DTN Early Word Opening Livestock

 
Cattle: Steady-$2 LR Futures: 50-100 HR Live Equiv $161.12 + 0.59*
Hogs: Steady-$1 HR Futures: mixed. Lean Equiv $ 94.05 + $1.45**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

It should be a typically slow Tuesday in cattle country with bids and asking prices remain poorly defined. That said, we do expect business to develop relatively early this week given the long holiday weekend ahead. Our guess is that both sides will try hard to push the cash market to bed by the close of Thursday. Live and feeder futures should open moderately higher, boosted by follow-through buying and cash premiums.

The cash hog trade is likely to resume this morning with bids steady to $1 lower. Although slaughter numbers are easing a bit, totals remain historically formidable. That fact makes late spring pork look all the more impressive. Lean futures are likely to open on a mixed basis with front contracts supported by light bull spreading.

	BULL SIDE		BEAR SIDE
1)	The late month fed cattle offering appears to be smaller than last week with only Nebraska distributing larger showlists on Monday.	1)	For the third consecutive week, out-front boxed beef sales (i.e., with delivery specs of 22 days or more) fell below 700 loads. With less product pre-sold through the first half of the summer, packers may be more cautious regarding the cost of live inventory as an important piece of processing margins.
2)	Beef cut-outs have opened the week with a decent display of strength with initial box movement and demand described as "moderate to fairly good".	2)	Although freezer stocks of beef as of the end of April (458.5 million pounds) totaled 2 percent below 2016, most analysts were expected a cut closer to 4-6 percent.
3)	The pork carcass value jumped sharply higher yesterday thanks especially to better demand for fresh cuts and bellies.	3)	Frozen pork stocks as of April 30 totaled 599.1 million pounds, 6 percent below 2016 but 9 percent greater than late March and more than generally expected. More specifically, belly stocks increased by 66 percent from March to April.
4)	The seasonal tendency is for June hogs to chop around in a sideways range from this point through expiration, with more potential for slippage than any strong late contract trading gains.	4)	Given the fact that pork processors are planning to slaughter virtually nothing on Saturday, their appetite for live inventory is likely to peak early this week.

OTHER MARKET SENSITIVE NEWS

CATTLE: (foodmarket.com) — Talks on restarting U.S. beef exports to China are moving fast and final details should be in place by early June, the U.S. Department of Agriculture said on Friday, allowing American farmers to vie for business that has been lost by rival Brazil.

As part of a trade deal, U.S. ranchers are set to halt the use of growth-promoting drugs to raise cattle destined for export to China and to log the animals' movements, according to the USDA.

The two sides are negotiating to meet a deadline, set under a broader trade deal last week, for shipments to begin by mid-July.

Finalizing technical details in early June should mean beef companies, such as Tyson Foods Inc and Cargill Inc , can sign contracts with Chinese buyers to meet the deadline, the USDA said.

China banned U.S. beef in 2003 after a U.S. scare over mad cow disease. Previous attempts by Washington to reopen the world's fastest-growing beef market have fizzled out. But now, the quick progress of the latest talks is raising hopes of U.S. farmers.

"Both sides feel the urgency to get it done by the deadline," said Joe Schuele, spokesman for the U.S. Meat Export Federation, which represents Tyson, Cargill and other meat companies.

China's embassy in Washington could not immediately be reached for comment.

The timing of the new deal allows U.S. producers to benefit as Brazil, the world's top beef exporter, is struggling with scandals and rival shipper Australia is suffering from a drought that is hurting production, analysts said.

China accounted for nearly one-third of the Brazilian meat packing industry's $13.9 billion in exports last year.

But in March, Beijing briefly banned Brazilian imports after Brazilian police accused inspectors of taking bribes to allow sales of rotten and salmonella-tainted meat.

JBS SA, the world's largest meatpacker, was involved in the probe and in separate allegations this week that Brazil's president conspired to obstruct justice with the company's chairman.

The food-safety probe hit Brazil's beef exports, which fell by 24.6 percent to $378 million in April from March, according to Abiec, an industry group that represents meat processors accounting for about 90 percent of Brazil's exports.

