DTN Early Word Opening Livestock

Cattle Futures Staged at Midweek for Further Strength

John Harrington
By  John Harrington , DTN Livestock Analyst
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Cattle: Steady Futures: 50-100 HR Live Equiv $132.42 + .24*

Hogs: Steady-$1 HR Futures: Mixed Lean Equiv $ 77.70 - .32**

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

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

GENERAL COMMENTS:

Cattle buying interest could slowly start to develop Wednesday, at least in terms of more preliminary bids placed on the table. But look for asking prices to firm thanks in part to Tuesday's recovery in cattle futures. Southern showlists should be priced around $110 to $112 with the Northern offering priced around $174 to $176. Live and feeder futures should open moderately higher, boosted by residual buying energy and technical concerns.

The cash hog market should open with bids steady to $1 lower. The country trade firmed again Tuesday as receipts seemed to moderate a bit. At this time, the Saturday kill is expected to total close to 237,000 head. Lean futures seem set to open on a mixed basis with nearby gains further on deferreds.

BULL SIDE BEAR SIDE
1) Cattle futures successfully rehabilitated significant buying interest on Tuesday and scored a generous serving of triple-digit gains. Spot October live bounced off its 40-day moving average and December closed back above its 100-day moving average. 1) There is still a gap in the December live cattle daily chart left from this past Monday's lower move. Furthermore, the longer-term trend in the continuous chart continues to point downward.
2) Beef cutouts moved respectably higher Tuesday with the choice box landing its highest close since Aug. 15. Gross packer margins are decent, lending cattle buyers plenty of incentive to support feedlot cash. 2) Early-bird guesses suggest that feedlot managers continued to place more cattle in September, possibly 3% to 5% more than 2016.
3) Spot October lean futures surged sharply higher on Tuesday, closing more than $5 over the cash index. Somebody thinks the cash hog trade is set to steadily recover through the first half of the month. 3) The pork carcass value closed moderately lower on Tuesday, pressured by softer demand for ham, belly and picnic cuts.
4) Indeed, the cash hog trade played impressively higher Tuesday for the second consecutive session with the national dressed base closing another .97 higher. Once again carcass sales totaled barely over 10,000 head. 4) Monday's hog kill was revised to 442,000 head (down 17,000 from the original estimate) with several plants experiencing technical problems. With production requirements high through the fall, facilities could well have difficulty keeping up without experiencing both equipment and labor problems. If enough bearings start to burn and/or workers tire, practical chain speed could still prove to be inadequate to handle market numbers.

OTHER MARKET SENSITIVE NEWS
CATTLE:

(Nebraska Ag Connection) -- An initial and ambitious step toward developing demand for U.S. beef in China was taken this week as the U.S. Beef China Roadshow, a week-long series of events organized by the U.S. Meat Export Federation (USMEF), brought exporters and importers together in Beijing, Shanghai and Guangzhou. These activities were made possible through support from the Nebraska Beef Council.

The "roadshow" moniker was an appropriate choice, as USMEF staff and 17 member companies began the journey with a U.S. beef showcase in Beijing, then traveled to Shanghai for a similar program later in the week. By the end of the week, the contingent had moved to Guangzhou, where the roadshow concluded with a U.S. beef overview, trade networking, product sampling and an American-style barbecue reception highlighting alternative cuts. More than 300 Chinese importers -- buyers who were selected and screened by USMEF attended each of the three roadshow events.

"We started in the north, moved to central China and finally ended up in the south, allowing U.S. companies to see and experience different regions of the country," explained Ming Liang, USMEF marketing director in China. "At the same time, Chinese buyers from each stop were able to interact with U.S. exporters. What this roadshow confirmed is that USMEF is in a unique position to facilitate meetings to assist U.S. packers and other exporters, as well as help our partners in the Chinese trade in an effort to get more U.S. beef into the country."

Each of the three roadshow stops featured member companies exhibiting U.S. beef products. A simple opening ceremony in each location included a brief overview of the current U.S. beef market, along with introductions by company representatives. Each roadshow event was themed with a particular popular local beef dining concept, including hot pot, Korean barbecue and western steakhouse. Cutting demonstrations and tastings were held throughout each event by USMEF's technical consultant.

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"The roadshow idea grew out of the need to introduce American companies to the Chinese market, as well as to provide Chinese distributors, retailers, restaurateurs and chefs an opportunity to handle and taste U.S. beef, with a goal of building on the momentum that started when China reopened to U.S. beef earlier this year," said Joel Haggard, USMEF senior vice president for the Asia Pacific. "In each of the three cities, there was obvious excitement on both sides, with importers lining up to meet USMEF's exporter members. We've said that developing the China market will take time, but we are very pleased with the reception we received this week. Our members who took part were excited about what they saw and walked away with serious commercial interest."

"We started U.S. beef sales in August, with the understanding that it will take time to convince our Chinese customers and consumers to move to U.S. beef, and our goal is to let them appreciate the difference between U.S. beef and beef from other countries," said Peter Cho, purchasing manager for Topping Cuisine International (TCI), a major food importer, distributor, meat processor and restaurant chain operator based in Shanghai. "There is a learning curve, and higher pricing is a challenge. But we feel that as time goes by and people are able to experience U.S. beef's quality, demand for it will grow."

Cho added that the success of U.S. beef in China will require a consistent -- and persistent -- approach.

"I believe as demand expands, the U.S. beef industry will eventually produce more beef for the market. As a result, prices should come down," Cho said.

U.S. exporters participating in the roadshow varied from well-established players to new companies hoping to capitalize on China's reopening to U.S. beef.

John Zhong, CEO of Better Protein, Inc., a Des Moines--based operation made up of family farm cooperatives across the Midwest, said his company was able to collect a solid list of contacts at each stop that included not only Chinese importers, but also foodservice and retail professionals.

"Our next step is to go back home to the U.S. and to follow up with our roadshow contacts to learn more about their product needs. "We'll touch base and start working together to create solutions and strategies for the market and I hope to begin supplying U.S. beef to China soon."

Other U.S. exporters agreed that learning about the needs of potential customers was extremely valuable.

"We really looked forward to the roadshow because it would allow us to get a practical education on China and learn what we need to do to be successful here," said Michael Strohecker, CEO of AmeriRanch, a California-based trading company that partners with family cattle ranches in Utah, Wyoming and Montana. "The week went almost exactly as we hoped when it was proposed. We were able to meet with several potential customers and learn what consumers here are interested in. USMEF did a tremendous job of putting both sides together in Beijing, Shanghai and Guangzhou. You could see the differences in each city and region, but you could also see the things that are common throughout China."

Steve Summers, sales manager for One World Beef, also noted that each stop on the roadshow provided a different perspective on the overall market.

"You could feel the energy for U.S. beef, and I was able to meet several top-notch importers at each stop -- and each had their own story and own approach to their business," said Summers. "That's the real advantage to seeing different parts of China and meeting different kinds of buyers. Our job now is to try to match our U.S. beef products with each of those buyers to help fit their needs."

Between roadshow events, USMEF led representatives of member companies on visits to Chinese retailers, cold storage facilities and restaurants serving U.S. beef in each city.

Bernard Rigal, managing director of sales for Colorado-based Platte Valley Food Group, called the roadshow an invaluable experience.

"How else, other than through USMEF's efforts to put this together for members, would we get to accomplish all of these things in one week?" asked Rigal. "It was truly great to see the tremendous opportunity China offers for U.S. beef, with real potential for endless growth. I was able to meet potential customers that were selected by USMEF, so we were able to talk business and discuss future business."

As the final event in Guangzhou wrapped up, Haggard pointed out that the U.S. Beef China Roadshow is only the starting point for what is certain to be a long road to getting U.S. beef established in the marketplace.

"In reality, this is only the very beginning of a campaign to develop distribution channels for U.S. beef in China," he said. "The hard work starts now. We have scheduled trainings and seminars to educate importers, distributors, retailers and restaurant operators about U.S. beef, and those will begin almost immediately. We are truly in it for the long run, but the roadshow was a critical initial event that will add momentum to the current growth in purchases and shipments."

HOGS: (News-Press Now) -- Triumph Foods is looking to expand its pork plant in St. Joseph.

The pork processing facility, 5302 Stockyards Expressway, announced plans Monday for a 12,000-square-foot expansion to be completed by spring 2018.

A press releases states the project includes robotic palletization technology to increase the speed of outbound shipping and reduce manual handling of finished products. Triumph states the addition also will allow for product storage with its strategic partner, Seaboard Foods, to expand its marketing and selling products to domestic retail and food service customers."

The company did not disclose how much it will invest in the expansion.

"While initially this project will not create additional positions directly, it allows us growth, which could translate to additional positions in the future," said Chris Clark, communications manager. "This expansion has come up on the heels of our $1.5 million ham boning line expansion this past June, which created 72 new, full-time jobs."

Pork processed by Triumph is marketed and sold under the PrairieFresh Premium Pork brand.

"This project is representative of the company's continued commitment to implement innovative solutions aimed at improving customer service, upgrading ergonomics and enhancing our capability to produce and distribute new products to the market," said Mark Campbell, chief executive officer with Triumph.

In July, Triumph Foods was working to complete a $1.5 million expansion that included new machinery in a ham boning line. That project was expected to create 72 new jobs.

Triumph employs more than 2,700 people in St. Joseph, making it the city's second-largest employer after Mosaic Life Care.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington

John Harrington
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