DTN Early Word Opening Livestock
Cattle Futures Staged for Higher Opening
GENERAL COMMENTS:Cattle: Steady Futures: 50-100 HR Live Equiv: $149.92 +0.07*
Hogs: Steady-$1 HR Futures: 50-100 HR Lean Equiv: $ 77.58 +0.54**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Both cattle buyers and sellers are running out of time to find a market. Wide spreads between bids and asking prices have persisted all week (e.g., $120 vs $128 in the South), essentially preventing the development of significant trade volume. These spreads will have to somehow narrow between late morning and early afternoon. Packers are short bought on one hand andfeedlot managers are nervous about large board premiums. Live and feeder futures seem set to open moderately higher based on residual buying interest and possible cash potential.
The cash hog trade is expected to open steady to $1 lower. This week's country market has been well supported by both tightening supplies and improving pork demand. If the Saturday kill comes in close to 42,000 head, weekly slaughter should again drop, possibly as low as 2.3 million ahead. Lean futures are staged to open moderately higher, thanks to spillover buying and supportive fundamentals.
| BULL SIDE | BEAR SIDE | ||
| 1) | For the week ending April 28, cattle carcass weights continued to aggressively deflate: all cattle averaged 798 pounds, 4 pounds less than the prior week and even with 2017; steers averaged 850 pounds, 6 poundsless than the week before and 3 poundsmore than 2017; heifers averaged 788 pounds, 7 pounds less than the previous week and 3 poundsmore than last year. | 1) | Net beef export sales last week totaled only 11,300 MT, down 30%from the previous week and 41% from the prior four-week average. |
| 2) | At the same time, actual beef exports totaled 16,600 metric tons (mt), up 6% from the previous week and 8% from the prior four-week average. | 2) | Even though this week's Saturday is forecast near 40,000 head, 18,000 head under the week prior, the weekly cattle kill should still total a substantial 642,000 head. |
| 3) | The pork carcass value continued to firm on Thursday, moving moderate higher thanks to better demand for bellies, ribs, and loins. | 3) | Net pork export sales last week fell to 16,500 MT, down 5% from the previous week and 21% from the prior four-week average. At the same time, actual exports declined to 22,000 MT, down 16% from the previous week and 3% from the prior four-week average. |
| 4) | Soon-to-be lead month June lean hogs finished Thursday's session 75 points higher at $77.33, 700 points higher than contract lows posted in early April, and nearly $14 above the cash index. All of a sudden, June does not look bashful about leading late spring/early summer cash higher. | 4) | According to the World Board, total U.S. red meat and poultry production for 2019 is forecast above 2018. In 2019, beef production (i.e., 27.715 billion pounds. up 1.8%) is forecast above 2018 on higher slaughter and heavier carcass weights. In 2019, pork production (i.e., 27.61 billion pounds, up 3.1%) is forecast to increase as expected growth in farrowings and pigs per litter will support larger pig crops. |
CATTLE: (Business Insider)-- McDonald's is now selling Quarter Pounders made with fresh beef nationwide-- something that has long been a key advantage for fast-food rival Wendy's. Wendy's is fighting back by slamming McDonald's in advertising.
"We'll keep screaming that from the rooftops and continue to hold others in check on what is really happening," CEO Todd Penegor said Wednesday, encouraging investors to "look on Twitter" for evidence of Wendy's feisty responses to McDonald's fresh beef.
Wendy's is doubling down on a key advantage as McDonald's tries to edge into its rival's territory.
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On Monday, McDonald's announced that it had completed its roll-out of fresh-beef Quarter Pounders across the US. With the completion of the national roll-out, the chain is planning to launch national advertising around the revamped, higher-quality burger.
At face value, this is extremely bad news for Wendy's. The fast-food chain has aggressively advertised its use of fresh, never-frozen beef in all its burgers, launching a national campaign highlighting its fresh beef and slamming McDonald's for its frozen patties in February.
However, Wendy's is trying to spin McDonald's attempt to take away its fresh-beef advantage as an opportunity.
On Wednesday, executives said in a call with investors that Wendy's has not yet seen any impact, positive or negative, from McDonald's fresh-beef roll-out.
