DTN Early Word Opening Livestock

Meat Futures Staged for Uneven Prices on Opening

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

Cattle: Stdy-wk w/Wed Futures:mixed Live Equiv: $149.62 - 0.54*

Hogs: Steady-$1 HR Futures: mixed Lean Equiv $ 79.47 + 0.15**

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

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

GENERAL COMMENTS:

Another round of light to moderate trade volume surfaced at midweek as some feedlot manager moved to find the best bids available. Business may be done for the week in some areas, but generally speaking the North looks as if it needs to move more steers and heifers. Asking prices on the balance of showlists are around $118-120 in the South and $185-plus in the North. Live and feeder futures are geared to open on a mixed basis thanks to follow-through selling on one hand and short covering on the other.

Hog buyers should return to the cash market this morning with bids steady to $1 higher. Cash appreciation seemed to slow yesterday, but seasonal fundamentals are expected to encourage greater packing spendng going forward. Saturday kill is now estimated to total 81,000 head. Lean futures are expected to open mixed as well, shaped by light bull spreading and profit takng.

BULL SIDE BEAR SIDE
1) Live and feeder futures are seriously oversold and due for at least a corrective rally. The odds would seem to increase given that June contract is in the lower 10 percent area of the historical price distribution. 1) The cash cattle trade continued to slide lower from Tuesday's crash (i.e., another $1 lower in the South at $115 live; ranged another $4-5 lower in the North, down to $180 dressed). Country confidence to erode.
2) Cattle carcass weights are expected to continue declining, at least for another few weeks, as front-end supplies remain tight and cattle rebound off of weather-related pull backs. 2) Cattle futures briefly tried to stablize early Wednesday, but sellers quickly resumed their bearish case, forcing contracts to close near the extreme lows of early April.
3) Nearby lean hog futures quickly climbed back into the passing zone on Wednesday, reasserting a bullish willingness to lead the cash market higher. 3) For the week ending May 12, Iowa barrows and gilts averaged 285.3 pound, 0.2 pounds bigger than last week and 3.3 pounds greater than 2017.
4) The pork cut-out is expected to gain $2 to $3 each week for the next several weeks, then slowing upward momentum throughout June, maintaining positive direction. 4) For the week ending May 12, U.S. hatcheries set 230 million eggs in incubators, up 3 percent from a year ago. At the same time, chicks placed totaled 185 million chicks, up 2 percent from 2017.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Beef Central-Australia) — DRY conditions across large parts of eastern Australia have pushed numbers on feed above one million head for only the third time in history, in the March quarter industry survey results released this morning.

Cattle on feed for the January-March quarter reached 1.025 million head, up 52,506 head or five percent from the December quarter.

The figure was 12pc above the five year average for cattle on feed, and comes despite extreme high feedgrain and ration prices.

Queensland experienced the greatest rate of change with an additional 42,782 head coming onto feed, pushing numbers to 561,500 head. That's still well short of the 627,000 head on feed in Queensland in the June quarter last year, when the national COF figure touched 1.089m.

More moderate increases were seen in South Australia (+10,617 head) and New South Wales (+3483 head), while Victoria and Western Australia saw small reductions on December operations (-1439 head and -2937 respectively).

Some Queensland feedyards have reported larger than usual inflows of southern feeder cattle into their pens over the past three months, in response to southern seasonal conditions. There's also clear evidence of large integrated lotfeeder/processors 'stockpiling' cattle on grain, in preparation for an anticipated mid-year shortage of killable grass cattle.

The quarterly survey is coordinated by Australian Lot Feeders Association and Meat & Livestock Australia.

HOGS: (Ripon Advance News Service) — U.S. Sen. Joni Ernst (R-IA) implored the U.S. Trade Representative (USTR) to reassess whether the trade tariffs imposed on Chinese imports are really the right move for America considering the country's backlash against the United States.

"As the United States continues bilateral trade negotiations with China and the Section 301 Committee prepares for its public hearing on May 15, I write to urge you to reconsider the tariffs on Chinese imports and pursue policies that enhance American competitiveness, rather than reduce our access to foreign markets," Sen. Ernst wrote in a May 10 letter to USTR Robert Lighthizer.

The senator pointed out in her letter to the ambassador that the increased tariffs imposed by the United States on China already have proven detrimental to American exports.

"Recent data from the United States Department of Agriculture revealed that Chinese importers have curbed shipments of soybeans and cut orders of pork," she wrote. "The data also showed that sales of soybeans have fallen from 8.3 million bushels during the first week of April, when the trade dispute began, to just 290,000 bushels during the final week of April."

Sen. Ernst, a member of both the U.S. Senate Agriculture, Nutrition and Forestry Committee and the U.S. Senate Armed Services Committee, serves as chairman of the Senate Armed Services Subcommittee on Emerging Threats and Capabilities.

In that role, she wrote, "I recognize the complex threats we face when protecting our nation's intellectual property, both for our economy and security" and she agreed that President Donald Trump should "increase pressure on China to change its ways."

"At the same time, the United States should foster more dialogue to expand international market opportunities for our country's goods and agriculture around the globe and use these contributions to reduce the trade deficit," Sen. Ernst wrote.

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

Follow John Harrington on Twitter @feelofthemarket

John Harrington