DTN Early Word Opening Livestock

Hog Paper Set for Firm Opening Thanks to Follow-Through Buying and Cash Strength

(DTN file photo)

Cattle: Steady-$2 HR Futures: Mixed Live Equiv: $139.80 - .37*

Hogs: $1-2 HR Futures: Mixed Lean Equiv $ 73.34 + .25 **

* 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 buyers and sellers could do more positioning today, but unless feedlot managers soften asking prices of $122 plus in the South and $192 plus in the North, significant trade volume may not develop until sometime Friday. Live and feeder futures are likely to open on a mixed basis with both follow-through buying and pre-cash profit-taking.

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The early spring cash hog trade continues to explode as packers sense tightening market numbers and are anticipating better carcass value. At this time, the Saturday hog kill is estimated to total 118,000 head. Lean futures should open moderately higher, supported by follow-through buying and signs of aggressive cash spending in the country.

BULL SIDE BEAR SIDE
1) Live cattle futures kept rolling solidly higher Wednesday with spot April settling at $118.97, nearly at par with last week's five-area steer average. Accordingly, late-year cash potential continues to improve. 1)

The beef carcass value continued to erode at midweek with the select box losing more than a buck. Total box supplies were described as "heavy."

2) The average trade guess suggests that the USDA will soon (i.e., Friday, the 20th) confirm a March placement total as much as 11% below 2017. 2) Beef processing margins are tightening thanks to an awkward combination of higher live cattle costs and eroding carcass value. Slowing chain speed could be a logical defensive mode.
3) Firming cash hog prices along with strengthening overall wholesale pork product values supported the lean hog futures market Thursday. 3) For the week ending April 14, U.S. hatcheries set 229 million eggs in incubators, up 3% from a year ago. At the same time, chicks placed totaled 182 million chicks, up 1% from 2017.
4)

For the week ending April 14, Iowa barrows and gilts averaged 285.2 pounds, 1.3 pounds lighter than the prior week and 1.4 pounds heavier than 2017.

4) At the present time, the June lean hog contract has a larger than normal premium relative to where April went off the board and where cash is trading currently.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Dow Jones) -- Farm-state senators want a national security review for the latest purchase of a US agriculture company by a foreign-based entity. Brazil's Marfrig Global Foods this month agreed to buy a majority stake in National Beef, the fourth-largest cattle processor in the US, raising eyebrows among US lawmakers who noted last year's corruption probe into Brazil's meat safety system -- which they say included some shipments from Marfrig.

Senators including Chuck Grassley (R., Iowa) and Sherrod Brown (D., Ohio) want the Committee on Foreign Investment in the US to probe the National Beef deal, which follows China National Chemical Corp.'s purchase last year of pesticide maker Syngenta, and the 2013 purchase of Smithfield Foods by China's WH Group.

HOGS: (Global Times) -- Brazil's pork exports to China have soared in recent months after a brief suspension by China, and experts said on Tuesday that the jump - which has come amid escalating U.S.-China trade tensions -- indicates a huge potential for agricultural imports from Brazil and the broader Latin America region.

First-quarter Brazilian pork exports to China increased 151.6 percent year-on-year to 39,175 tons, according to data released Monday by the Brazilian Ministry of Industry, Foreign Trade and Services.

The fast growth largely offset losses in exports to Russia, which was the largest destination for Brazilian pork before Russia banning it in December 2017 after discovering illegal food additives in the meat, according to media reports. China also banned meat imports from Brazil but lifted the ban at the end of 2017. Pork exports to China may further expand after the Chinese government announced a 25 percent tariff on pork imports from the U.S. in response to possible tariffs on Chinese imports by the U.S., news website ifeng.com reported on Tuesday, citing Francisco Turra, chairman of the Brazilian Animal Protein Association.

"We expect that exports to China will grow dramatically and that the impact of the Russian export ban will be kept to a minimum," Turra was quoted as saying. Experts said that rising tensions between China and the U.S., which is also a major agricultural products supplier, would give Brazil and other Latin American countries a huge opportunity.

"If China were to impose tariffs on U.S. agricultural products as announced, that would drive down exports of U.S. agricultural products to China and leave a void for Latin American agricultural producers to fill," Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant, told the Global Times on Tuesday.

Ma said that Latin American countries are also big agricultural exporters and "expanding agricultural imports from the region could diversify China's food supply and avert risks."

Other experts also said that China has already been trying to strengthen trade ties with Latin America, expanding exports and investment in the region.

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

Follow John Harrington on Twitter @feelofthemarket

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