DTN Early Word Opening Livestock

Meat Futures Staged for Mixed Opening

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

Cattle: Steady-$2 HR Futures: 50-100 LR Live Equiv: $140.18 - .29*

Hogs: $1-2 HR Futures: 50-100 HR Lean Equiv: $ 73.03 +1.82**

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

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

GENERAL COMMENTS:

The cash cattle trade is expected to remain poorly tested Tuesday with both buyers and sellers monitoring the board for greater definition of price potential. Chain speed is expected to slowly accelerate this week, possibly totaling as much as 615,000 head. Needless to say, more tonnage on the street will necessitate greater demand to keep feedlot cash on a steady/firm keel. Live and feeder futures seem likely to open moderately lower, checked by Monday's late sell-off.

Hog buyers should be more aggressive Tuesday in terms of bids. Both Monday's jump in carcass value and small cash receipts seem to point in that direction. Lean futures should open higher thanksto the help of short-covering and signs of improving pork demand.

BULL SIDE BEAR SIDE
1) Though falling from its early session high, spot April live cattle still managed to close moderately higher. April has rallied nearly $10 from the early April low and is not far from a major technical retracement in the $119 area. 1)

New showlists distributed in feedlot country were generally larger than the prior week with only Texas offering fewer ready steers and heifers.

2) While beef cutouts remain lackluster (boxes were no better than mixed Monday), a resurgence of interest on key retail feature items is soon expected to support the beef carcass value towards late-spring peaks. 2) Cattle futures tried to rally early Monday, but triple-digit gains could not last much past midsession. The fact that the board closed no better than mixed indicated that both specs and commercials remain nervous about large, second-quarter beef supplies.
3) The pork carcass value exploded sharply higher on Monday with much stronger demand reflected in all primals except the picnic. 3) Lean hog futures broke lower Monday thanks to long liquidation and the deep discount of the cash index. These bearish factors should still be in play Tuesday.
4)

Despite moderately higher bids, hog buyers were not very successful in moving country numbers on Monday. It would seem like more aggressive packer spending will be necessary to fund slaughter plans.

4) Despite the recent strength in the cash hog market, the board is still struggling with concerns over whether the large pork supplies in the coming months will be able to clear through both domestic and export channels.

OTHER MARKET SENSITIVE NEWS

CATTLE: (brownfieldnews.com) -- The industry-led Cattle Industry Working Group (CTWG) has released its draft plan for a voluntary, nationwide cattle I.D. and traceability system.

Leaders of the working group unveiled and discussed the proposal in Denver last week. The meeting was a follow-up to the National Institute for Animal Agriculture's (NIAA) annual conference.

Here are a few of the comments contained in the CTWG's draft proposal:

"Discussions by the CTWG to date have supported a Bookend structure for an I.D. and traceability system. We must walk before we run. A full traceability system may be achievable in the future, but there is strong opposition among producers Tuesday for full traceability."

"Improve the tagging technology from metal clip tags to approved low frequency or ultra-high frequency tags will significantly improve 'speed of commerce' capabilities, supporting infrastructure is already evolving in the market, and it is the market that will determine if the dual technology approach continues to be preferred, or if one technology or the other proves to be more practical over time."

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"840 tags are currently required for interstate movement, however we must facilitate greater participation by including intrastate movement and the inclusion of 900 series tags."

"Adding 900 series tags in the beginning would increase producer participation thus increasing traceability capabilities until the 900 series tags can be phased out. More than 10 million Low Frequency RFID tags were sold into the U.S. market in 2017 and more than 50% of them were non-840 tags."

"Some stakeholders are concerned with cost, thus the emphasis on the state-agency databases. Other stakeholders are concerned about privacy and confidentiality, thus the emphasis on private sector databases. This demands flexibility in database structure and management."

"Producers must be in control of their own choices and own data."

"Allowing livestock to move through agriculture operations at the quickest speed possible, especially in livestock auction settings, where the pace of sale can affect value of animals."

"We currently envision that a Network of Private Databases may act as the 'hub of the wheel' for the system; should we consider if there is a need for a producer-driven ID Agency (like in Canada, Australia, etc.)?"

CTWG leaders say they will continue to gather industry input, but they are going to move forward with their proposal. The next step, they say, is to present the proposal to industry stakeholders over the next several months.

Brownfield discussed the draft proposal with Glenn Fischer, president of Allflex USA, one of the leaders of the CTWG.

HOGS: (Bloomberg.com) -- President Donald Trump's push for a quick resolution to Nafta talks is being stymied by persistent differences among the U.S., Canada and Mexico over a handful of the make-or-break issues.

After seven rounds of talks rotating between the three countries, negotiators have entered what they've called a permanent round in Washington and are expected to keep going until a deal is struck.

Digging in for more technical talks starting on Monday, they remain at loggerheads over regional content rules for automobiles and other sticking points, even as U.S. Vice President Mike Pence and Canadian Prime Minister Justin Trudeau said over the weekend that an agreement could be wrapped up in weeks.

A meeting between cabinet-level trade officials planned for last week to deal with the toughest issues was canceled when U.S. Trade Representative Robert Lighthizer decided to skip a regional summit in Peru. It's unclear when it can be rescheduled.

While talks are continuing on less contentious topics such as the environment and financial services, they weren't the catalysts that spurred Trump to call for a renegotiation of the decades-old trade deal in the first place. And on key topics -- from cars to government procurement -- the U.S. is sticking with demands that its partners consider untenable.

Although leaders of the countries say a deal could be completed within weeks, that won't be possible if the sides remain as far apart on the most important points as they are now, according to people familiar with the talks.

"The only way that this thing gets done, frankly, is if Donald Trump capitulates," Jerry Dias, head of Unifor, Canada's largest private sector union representing auto workers, said on Friday after meeting with Canada's lead Nafta negotiator Steve Verheul.

"Ultimately, he is going to have to find a way to claim a victory while backing off of a whole host of U.S. proposals. I don't know how you do both," Dias said.

Emily Davis, a spokeswoman for USTR, declined to comment.

Trump's negotiating team is pushing for a deal by early May. That's in order to meet U.S. timelines for having an agreement approved, at the latest, by the lame-duck Congressional session following midterm elections in November, according to two people familiar with the negotiations.

While Mexico has a presidential election in July, the nation has fewer legal timing requirements, and a potential deal reached as late as August could probably be debated and voted on before the nation's next Senate is seated in September. Mexico's new president will take over in December; President Enrique Pena Nieto isn't eligible for another term.

Other trade talks could potentially complicate the near-term schedule. Several Mexican negotiators will be in Brussels this week in a push to close an update of the nation's 17-year-old free-trade agreement with the European Union, said two people familiar with the schedule.

Economy Minister Ildefonso Guajardo plans to join them later in the week, and is expected to remain there next week, when Pena Nieto arrives in Germany for Hannover Messe, an industry show where Mexico is the chosen partner country this year. Mexican negotiators are aiming to announce the close of that agreement with the EU during Pena Nieto's visit.

Deepening ties with the EU is part of Mexico's push to diversify from the U.S., which was the destination for 72 percent of the nation's $435 billion in exports last year.

Talks last week included a focus on content rules for cars, where the U.S. is pushing for more regional content and higher salaries for Mexican factory workers. Progress has been clouded by the lack of a paper proposal from the U.S. -- its suggestions continue to be debated verbally without any clear text, according to the people.

And on the key topic of autos, the impasse that's existed since the initial U.S. proposal was presented in October still stands.

The differences in positions contrast with the upbeat public statements by the top officials in the U.S., Canada and Mexico, who've expressed optimism recently about the process.

"I'll leave this summit very hopeful that we are very close to a renegotiated Nafta," Pence told reporters at the Summit of the Americas in Lima.

After the meeting with Pence, Trudeau said the "positive momentum" included the thorny issue of U.S. demands around automobile production. "We would like to see a renegotiated deal land sooner rather than later," he said.

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

Follow John Harrington on Twitter @feelofthemarket

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John Harrington

John Harrington
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