DTN Early Word Opening Livestock

Cattle Paper Staged for Firm Opening

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

Cattle: Steady-$2 HR Futures: 50-100 HR Live Equiv: $140.47 - .15*

Hogs: $1 HR Futures: Mixed Lean Equiv: $ 71.21 + .24

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

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

GENERAL COMMENTS:

Feedlot business will typically be in prep-mode Monday as both sides focus exclusively on the distribution of new showlists. We expect showlists to be steady to somewhat larger than last week. Asking prices will be slow to develop with producers closely monitoring the board potential. Live and feeder futures should open at least moderately higher supported by greater packer spending on Friday and technical buying interest.

Look for the cash hog trade to launch the new week with bids steady to $1 higher. Market barrow and gilt numbers now seem set to generally contract over the next several months witha reduction in numbers through the end of the month and more significant curtailment as we get deeper into May. Lean futures seem set to open mixed thanks to a slow combination of long liquidation and short-covering.

BULL SIDE BEAR SIDE
1) The cash cattle trade jumped significantly higher on Friday for the first time in nearly a month (i.e., $120 in Kansas, $2 to $3 higher live; mostly $122 in the North, $6 higher basis Nebraska's weighted average). While second quarter fed numbers are scheduled to grow significantly in the weeks ahead, many showlists remain quite green. 1)

Totaling 605,000 cattle last week, federally inspected weekly chain speed should relentlessly climb over the next 30 days, averaging in the 640's by mid-May.

2) While unusually cold conditions so far this spring have kept grills stashed well behind snow blowers, no one doubts that the next big move in beef cutouts will be sharply higher. 2) For the week ending April 10, declines from the long side and continued increases in shorts led to another sharp drop in net-long positions in live cattle futures held by noncommercials (i.e., down 10,100 to 35,000).
3) After steadily averaging over 2.4 million head in March, last week's hog kill dropped to 2.385 million. The seasonal trend going forward is down, until the year's smallest kill is notched this summer. 3) During the same week, noncommercial traders decreased their net-long position in lean hog futures by 6,700 contracts, now net-short at 3,600.
4)

The total move of lean hog futures last week was very strong with more than 400-point gains on the May, June and July contracts. Technically, this progress sponsored a shift in the short-term trend to positive.

4) With June lean hog futures starting Monday nearly $25 above where April expired on Friday, the big question becomes how much seasonally bullish fundamentalshave already been dialed into the early summer board.

OTHER MARKET SENSITIVE NEWS

CATTLE: (USDA/APHIS) -- The United States Department of Agriculture's (USDA) Animal and Plant Health Inspection Service (APHIS) is proposing to update its branding requirements for cattle entering the United States from Mexico. The changes would simplify the branding requirements, making the brands easier to apply and read, reducing errors. They would ensure Mexican cattle are easily identifiable and traceable for the remainder of their lives in the event of a disease detection.

The Mexican government requested changes to address issues with the current branding requirements, including confusion between the Mx and MX brands used for spayed heifers and breeding cattle respectively; the small size of the brands, which can cause blotching and require rebranding; and the rejection of animals at ports entry based on questions about whether they were branded correctly.

The proposed rule addresses these concerns by requiring an M brand for all cattle. The brand would also be larger in size for better readability. Together, these steps will reduce branding errors. To make it easy to distinguish between feeder and breeding cattle, brands for breeding animals would be placed on the shoulder. Feeder cattle would continue to be branded on the back hip.

The proposed rule would still allow an MX ear tattoo option for breeding cattle, instead of a brand, because the tattoos have not posed a readability problem and are a permanent form of identification. Cattle imported from Mexico would still require an approved eartag for traceability purposes.

USDA is already allowing Mexico to use the M brand on spayed heifers and breeding cattle as an alternate to the Mx and MX brands. This has reduced errors and confusion at border ports. The change is proving to be beneficial for both countries.

USDA will accept comments on this proposed rule for 60 days following publication in the Federal Register.

HOGS:(USDA) -- U.S. Secretary of Agriculture Sonny Perdue and U.S. Trade Representative Robert Lighthizer Monday announced the government of Argentina has finalized technical requirements that will allow U.S. pork to be imported into Argentina for the first time since 1992.

Since the White House announced an agreement with Argentina last August, technical staff from the U.S. Department of Agriculture and the Office of the U.S. Trade Representative have been working with Argentina's Ministry of Agro-Industry on new terms for market access that are practical, science-based and consistent with relevant international animal health standards. The finalization of these technical requirements means that U.S. exports of pork and natural swine casings can now resume.

"This breakthrough is the result of efforts by this Administration to help America's farmers and ranchers reach new markets and ensure fair trade practices by our international partners," Perdue said. "Once the people of Argentina get a taste of American pork products after all this time, we're sure they'll want more of it. This is a great day for our agriculture community and an example of how the Trump Administration is committed to supporting our producers by opening new markets for their products."

"I welcome Argentina's decision to allow imports of U.S. pork products and the economic opportunity it will afford to U.S. pork producers," said Lighthizer. "This effort demonstrates the Trump Administration's continued commitment to address foreign trade barriers to American agriculture exports."

The United States is the world's top pork exporter, with global sales totaling $6.5 billion last year. Argentina is a potential $10-million-per-year market for America's pork producers, with significant growth opportunities possible in subsequent years.

John A. Harrington can be reached at john.harrington@dtn.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington