DTN Early Word Opening Livestock

Cattle Futures Staged for Mixed Opening

John Harrington
By  John Harrington , DTN Livestock Analyst
(DTN file photo)

Cattle: Steady Futures: mixed Live Equiv $140.16 - 0.65*

Hogs: Steady Futures: 50-100 HR Lean Equiv $109.97 + 0.79

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Look for a typically quiet Monday in cattle feeding country with packers exclusively interested in the collection of new showlists. We expect the fed offering to be somewhat larger than last week. Both buyers and sellers are eager to learn whether last week’s firmness was a one-trick pony or the first step in a more significant recovery. Our guess is that initial asking prices will start out around $122-plus in the South and $192-plus in the North. Live and feeder futures should open on a mixed basis thanks to a combo of follow-through buying and long liquidation.

Hog buyers are expected to return to work this morning with generally steady cash bids. Supply and demand fundamentals are expected to remain generally positive over the next several weeks,, but the next major swing will no doubt be bearish. Lean futures are likely to open with uneven prices with the front end gaining on deferred. Spot July is scheduled to expire today at high noon.

BULL SIDE BEAR SIDE
1) Feedlot psychology should benefit from last week’s shot in the arm (i.e., a $2 hike in cash sales and the board’s significant recovery). Look for early-week asking prices to have more starch. 1) Last week’s combination of higher cattle prices and further losses in the struggling wholesale beef trade means that packer margins are tightening, a reality sure to make cattle more defensive through the balance of the month.
2) Now that the "official" index roll in live cattle futures is completed, specs should be more willing to support spot August, especially given the premium. 2) For the week ended July 11, noncommercials continued liquidating long positions while adding to shorts, with their net long position in live cattle futures declining by 5200 to 114,800 contracts.
3) The pork carcass value scored a solid rebound on Friday thanks to better demand for loins, hams, and picnics. Attractive processing margins continue to be supportive to the cash market. 3) Last week’s hog kill popped back over 2.2 million head for the first time since Memorial Day. The seasonal bottom in pork production may have already come and one.
4) For the week ending July 11, noncommercial traders were net buyers of lean hog futures, increasing their net position by 5,900 contracts to 64,600. 4) Despite the large premium of the cash index and its pending debut as the spot contract, August lean hog futures close under 80 on Friday for the first time since June 28. Clearly, the late summer board is eager to the lead the cash market lower.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Xinhua) -- Brazilian meatpacking group, JBS, had paid monthly bribes to around 200 agricultural inspectors for several years, according to documents turned over by its executives during a corruption investigation.

On Thursday, financial daily Valor Economico published that these monthly payments were worth up to 20,000 reais (6,000 U.S. dollars) for each agricultural inspector who had been "bought" in exchange for flexibility in the application of sanitary norms.

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A list of all those involved will be sent to Brazil's prosecutor-general within 60 days, as part of the cooperation agreement signed by Wesley Batista, one of the owners of JBS.

In his statement, Batista admitted that the payment of bribes had been a regular practice to gain the favors of federal inspectors during their inspections of the company's facilities.

On March 17, the federal police launched Operation Weak Flesh, which revealed systematic violations of sanitary regulations by the country's largest meatpacking company, including the sale of meat past its sell-by date.

JBS, the largest meatpacking company in the world, saw around 60 of its production facilities found in violation of regulations.

(hpj.com) -- Data from the 2016 National Beef Quality Audit suggests the beef industry continues to improve the quality of its products, but there is still room for improvement. Results from the research were presented at a session during the 2017 Cattle Industry Summer Meeting in Denver July 13.

The research, funded by the Beef Checkoff Program, has been conducted every five years for the past quarter century, and provides a set of guideposts and measurements for cattle producers and others to help determine quality conformance of the U.S. beef supply. NBQA results through the years have helped lead to improvements in cattle and beef production, including reductions in carcass blemishes and fewer lost opportunities related to branding and other practices.

Among the positive findings in the 2016 NBQA are a significant increase in Choice and Prime carcasses, a high mobility score for cattle entering packing plants and the fact that the number of blemishes, condemnations and other attributes that impact animal value remain small. Among areas for possible improvement are the fact that there was more bruising (although bruising was less severe) and the fact that more than 30 percent of livers harvested did not pass inspection and were condemned.

"The research proved the beef cattle industry has a great story to tell, but also suggests we aren't getting that story to as many people as we should," said Josh White, executive director of producer education for the National Cattlemen's Beef Association, a contractor to the Beef Checkoff Program. "Utilizing the Beef Quality Assurance program and its principles more uniformly throughout the industry could not only enhance industry commitment to better beef, but would help increase consumer confidence and encourage greater beef demand.

This research suggests that carrying the BQA message throughout the industry would benefit every beef audience."

HOGS: (thecattlesite.com) -- The President of the Canadian Agri-Food Trade Alliance suggests the prospects of the Trans-Pacific Partnership moving forward without the participation of the United States presents a tremendous opportunity for Canadian agriculture.

Last week the European Union and Japan announced they have reached a free trade agreement in principle.

Brian Innes, the President of the Canadian Agri-Food Trade Alliance, says Canada is losing ground to nations like Australia that already have free trade agreements with Japan and word that Japan and Europe have reach tentative deal accelerates the need for Canada reach an agreement that would involve Japan.

"It's certainly time that we got right to it. From a Canadian perspective it's a little like getting ready to watch a train wreck when other countries have access to Japan that we don't.

"Japan is such a high value market for Canadian agriculture, it's so critical that we have competitive access in that market and with Europe now signaling that they may have an agreement and Canada not having an agreement that could be really bad news for our sectors that export where Europe could fill that market with better access.

"Pork is a prime example. Clearly we have a globally competitive pork industry but it succeeds because we've got competitive access with other countries.

"The Danes are also major pork exporters in the world as are other European pork producers.

"If they have better access to Japan than we have, that puts us at a disadvantage which means we get less value for our product or the Europeans beat us out of the market.

"The prospect of losing access to Japan is a really serious one for Canadian agriculture and so now, more than ever, we really need to get an agreement with Japan and the TPP agreement that has already been agreed to by Japan and Canada is a great place to start."

Mr Innes says the fact that that key countries, including Japan, New Zealand and Australia have indicated they want to move the TPP forward without the United States provides an important opportunity.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington