DTN Early Word Opening Livestock

 
Cattle: Stdy/wk with Wed Futures: mixed Live Equiv $159.83 + 0.13*
Hogs: Steady Futures: mixed Lean Equiv $ 95.20 - 0.44**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Light to moderate cattle trading developed at midweek as some producers moved to accept lower bids of $132 in the South ($2 lower than last week) and mostly $208 in the North (generally $5 lower). Our guess at this point is that packers and feedlot managers still have some work to do today before breaking for the long holiday weekend. Yet it's possible that country movement was larger than we thought, so check out mandatory summaries later this morning. However close cash players are to being done, the unsold steers and heifers remaining on showlists are probably priced around $134 in the South and $210-plus in the North. Live and feeder futures should open on a mixed basis tied to a combination of residual selling and pre holiday/on feed report short covering.

Hog buyers are expected to resume business this morning with generally steady bids. As we prepare to move toward the long weekend, Saturday slaughter plans are quite minimal, perhaps as large as 3,500 head but little more. Keep in mind that processors won't shift back into high gear until next Tuesday. But assuming that decent processing margins hold, chain speed will be aggressively ramped up the following Saturday (i.e., June 3). Lean hog contracts are likely to begin with mixed prices thanks to light bull spreading and late week positioning.

	BULL SIDE		BEAR SIDE
1)	Between lower cattle costs and carcass value stability, beef packer margins continue to improve. Such a reality should eventually foster a recovery in the feedlot trade.	1)	Cattle buyers are being successful in pressing feedlot cash still lower this week, gathering light to moderate numbers at midweek with lower bids (i.e., $132, $2 lower in the South; mostly $208 in the North, $5 lower). Increasingly ample fed offerings seem evident to both buyers and sellers.
2)	Even if Friday's on feed report confirms bearish April placement expectations (i.e., up 6-8 percent from last year), such negative news may already be built into discounted deferred live cattle contracts.	2)	For the week ending May 20, U.S. hatcheries set 225 million broiler eggs in incubators, up 2 percent from a year ago. At the same time, chicks placed totaled 181 million chicks; up 2 percent from 2016.
3)	For the week ending May 20, Iowa barrows and gilts averaged 280.8 pounds, 1.2 pounds lighter than the prior week and 2.1 pounds smaller than 2016.	3)	The pork carcass value closed moderately lower on Wednesday, trimmed by lower sales of picnics, ribs, hams, and bellies.
4)	Looking into next month, the historical odds for higher cash hog prices are quite good. June monthly average has been higher than May more than 70 percent of the time over the last 10 years.	4)	Soon after an early attempt to extend an early-week rally, lean hog futures attracted significant selling interest on Wednesday. This stand as a sure sign of commercial nervousness, especially given current hedgable price levels through the fall and the uncertain sustainability of pork demand strength.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Omaha World Herald) -- New details have emerged on what U.S. beef producers may have to do to export their product to China, but the industry still awaits specifics that will determine the size of the opportunity ahead, the U.S. Meat Export Federation said Tuesday.

Producers would be required to track the locations where cattle raised for beef exported to China are born and slaughtered, under a U.S. proposal that has been accepted by Beijing, Reuters reported Monday, citing the USDA.

The beef exported to China also must be free from residue of beta-agonists, a growth-enhancing feed additive. And beef shipped to China must be from cattle under 30 months of age, a standard designed to reduce the risk of so-called mad cow disease.

Details could be finalized by early June, with shipments starting in July, the report said.

While there was intense buyer interest at a trade show in China last week, it's still hard to size up the market without a final deal in place, said Joel Haggard, senior vice president of the meat export federation. The group is a trade association representing cattle ranchers and feeders, and beef processors.

"Without having the details or protocol, without knowing the type of programs our ranchers are going to have in place to produce for the China market, it's very difficult to gauge the opportunity," he told reporters in a conference call Tuesday.

It appears ranchers and packers may have to raise and process beef specifically for the Chinese market, or be able to segregate those animals.

"It's pretty clear we're going to have a special China beef program that runs through our industry," Haggard said.

Exporters and importers don't have enough information yet to negotiate prices, which will affect demand and will determine how much of an incentive ranchers have to produce cattle to meet China's requirements, Haggard said.

"It's going to be a tricky start, I think it's going to be a slow start, but long-term, it looks promising," he said.

The federation expects China to assess its standard duty of 12 percent on imported beef, plus a 13 percent value-added tax.

Nebraska is the country's top beef processor, and state and business leaders have been laying the groundwork to benefit from what they estimate to be a $2.6 billion market for beef.

Omaha beef processor Greater Omaha Packing has contributed input to the industry groups working with the Trump administration on negotiations. A tour of the company's Omaha plant last fall helped spur China's decision to reopen its market to U.S. beef, the company said.

"We believe the tour helped them see how modern and capable plants can be in the U.S.," plant spokesman Mark Theisen said.

He said the plant already ships products to 58 countries, meeting a variety of food safety, traceability and labeling protocols.

And he said the company believes U.S. packers already exceed international animal health and food safety standards, so no extra criteria should be needed to make beef products acceptable in China, where some consumers are wary about food quality.

HOGS: (American City Business Journals) -- The Maschhoffs, a family owned pork producer, hired Paul Fox as chief operating officer, effective May 22.

Carlyle, Illinois-based The Maschhoffs has been without a COO since 2015, according to Josh Flint, company spokesman. Bradley Wolter had been COO of The Maschhoffs until fall 2015, when he was named president.

Fox previously served as managing director of economic benefits for Brighton, Illinois-based FamilyFarms Group, a member-owned group of family farm businesses, following a 17-year career at multinational food producer Tyson Foods Inc.

"Paul was selected based on his significant leadership experience in the protein industry," Flint said.

At The Maschhoffs, Fox will be responsible for the company's operations in nine states and five production regions. The pork producer has a 218,000-sow breed-to-wean business with an annual production capacity of about 5 million market hogs, according to the company.

A St. Louis native, Fox earned a bachelor's degree in animal science from Missouri State University, and a master's degree in leadership and ethics from John Brown University.

The Maschhoffs saw revenue drop 8 percent in 2016 to $1.2 billion, as an influx of hogs on the market led to a drop in pork prices. Last year, The Maschhoffs closed its holding company, Maschhoff Family Foods, as it sold its GNP Co. subsidiary to Pilgrim's Pride Corp. With the $350 million sale of GNP, a chicken supplier, The Maschhoffs is expected to see total revenue drop by one-third in coming years, Flint previously told the Business Journal .

The company is owned by Ken, Julie, Dave and Karen Maschhoff. Fox reports directly to President Bradley Wolter.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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