DTN Early Word Opening Livestock

 
Cattle: Steady to $2 HR Futures: 50-100 HR Live Equiv NA* 
Hogs: Steady to $1 HRFutures: 50-100 HR Lean Equiv NA**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Historically, it's not unusual for the cattle market to celebrate "May Day" in a bullish state of mind. Yet fed cattle prices have already rallied so far in the first third of 2017. How much more fire does this market have in its belly? However unsettled that question may seem Monday, you can bet that feedlot managers will be eager to bet on positive momentum and price showlists at least $2 to $3 higher as the new month begins (e.g., $140 to $142 higher in the South, $220 to $225 in the North). That said, activity Monday should be limited to the distribution of new showlists. Look for the early-month offering to be about steady to somewhat larger than last week. Live and feeder futures should open higher, supported by residual buying and cash premiums.

While last week's cash hog trade recorded a slow pace of appreciation, seasonal bulls are hoping that the country market can start to build on that tentative step. Hog buyers should start out Monday with bids steady to $1 higher. Lean futures seem set to open substantially higher with the help of technical buying and expectations of improving fundamentals.

	BULL SIDE		BEAR SIDE
1)	Last week's surge in cattle spending represented the latest dramatic proof that relatively tight fed supplies continue to be the driving force behind springtime cash strength.	1)	Although the beef carcass value firmed late in the week, the appreciation lagged significantly behind the surging cost of live inventory. Accordingly, packers will be facing much tighter processing margins this week, possibly prompting slower chain speed and reducing their desire to pay up for the next round of ready steers and heifers.
2)	Beef cutouts jumped significantly higher on Friday with box demand described as "moderate to fairly good." Seasonally, we should be moving into the year's very best period of beef demand	2)	The combination of greater trade volume generated last week and the typical surge in early-month contract availability could lend cattle buyers greater leverage in feedlot country at least over the short term.
3)	Lean hog futures landed a very strong performance through much of last week by posting triple-digit gains in the actively-traded June, July and August contracts. The trend in the market has turned back solidly positive both short and long term.	3)	During the week ending April 25, noncommercial traders net sellers of lean hog futures, reduced their net-long position by 9,500 contracts thanks to long liquidation and new shorts.
4)	The pork carcass value closed solidly higher on Friday, supported by better demand for hams and butts.	4)	Strangely, frozen belly levels in cold storage have been record low since November 2016. For whatever reason, the industry decided in November that forward supplies of bellies would be sufficient enough to draw upon during periods of seasonally high demand and that cold tonnage may not be as necessary as in the past. Indeed, the 20.6 million pounds currently in the freezer might be too much, as it represents a 2% total cushion of product possibly needed for June, July and August.

OTHER MARKET SENSITIVE NEWS

CATTLE:(beefcontral.com) -- SHORT supply of beef out of Australia and New Zealand is helping maintain prices for imported lean grinding beef in the US well above equivalent domestic supply.

The combination of wet weather during March and early April (in part influenced in both countries by Cyclone Debbie), public holiday-shorted killing weeks in both countries and the drought impact on herd size in Australia has greatly reduced inflows of Australian and NZ beef to the US in April.

One estimate this week suggests total Australian shipments in April might struggle to reach 12,000t, the lowest level since January, about half of what Australia shipped to the US in 2016, and a fraction of shipments for the month in 2014 and 2015.

Imported 90CL prices in the US last week edged 1c higher to A614¢/kg, continuing the general upward trajectory seen since the beginning of 2017.

Steiner Consulting's imported beef market report last week suggested that US market participants were finding it increasingly difficult to bridge the gap between US bids and Australian offering prices. Some of the offers from Australia remained outside the high-end of the range of prices suggested in reporting.

"Slaughter in Australia has been limited by a number of holidays and this has significantly reduced beef availability from this market," Steiner's weekly report said.

The level of volume shipped from Australia, lack meaningful supplies into the US yet from new export player, Brazil and the lower than expected supply shipped from NZ had created a very tight supply situation in the US imported lean grinding beef market, Steiner's report said.

"Near-term supplies are tighter than many expected," last week's report said.

The result is continued firm prices for lean grinding beef and imported beef trading at a premium to domestic prices.

US cow and bull slaughter has been running about eight percent above year ago levels in March and early April, but the pace of slaughter should slow down modestly in May, Steiner said.

Moisture conditions in many parts of the US have improved and higher feeder cattle prices have bolstered demand for calves and could slow down the flow of cull cows into the US slaughter market, the report said.

"Fed beef prices also remain very firm at this point thanks to robust demand but also very current supplies of cattle on feed. Most US cattle coming to market spend time in a feedlot. When feedlots fall behind in their marketings, this tends to increase the weight of cattle relative to where they normally should be for the time of year."

The weight of US fed steers so far this year is running significantly below year ago and approaching the five year average, Steiner said.

"Front end supplies, i.e. the supply of cattle that are market-ready, is down as much as 15pc from a year ago, which has bolstered US beef prices overall, including the price of beef fat trimmings. US feedlots placed more cattle on feed in March but the pace of marketings was strong enough to have more than offset the placement numbers."

US beef prices Monday are about 15-20pc higher than what futures were indicating earlier in the year, Steiner said last week.

HOGS: (nationalhogfarmer.com) -- Swine disease knows no national boundaries, and thousands of pigs are transported between the United States and Canada creating greater chance of disease spread.

With that in mind, Paul Sundberg, executive director of the Swine Health Information Center, is participating with swine industry representatives from the United States and Canada to create and implement industry-wide, North American standard operating procedures for transportation-related biocontainment.

Practitioners from the United States, Canada, National Pork Board, American Association of Swine Veterinarians, Ontario Ministry of Agriculture, Food and Rural Affairs, Canadian Pork Council, packing industry representatives and transportation subject matter experts are collaborating on the project. This group desires to involve more stakeholders in this process with the ultimate goal of decreasing the incidence of disease associated with marketing transportation of pigs and sows to the first points of concentration.

With the lessons of porcine epidemic diarrhea and other disease transmission fresh in their memories, Sundberg says they hope to capture the urgency felt across the swine industry to prevent pathogens from being carried back to the farm from first points of concentration, where they must be contained.

The program will look for the best biocontainment recommendations from the variety of transportation biosecurity programs now in the industry, and develop a list of basic procedures at these facilities. Focusing on biocontainment will help solidify a common foundation for actionables in other programs as it emphasizes how transporters and markets act at their interface.

To be successful, the group launching this effort recognizes the need to engage producers, packers, sow assembly yards and buying stations, as well as those who transport pigs in the conversation. Doing so will help to grow the collective industry "political will" essential in implementing recommendations and that will differentiate the outcome of this project from the other transportation biosecurity SOPs currently available from multiple programs. Together, with input and support from all stakeholders and clear, mutually beneficial objectives, SOPs can be developed, implemented and enforced to decrease the spread of pathogens.

The group will continue its efforts to engage all stakeholders as well as achieving its objectives which are outlined on the SHIC website.

The mission of the SHIC is to protect and enhance the health of the U.S. swine herd through coordinated global disease monitoring, targeted research investments that minimize the impact of future disease threats, and analysis of swine health data.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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