Cattle: Steady-$2 HR Futures: 25-50 HR Live Equiv $130.74 + .92*
Hogs: $1 LR Futures: Mixed Lean Equiv $ 83.36 + .33**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
The cash cattle trade will remain in dry-dock Tuesday with both bids and asking prices poorly defined. Barring a big break in the board, significant trade volume will probably be delayed until the second half of the week. Live and feeder futures should open moderately higher, supported residual buying and stabilizing fundamentals.
Hog buyers seem ready to resume defensive cash procurement. Opening bids are likely to be at least a buck lower. With a $15 to $16 spread between the cash lean index and the carcass value, processing margins remain excellent. Accordingly, it's hardly surprising that packers are pushing chain speed as hard as ready numbers will allow. Lean futures should open with uneven price action linked to bear-spreading and long liquidation.
|BULL SIDE||BEAR SIDE|
|1)||Beef cutouts closed sharply higher on Monday with signs of decent early-week box movement. For the first time since June 12, both choice and select cutouts advanced by more than a dollar.||1)||Given the way October and December live futures opened higher on Monday but closed no better than mixed, overhead chart resistance has once again been reinforced and strengthened (e.g., $108 to $109 basis October).|
|2)||Although showlist size varies from state to state (i.e., larger in Texas and Colorado, smaller in Kansas and Nebraska), the overall offering of ready cattle looks somewhat tighter than last week.||2)||Though many are expecting a friendly on feed report with August placement 5% or more below 2016, all the potential goodies may already be dialed into the market in terms of premiums in deferred live contracts.|
|3)||The pork carcass value closed moderately higher, supported by better demand for rib and belly cuts.||3)||Some believe this week's hog slaughter could approach 2.5 million head, the largest weekly total since December 2016. The seasonal expansion is well underway and is being supplemented by the addition of two new plants.|
It is possible the pork cutout could enter a time of price support for the next two weeks, as there is a strong seasonal move upward in the immediate future. Bone-in loins and butts are due to catch some seasonal strength. Also, bellies could soon find support.
|4)||If the cash index continues to implode at the bearish rate of $1 plus per day, spot October lean hogs may not be near cheap enough, not with more than three weeks left in its contract life.|
CATTLE: (Kyodo News) -- Taiwan on Monday conditionally lifted a 16-year-old ban on beef imports from Japan, clearing a major roadblock in negotiations on an economic partnership agreement, the government announced.
The Executive Yuan, the executive branch of Taiwan's government, said on its website that the new measure comes into force with immediate effect.
The announcement came after the Food and Drug Administration issued a two-month notification on July 17 that Taiwan had decided in principle to lift the bans.
FDA Division of Food Safety section head Wu Tsung-his told Kyodo News that the Taiwan government will now wait for the Japanese government to provide a list of government-certified facilities so Taiwanese importers can import Japanese beef from those facilities.
Nearly 95 percent of Taiwan's beef is imported. Last year the United States was Taiwan's No. 1 beef supplier by weight and value, followed by Australia and New Zealand.
Before the bans were imposed following the discovery of cattle with mad cow disease, Japan exported a minuscule amount of beef and beef products to Taiwan.
In 2000, Japan shipped only 4 tons, only 0.01 percent of the total amount imported by Taiwan that year.
According to the details published on the FDA website, when shipments resume, Japanese beef and beef products exported to Taiwan must come from cattle less than 30 months old. Younger cattle are considered to pose less risk of mad cow disease.
Taiwan also agreed to resume Japanese beef imports on the condition that the cattle are slaughtered or processed at government-certified facilities and come from cattle which can be traced to the farms where they were born and raised for more than 100 days.
Also, specific risk materials, parts of the cow that are at particular risk of infection, must be removed from cows slaughtered for beef and beef products shipped to Taiwan. Mechanically recovered meat, mechanically separated meat and advanced meat recovery product from the skull and vertebral too will not be accepted.
All imports of Japanese beef and beef products must also pass related radiation inspections and carry government documents with necessary information proving that they pass necessary inspections, the FDA website said.
Lifting the ban on Japanese beef is seen by many as an important step forward in the bilateral negotiations on an EPA.
With the lifting of the ban, both sides can move on to the next hurdle: restrictions on food imports from five Japanese prefectures imposed in the wake of the 2011 Fukushima nuclear disaster, according to sources familiar with the matter.
Following the March 2011 disaster triggered by a powerful earthquake and tsunami, Taiwan banned food imports from Fukushima Prefecture and nearby Ibaraki, Gunma, Tochigi, and Chiba prefectures, and in addition has been conducting random radiation checks on nine categories of imported foods.
While the administration had formulated a plan to relax the ban in two stages, the plan has received strong opposition from the main opposition Nationalist Party (KMT).
Sources involved in the negotiations who spoke on condition of anonymity said that the food ban has become a highly charged political issue and that it would be difficult to convince the Taiwanese public to accept the lifting of the ban if Taiwan cannot get something in return such as an EPA.
HOGS: (Politico) -- The National Pork Producers Council is acutely aware of how much is at stake for the U.S. pork industry if it becomes collateral damage as American negotiators push for other priorities.
"If we lose our tariff-free status, it will be a financial catastrophe for our producers," Nick Giordano, NPPC's vice president for global government affairs, told Morning Trade. "They will come with pitchforks and shovels for me, for NPPC leadership, and our elected officials will not escape unscathed."
Giordano's comments came in response to a Reuters report published Friday saying that Mexican negotiators are considering retaliating against a potential U.S. proposal involving seasonal produce by limiting the amount of pork the U.S. can export to its southern neighbor. Giordano said while he had not heard of specific moves to retaliate by targeting U.S. pork, he was "not surprised."
The produce proposal, which POLITICO first reported last month, has not been presented yet. But it would make it easier for growers of fruits and vegetables to allege that Mexico is selling produce in the U.S. at below-market prices by allowing American producers in a given region to band together to bring anti-dumping and countervailing duty cases backed by seasonal data.
"We're not a big fan of what the southeastern growers are trying to do, because there's always collateral damage at things like this," Giordano said. "We don't want to be a bargaining chip."
John Harrington can be reached at firstname.lastname@example.org
Follow John Harrington on Twitter @feelofthemarket
© Copyright 2017 DTN/The Progressive Farmer. All rights reserved.