DTN Early Word Opening Livestock
Cattle Futures Seem Set to Open Moderately Higher at Midweek
GENERAL COMMENTS:
Cattle: Steady-$2 LR Futures: 50-100 HR Live Equiv $159.53 + .18*
Hogs: Steady-$1 HR Futures: Mixed Lean Equiv $ 95.43 - .10**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Cash cattle action shouldbe slow in developing Wednesday. Feedlot managers will probably keep one eye on the board and the other on news from the FCE. Given the holiday-shortened schedule, it's more difficult than ever to predict the timing of cash business. Yet significant trade volume could easily be postponed until Thursday or Friday. At this point, we assume asking prices will start out around $134 in the South and $210 to $212 in the North. Live and feeder futures are set to open moderately higher, supported by follow-through buying and still-large cash premiums.
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The cash hog trade should open with bids steady to $1 higher. It sounds like analysts are expecting this week's kill to total close to just under 2 million head. Processing margins remain well into the double-digits, and for Saturday, could total as much as 220,000 head. Lean futures should open on a mixed basis tied to residual selling and short-covering.
| BULL SIDE | BEAR SIDE | ||
| 1) | Cattle futures seemed to quickly shake off the bearish implications of the May 1 Cattle on Feed report by closing with solid gains on Tuesday. More and more traders are concluding that current discounts may be deep enough. | 1) | New showlists distributed in feedlot country on Tuesday were generally larger with only Nebraska offering fewer ready steers and heifers. |
| 2) | After a three-week period of sluggish sales, out-front (i.e., with delivery specs of 22 days or more) boxed beef business picked up last week, topping 1,000 loads for the first time since late April. | 2) | With spot June live cattle at a $9 discount to last week's cash market, basis remains very strong, compared with more typical levels in late Mayand June being par to $1 below cash. Such basis strength is likely to work against feedlot leverage. |
| 3) | Despite the clumsy start to the short trading week, lean hog futures continue to sport both bullish short and long market trends. | 3) | Nearby lean hog futures failed to tap follow-through buying strength and technical potential Tuesday by closing sharply lower. Such action supports ideas that the board is overbought and/or running out of gas. |
| 4) | Bellies hold the key to summer highs for the cutout, hogs and futures. The good news is that seasonal odds favor a sharp belly appreciation as we speed toward BLT season over the next 30 to 60 days. | 4) | For the most part, the current structure of lean hog futures points to greater and greater pork production through the balance of 2017 and into 2018. |
CATTLE: (foodmarket.com) -- JBS S.A., the world's largest meatpacker, announced Friday that Joesley Batista resigned as chairman and member of the board. The Board of Directors unanimously elected Tarek Farahat as Batista's replacement.
Company owners and brothers Joesley and Wesley Batista entered into a plea bargain deal that accused Brazil's President Michel Temer of endorsing the bribing of a witness in the country's largest meat scandal. The brothers' testimony, released last week, unleashed a political crisis, alleging that they bribed hundreds of politicians, reports Reuters. Both brothers resigned from their senior posts effectively immediately.
Tarek Farahat has worked for Procter & Gamble for 26 years, serving in a number of leadership positions in several regions around the globe, including the Middle East, Europe and Latin America. From 2006-12, he served as president of P&G Brazil. In 2012, he became president of P&G Latin America and an officer of the company's executive board. Farahat has been a member of the Board of Directors of JBS since 2013 and has served as global president of Marketing and Innovation since 2015.
In the same meeting, José Batista Sobrinho was unanimously elected vice chairman of the Board.
The Board also ratified the creation of a Governance Committee, which will be led by Farahat and whose main objective will be to implement global best practices in corporate governance and compliance at JBS.
"Governance is my utmost priority. We will work hard to restore trust with the market and protect the more than 235,000 families that are part of JBS. There is a significant amount of work to be done in order to regain the trust of our stakeholders," states Farahat.
"We remain focused on offering consumers the highest quality products and services while maintaining a close partnership with our suppliers and clients, and supporting our more than 235,000 team members worldwide," adds Farahat.
HOGS: (foodmarket.com) -- A Canadian shipment of pig feet to China has tested positive for residues of banned growth drug ractopamine and may curb future trade, Canadian government and industry officials say.
China views the tainted shipment as a "systemic failure" of Canada's program that certifies pork sent to China is free of ractopamine, and the situation "could affect future pork exports," according to an email to the industry from the Canadian Food Inspection Agency (CFIA). The email circulated on Monday and was obtained by Reuters.
China, the world's biggest pork consumer, is one of Canada's biggest pork markets, importing 314,000 tonnes worth C$587 million in 2016, according to Statistics Canada. Pig feet are a popular dish in China.
John Harrington can be reached at feelofthemarket@yahoo.com
Follow John Harrington on Twitter @feelofthemarket
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