in value during the 12 months ending September.

"The foreign market with the greatest growth potential -- China -- remains closed to U.S. beef and beef products, even as China imports large and growing volumes from our competitors," the National Cattlemen's Beef Association, U.S. Meat Export Federation and North American Meat Institute said in the joint March 27 letter to Trump. "We appreciate your leadership on this matter."

U.S. trade relations with China were a cornerstone of Trump's campaign as he accused the nation of unfair trade practices and threatened to slap a levy on Chinese products of as much as 45 percent. Last week, he ordered a study to identify the forms of "trade abuse" that contribute to U.S. deficits with all foreign countries.

Export markets are especially important now, given hard times in Farm Belt states, where voters overwhelmingly supported Trump. Net farm income is expected to fall for a fourth straight year to $62 billion, according to U.S. Department of Agriculture data, down from a record $124 billion in 2013.

Total U.S. agricultural exports were about $134.9 billion in 2016, a 10 percent decline from two years earlier, according to the USDA.

The sector was projected to get a boost of as much as $5 billion from the Trans-Pacific Partnership -- which would have opened more Asian markets for meat, grain and dairy products -- but Trump pulled out of the trade deal soon after taking office.

Industry groups subsequently asked Trump to press Xi on resuming beef imports, especially considering China's increasing appetite for meat. Per capita beef consumption increased 33 percent between 2012 and 2016, according to Bloomberg Intelligence, coinciding with a 38 percent increase in disposable income for urban Chinese households.

That helps ranchers in Australia, Brazil and Uruguay -- but not the U.S. American farmers exported $10.4 billion in red meats and related products globally in January-October, according to the most recent USDA statistics.

Opening China's beef market is a top priority for Trump's nominee for U.S. ambassador to the nation, Iowa Governor Terry Branstad, whose state has about 26,000 cattle farmers.

"I want to serve it at the embassy, and I certainly want to do what I can to try to convince the Chinese leadership to do that sooner rather than later," Branstad said during a USDA forum in February.

The Chinese government said in September it would lift the 2003 ban on imports of bone-in and boneless beef from U.S. livestock younger than 30 months of age -- a ban triggered by a case of mad-cow disease in Washington state.

But in order for Chinese supermarkets to sell American beef, authorities need to approve proposed rules on issues including the traceability of individual animals, said Thad Lively, senior vice president for trade access at the U.S. Meat Export Federation in Denver.

The federation started working in 2015 to trace the supply chain -- from ranch to meat packer -- exclusively for "China-eligible" cattle. It demonstrated a tracking system in September to a Chinese delegation visiting feed lots and slaughter plants in the U.S.

However, there's been no progress in obtaining Chinese approval, he said. The stalemate comes as agricultural exports to China this fiscal year are expected to increase by more than $3 billion from a year earlier, Robert Johansson, the USDA's chief economist, said at the February forum. Soybeans are the biggest export to China.

China's restriction on U.S. beef is among several policies impeding American exports of animal protein to the world's most-populous country. China banned imports of American poultry in 2015 after an outbreak of bird flu in the Midwest, cutting off a major market for chicken feet, a popular Chinese snack.

"We are very anxious to get that market restored," said James Sumner, president of the USA Poultry & Egg Export Council, an industry advocate based in Stone Mountain, Georgia. "I don't think there was a single broiler company not shipping paws to China before the ban was implemented."

China became the largest importer of U.S. agricultural products in 2011, and American beef producers want to capitalize on a growing middle class and their perceptions that foreign-made foods are better quality than homegrown ones.

Minneapolis-based Cargill, the biggest closely held U.S. company and one of the top grain traders, didn't have much beef business with China before the ban. That may not be the case if Trump and Xi can work out a deal.

"There is significant potential for U.S. beef exports when China grants access," Mike Martin, a Wichita, Kansas-based spokesman, said in an email.

HOGS: (brownfieldagnews.com) -- Iowa Senator Chuck Grassley has reintroduced legislation to ban packer ownership of livestock.

"I've put this bill in every year for the last 20 years, "Grassley says. "Sometimes we get it through the Senate on a farm bill, but we never get it through. But I don't give up and sometime this is going to happen."

Continued concentration and vertical integration in the meat industry is hurting family farmers, Grassley says.

"First the poultry industry, then we saw the pork industry going the same direction," he says. "Thursday I receive consistent contact from cattlemen concerned that their industry is headed that way as well, to vertical integration."

Grassley cites USDA figures showing the amount of cattle traded on the cash market declined from 52 percent in 2005 to 21 percent in 2015. "That's a very clear indication that the beef industry is headed the way of pork and poultry, which have cash-traded levels well below 20 percent."

Grassley says packers are needed to harvest livestock, but he says adequate competition is also needed for "fair and efficient price discovery".

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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