"This is a very opportune time for the U.S. to step up," said Derrell Peel, an agricultural economist at Oklahoma State University. Chinese appetite for beef has climbed due to its expanding middle class. In 2003, its imports totaled just $15 million, or 12,000 tons, including $10 million from the United States, according to the USDA.

Brazilian exporters hope China's trade deal with Washington will not inflict more pain on meat companies in the country because U.S. exporters will be targeting different, higher-end customers, said Abrafrigo, an association representing Brazil's small meatpackers.

To reopen U.S. trade, Beijing has accepted a U.S. proposal in principle that would require producers to document the locations where cattle raised for beef exported to China are born and slaughtered, the USDA said. The system would be less onerous than tracking cattle throughout their entire lives, during which they can be kept at up to four different locations.

Peel, a livestock expert, estimated that U.S. producers trace the movements of less than 20 percent of the nation's cattle.

Under another rule, U.S. beef exported to China must be raised without a class of growth-enhancing drugs known as beta-agonists that includes Elanco's Optaflexx, according to the USDA. Elanco, owned by Eli Lilly and CO, declined to comment.

A trade group for veterinary drug companies, the Animal Health Institute, said China should accept beef from cattle raised with beta-agonists because they are safe.

U.S. beef shipments to China also will have to come from cattle under the age of 30 months, according to the USDA. Most U.S. cattle will meet that requirement, the U.S. Meat Export Federation said.

The terms of the deal are a win for the United States over Canada, which is approved to ship only frozen beef to China.

China already bans meat from Canadian cattle fed with Optaflexx, according to the Canadian Meat Council. It also requires that Canadian beef be produced from cattle that are less than 30 months old and can be tracked to the farm where they were born.

HOGS: (producer.com) -- Reports of the death of the Trans-Pacific Partnership trade deal have been greatly exaggerated.

There was a plethora of stories following the withdrawal of the United States from the trade pact that suggested the agreement was dead.

However, trade ministers from the remaining 11 countries that formed the TPP as well as representatives from the U.S. and China met in Chile in March to talk about how to salvage the deal.

At that meeting, Canada offered to host the next gathering in Toronto, which occurred earlier this month under a veil of secrecy.

Canadian International Trade Minister Francois-Philippe Champagne was forced to speak to reporters about the gathering after Japanese media broke the story that the meeting was taking place.

"It shows that Canada is front and centre when it comes to trade in the Asia-Pacific region," he was quoted as saying in an iPolitics story.

"(We're) very happy that the talks are progressing."

Champagne said the next meeting will be held in Vietnam in November in conjunction with the 2017 Asia-Pacific Economic Cooperation summit.

Brian Innes, president of the Canadian Agri-Food Trade Alliance, is thrilled that there is an effort afoot to resuscitate the agreement because it would be beneficial for agricultural exporters.

"What I heard new out of the discussions in Toronto is that there is a real interest in charting a path forward with the 11 countries that are remaining in the Trans-Pacific Partnership agreement," he said.

"What we've seen is there has been a lot of positive momentum."

Innes is pleased that Canada is playing a leadership role in what has been dubbed TPP-11.

"(Champagne) has indicated clearly that it's Canada's interest to have a path forward to more open and stable trade in the Asia-Pacific," he said.

Innes said gaining unfettered access to Japan would be the big win for Canadian agricultural exporters in a revitalized TPP deal.

CAFTA would like to see the remaining 11 countries adopt the framework of the existing agreement that all TPP countries signed in February 2016.

"There was a lot of work that went into the agreement so, yes, the best way forward would be to adopt what has already been negotiated," said Innes.

Canada would be one of the biggest beneficiaries of TPP-11, according to a recent blog by the Canada West Foundation.

"Canada does better defensively in not having to worry about competitors gaining access to the U.S. market," it said. "Canada also appears to stand to gain the most from the TPP going ahead without the U.S. as its companies, but not American firms across the border, will have preferential access to the new bloc."

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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