DTN Early Word Opening Livestock

 
Cattle: Steady-$2 HR Futures: mixed Live Equiv $157.21 + $1.47*
Hogs: Steady-$1 HR Futures: mixed Lean Equiv $ 83.01 + $1.17**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Talk about a tough act to follow. While feedlot managers will naturally start out in a bullish frame of mind (e.g., ready to price showlists at least several dollars higher) , few seem wild enough to expect a price surge equal to the bullish tsunami seen last week. At any rate, nothing will be decided today as packer focus exclusively on the collection of new showlists. We expect the fed offering to be steady to somewhat larger. Live and feeder futures should open on mixed basis thanks to follow-through selling and short covering.

Expect the cash hog market to open the morning with bids steady to $1 higher. The country trade enjoyed a rather strong round last week as interior cash hog prices moved up over $8 and the delayed lean settlement index value moved over $4 higher. The pork cutout increased modestly with all the primals contributing to the advance. These trends are expected to continue.Lean futures should also open with uneven prices tied to light bull spreading and early week profit taking.

	BULL SIDE		BEAR SIDE
1)	From Friday to Friday, the choice and select beef cut-outs erupted by $17.09 and $11.89, respectively. Seasonal beef demand appears to be in fine fettle. Furthermore, retailers and food manager can be expected to be strong buyers for several more weeks before coasting into Memorial Day.	1)	Despite the red-hot character of the boxed beef market, carcass value has fallen far behind the surging cash cattle trade. DTN estimates that gross packer margins are starting the week under $100 for the first time since early 2016.
2)	Although Friday's sell-off in cattle futures was unnerving, it seemed more relative to overbought charts that faltering fundamentals. Still huge cash fundamentals should soon lend the board renewed support.	2)	Limit losses on cattle futures may have marked a major seasonal top, potentially sparked a prolonged sell-off fueled by the liquidation of record live open interest.
3)	The pork carcass value caught a decent jump on Friday, increasing more than a buck thanks to better demand for loins, picnics, ribs, and bellies.	3)	While there's a growing consensus among traders that hog/pork fundamentals are turning the corner to support a decent seasonal rally over the next several months, some believe that such good news is already fully prices in terms of summer lean hog futures.
4)	During the week ending May 2, noncommercial traders were net buyers of lean hog futures, increasing their net long position by 3,700 contracts.	4)	Though weekly hog is now expected to seasonally decline through the balance of the quarter, no one is predicting that chain speed will duck below 2016. Furthermore, mounting beef production through the same period of time could easily work to check the potential of pork price appreciation.

OTHER MARKET SENSITIVE NEWS

CATTLE: (USMEF) -- U.S. pork and beef exports capped a strong first quarter with excellent March results that included a new record volume for pork, according to statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Pork exports reached 227,955 metric tons (mt) in March, up 16 percent year-over-year and topping the previous monthly high set in November 2016. Export value was $586.6 million, up 22 percent. For the first quarter, pork exports were up 17 percent in volume (627,647 mt) and 22 percent in value ($1.58 billion).

March exports accounted for 28 percent of total pork production and 23.3 percent for muscle cuts only, up from 25.4 percent and 22 percent, respectively, last year. First-quarter ratios were also significantly higher at 27.2 percent and 22.6 percent, compared to 23.9 percent and 20 percent in 2016. Export value per hog slaughtered averaged $54.93 in March, up 15 percent year-over-year, while the first-quarter average increased 18 percent to $52.42.

Beef exports totaled 105,310 mt in March, up 18 percent year-over-year, with value increasing 22 percent to $588.2 million. First-quarter beef exports were up 15 percent in volume (292,215 mt) and 19 percent in value ($1.61 billion).

March exports accounted for 12.5 percent of total beef production and just under 10 percent for muscle cuts only, each up slightly from last year. For the first quarter, the percentage of total beef production exported was down slightly from a year ago (12.4 percent vs. 12.5 percent) despite an increase for muscle cuts (9.8 percent vs. 9.4 percent). Export value per head of fed slaughter averaged $270.14 in March, up 11 percent from a year ago, while the first-quarter average increased 10 percent to $267.71 per head.

"Entering 2017 with record-large pork production and an uptick in beef slaughter, we knew this 'wall of U.S. meat' presented a challenge for our industry," said USMEF President and CEO Philip Seng. "So the fact that first-quarter export volumes are higher than a year ago is not surprising, but it's important to look beyond that -- to the higher percentage of production being exported and the strong return on those exports. The U.S. is not just moving more meat internationally because we have more available. Our products are commanding solid prices and winning back market share in many key destinations, even with a strong U.S. dollar and many trade barriers still in place. But our competitors are working every day to reverse this trend, so we must aggressively expand and defend our international customer base."

The red-hot pace for U.S. pork exports to Mexico continued in March, with volume up 34 percent year-over-year to 68,866 mt, and value increasing 47 percent to $127.2 million. For the first quarter, exports to Mexico totaled 206,262 mt (up 29 percent) valued at $371.9 million (up 42 percent). Strong demand from Mexico is especially important for U.S. ham prices, but pork variety meat exports to Mexico also posted a strong first quarter, increasing 14 percent in volume (37,596 mt) and 38 percent in value ($58.1 million).