"It's still early," Wendy's CEO Todd Penegor said. "The competitor just turned on their national support."
Instead of shying away from the discussion, Wendy's has launched its own advertising around McDonald's decision, emphasizing that the rival chain is currently only using fresh beef in its Quarter Pounder burgers.
"We'll keep screaming that from the rooftops and continue to hold others in check on what is really happening," Penegor said, encouraging investors to "look on Twitter" to see Wendy's responses.
This week, Wendy's has taken to social media to slam McDonald's for serving some burgers that do not use fresh beef. On Tuesday, the fast-food chain tweeted a meme spoiling the end of "Avengers: Infinity War" to slam McDonald's for using frozen beef in the Big Mac.
"We wanted to make sure that people aren't confused about what is communicated and what is reality," Kurt Kane, Wendy's chief concept and marketing officer, told Business Insider in March, when Wendy's began its most recent anti-McDonald's social media campaign.
He added: "You shouldn't have to use a decoder ring to figure out what quality you're going to get" when you order a burger.
HOGS: (meatfyi.cpm)-- Russia is in the process of building several new large pig production projects. This is happening despite the fact that self-sufficiency has almost been reached and in some cases there is an oversupply situation.
The combined worth of the pig farms currently under construction in Russia is around 200 billion roubles ($ 3.3 billion) and the production capacity is roughly 1 million tonnes of pork in liveweight. This estimate was shared by Yuri Kovalev, chairman of the Russian Union of Pork Producers (RUPP), to the local newspaper Kommersant. All these projects are estimated to start commercial operation by 2022.
According to Mr Kovalev, a certain degree of surplus pork can already be seen on pork markets in virtually all regions of Russia. In 2017, the pork self-sufficiency rate of Russia was estimated to be at 95%. In addition, there are still some import supplies that meet a small share of the domestic demand.
Feed transport arriving at a pig farm in Russia. There are many more to follow in the years to come, despite a state of self-sufficiency. Photo: Henk Riswick
Feed transport arriving at a pig farm in Russia. There are many more to follow in the years to come, despite a state of self-sufficiency. Photo: Henk Riswick
Pork self-sufficiency to 115%
In 2017 Russia produced 4.57 million tonnes of pork in liveweight, which was an increase of 5% compared to the previous year, Russia's Agricultural Ministry estimated. If all announced pig farming projects indeed will be launched, the self-sufficiency rate of Russia with regards to pork could reach 115% by 2022 and the production surplus as the result would be close to 700,000 tonnes.
An example of the expansion is a recently announced plan by agricultural holding Kopitaniya. It revealed plans to invest 3 billion roubles ($ 50 million) into a new pig farm for 150,000 pigs.
This would drive up the company's capacities in Siberia by 40% from the current level to 69,000 tonnes of pork per year. The new farm should start commercial operation early 2019.
Eugene Leshenko, the agricultural minister of Novosobirsk region, where the farm will be based, stated on an earlier occasion that in 2017 pig farms in his region had yielded 70,000 tonnes of pork. There were no growth in production volumes, compared to 2016, but there was no need as well, he said.
The self-sufficiency in pork of Novosobirsk region was above 100%, so the pig farms started facing difficulties with selling their products to customers, Leshenko said.
Russian pig farmers hope that the oversupply crisis in the industry can be avoided by a rise in demand to Russian pork both in domestic and foreign markets. In the first quarter of 2017, Russia's pig industry exported 22,400 tonnes of pork, up 50% compared to the same period in 2016.
It is a big question whether the growth in pork exports could be sustainable, as Russia failed to negotiate the opening of new markets for pork products in 2017. As a result, nearly 85% of the pork exports in last year were sent to traditional trade partners like Ukraine and Belarus.
The domestic demand could recover in the years to come, as it was under pressure between 2014 and 2016. The economic crisis in the country had undermined the purchasing power of Russian citizens. As a result, they opted to consume less pork and beef and more chicken.
John A. Harrington can be reached at john.harrington@dtn.com
Follow John Harrington on Twitter @feelofthemarket
(SK/BAS)
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