In leading value market Japan, March exports increased modestly in volume (37,806 mt, up 2 percent) but climbed 12 percent in value to $155.2 million -- the highest since October 2014. In the first quarter, export volume to Japan was up 7 percent in volume (101,581 mt) and 13 percent in value ($411.3 million). Chilled pork exports to Japan increased 3 percent to 56,307 metric tons, while value increased 10 percent to $260 million.

Other first-quarter highlights (compared to year-ago levels) for U.S. pork included:

Strong variety meat demand in China/Hong Kong helped drive exports to the region 5 percent higher in volume (131,036 mt) and 11 percent higher in value ($258.8 million). While muscle cut exports slowed, variety meat volume climbed 24 percent (to 86,097 mt) while value was up 29 percent to $176.2 million -- making an important contribution to per-head value.

Since posting a slow start in 2016, pork exports to South Korea have steadily regained momentum as exports totaled 51,158 mt (up 31 percent) valued at $137 million (up 39 percent). Most U.S. pork now enters Korea duty-free under the Korea-U.S. Free Trade Agreement, which has helped boost volumes of raw material for further processing, as well as processed pork products.

Another major market rebounding from last year's slow start is Colombia, where U.S. pork also benefits from lower tariffs secured in a recent free trade agreement. First quarter exports to Colombia doubled from a year ago in both volume (16,532 mt) and value ($36.5 million). Also bolstered by a near-doubling of exports to Chile and Peru, first-quarter pork exports to South America were up 95 percent in volume (23,838 mt) and 94 percent in value ($57 million).

In Australia, an important market for U.S. hams and other cuts utilized in further processing, exports increased 38 percent in volume to 20,607 mt, while export value climbed 43 percent to $57.7 million.

March beef exports to Japan increased 41 percent in volume (28,135 mt) and 39 percent in value ($167.7 million). This capped a very strong first quarter in which exports jumped 41 percent (to 74,411 mt) and 42 percent (to $427.3 million), respectively. This included a 55 percent increase in chilled beef volume to 33,366 mt, as U.S. beef captured its highest-ever market share in Japan's high-value chilled sector.

Coming off a record performance in 2016, beef exports to South Korea posted a very strong first quarter, with volume up 23 percent to 42,551 mt and value increasing 30 percent to $267.5 million. With U.S. beef continuing to gain momentum in Korea's retail and restaurant sectors, first-quarter chilled beef exports were up 78 percent to 8,508 mt.

Other first-quarter highlights (compared to year-ago levels) for U.S. beef included:

Exports to Mexico posted a solid increase in volume (57,057 mt, up 17 percent), while value increased 3 percent to $226.8 million. An important destination for shoulder clods, rounds and other beef end cuts, muscle cut exports to Mexico expanded at an even faster pace, climbing 23 percent in volume (30,015 mt) and 11 percent in value ($175.1 million).

Despite a recent slump in the value of the Canadian dollar, beef exports to Canada have rebounded in 2017, with solid increases in both volume (29,909 mt, up 14 percent) and value ($190.5 million, up 19 percent).

In Taiwan, where U.S. beef captures more than two-thirds percent of the chilled beef market, exports increased 28 percent in volume to 9,746 mt and 29 percent in value to $85.7 million. This included a 10 percent increase in chilled beef volume to 3,650 mt.

Beef exports to South America were down 2 percent in volume (4,919 mt) but increased 16 percent in value ($23 million), bolstered by a strong performance in Colombia and a recent rebound in Peru. This week USDA also confirmed the arrival of the first U.S. beef shipments to Brazil since a BSE-related suspension was imposed more than 13 years ago. The first significant export volumes for Brazil will likely appear in the May USDA data, which will be available in early July.

March exports to South Africa (1,107 mt) were the highest since the market opened last year, making it the month's 10th-largest volume destination for U.S. beef. For the first quarter, South Africa ranked 11th at 1,971 mt. Export value was $1.5 million, with most of the volume being beef livers.

HOGS: (thepigsite.com) -- Following a trend seen throughout most of 2016, Japanese pork imports continued to grow modestly during the first quarter of the year being up 8 per cent year-on-year, reports Bethan Wilkins, AHDB Analyst.

In contrast to the trend seen early in 2016, the US and Canada were the main beneficiaries of the import growth. Volumes from the US were 10 per cent higher than 2016 levels, while Canadian shipments grew a healthy 19 per cent. In contrast, EU shipments did not show any increase on the year and consequently lost 2 per cent of the market share.

The stagnation of imports from the EU, which consist almost entirely of frozen product, likely comes of the back of elevated shipments when prices were low in 2016. Supplies are reported to have exceeded demand from processors, leading to a 5 per cent increase in stocks at the end of 2016. As such, the EU may struggle to make gains on the Japanese market this year not helped by increasing EU pig prices.

Conversely, the majority of North American shipments are fresh/chilled products. Supplies are expected to be plentiful this year, following expanding US production, which should keep prices competitive and support Japanese import requirements.

However, whether import growth continues through 2017 is uncertain. This is due to an anticipated slight decline in Japanese consumption on the back of competition from rival proteins; poultry and beef. The latest USDA forecasts anticipate Japanese pork imports to be down around 1 per cent on the year during 2017

UK pork does not currently compete on the Japanese market, however as the fourth largest global pork importer, developments are important to ensure that supply and demand are balanced on the global market. Whether developments in Japan have any dampening effect on the global and UK markets this year remains to be seen. However, tightening supplies within the EU and growing demand from other Asian destinations, could counter any difficulties faced.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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