DTN Early Word Opening Livestock
Beef Futures Set for Firm Opening Thanks to Follow-Through Buying
GENERAL COMMENTS:Cattle: Steady-$2 HR Futures: 50-100 HR Live Equiv: NA*
Hogs: Steady-$1 HR Futures: Mixed Lean Equiv: $83.32 +1.37**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Cattle-buying interest could be more focused at midweek, but that may mean just more bids on the table. Look for opening bids to be refreshed around $107 live and $177 to $178 dressed. On the other hand, Tuesday's surge in futures could easily encourage feedlot managers to choke up on the bat in terms of asking prices. Our guess is that showlists will now be priced around $115 in the South and $184 plus in the North. Needless to say, both sides will closely monitor futures for clues of cash market potential. Live and feeder futures should open moderately higher, supported by follow-through buying and ideas of cash stability/firmness.
The cash hog trade is geared to open Wednesday with bids steady to $1 higher. Processing margins are still quite good, certainly positive enough to keep chain speed cranked up as much as possible. Of course, the problem in that regard is the tightening of ready numbers. Lean hog futures are set to open on a mixed basis with nearbys some higher and deferreds some lower.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live and feeder futures exploded higher Tuesday with spot June live closing at the highest point since May 11. Such aggressive buying suggests that more and more traders believe near-term feedlot cash will maintain a steady/firm undertone. | 1) | Tuesday's big surge forward in cattle futures may be a little promising psychologically, but it didn't change the overall technical picture all that much. June and August remain locked in long-held trading ranges. |
| 2) | While the discounted cattle board still struggles with the larger inventories scheduled over the next 30 to 60 days, if packers maintain aggressive harvests over the coming weeks, the wall of cattle likely will be less and less of a problem. | 2) | Discounted cattle futures continue to make it tough for feedlots to dig in with higher asking prices. Unless the board can actually break into new highs, the country's marketing strategy will be trigger-pulling as soon as possible. |
| 3) | The pork carcass value closed sharply higher on Tuesday with much stronger demand reported on all primals. | 3) | Not only has Mexico imposed a 20% tariff on U.S. pork legs and shoulders, the country has also opened a 350,000 ton tariff-free quota for other pork-exporting countries in order to secure necessary domestic supply this year. |
| 4) | Tuesday's combination of another round of higher cash hog bids and negotiated trade volume no greater than moderate underscores the seasonal reality of tightening slaughter numbers. | 4) | News that Seaboard has decided to delay the start-up of a second shift at its Sioux City plant is discouraging for pork producers and cash bulls who were hoping the additional chain speed would help manage additional tonnage as early as midsummer (see article below). |
CATTLE: (Washington Post) -- It is little more than a footnote in the back-and-forth over the planned North Korea summit -- but the rumor of a McDonald's in Pyongyang is juicier than a three-patty Big Mac.
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North Korean leader Kim Jong Un may allow a "Western hamburger franchise" into the country as a show of good will to the United States, according to an intelligence report described by U.S. officials to NBC.
That follows remarks by South Korean adviser Chung-in Moon in late April, who said that North Korea might be interested in welcoming a McDonald's as tensions ease.
Compared to the threat of nuclear war, of course, a Pyongyang McDonald's seems like small fries. But experts and history suggest there's more at play here than one token franchise.
McDonald's has long been seen as a symbol of Western culture and capitalism -- particularly in Communist countries. And it's expansion into China and Russia was seen as a landmark in the 1990s.
"This has happened with a number of different Communist cultures," said Jenny Town, a research analyst at the Stimson Center and the managing editor of 38 North, an academic news site about North Korea. "Once they start to get different points of contact with the West, it changes their views -- and it usually starts with McDonald's or Coca-Cola."
From its earliest days, McDonald's has been more than a fast-food restaurant. It also is a vector for American culture and a powerful symbol of globalization.
In the 1970s, when the chain expanded into Europe, it used the tagline "United Tastes of America" in its ad campaigns. It also promised to bring all-American business values -- speed, standardization and ruthless efficiency -- to the countries where it operated.
McDonald's now operates 37,241 more-or-less identical, highly profitable locations in 120 countries. In his book "Grinding It Out: The Making of McDonald's," longtime president Ray Kroc called the company "my personal monument to capitalism."
That may explain why the company's expansion into Communist countries has been treated as a milestone in the past. When Moscow got its first franchise in 1990, Russians waited in line for hours to eat at what USA Wednesday called "this city's new symbol of capitalism."
Not long after its Russian debut, McDonald's began popping up in Beijing and Shenzhen. Chinese customers hated the food, ethnographer Yunxiang Yan found, but loved the aura of prosperity and progress.
"In the eyes of Beijing residents," he wrote in 1997, "McDonald's represents Americana and the promise of modernization."
Town, of 38 North, said McDonald's can expose people to a side of the United States with which they may be unfamiliar. That can help moderate negative views in places such as North Korea, where anti-American propaganda is widespread. Town said she thinks it would make sense for McDonald's to open in Pyongyang. It would probably be popular: North Korea has approached McDonald's about franchising in the recent past, she said, but has had to turn to Singaporean burger knockoffs instead.
A spokesman for McDonald's did not respond to a request for comment. Kim Jong Un also is believed to like burgers. In 2011, a South Korean newspaper reported that his father regularly had McDonald's flown from China on Air Koryo jets. And President Donald Trump is a big fan of fast-food as well.
HOGS:(foodmarket.com) -- The start-up of second shift operations at the Seaboard/Triumph Foods pork plant in Sioux City, Iowa is delayed for an undetermined time.
Earlier reports had indicated plans for the start-up of the second shift last month, but that did not occur and the company is not yet ready to announce a target date.
The Sioux City plant is a joint venture between Seaboard Foods, a vertically integrated processor with a plant on Guymon, Oklahoma, and Triumph Foods, a pork producer owned LLC firm, which has a plant in St. Joseph, Missouri. The new plant began operating in early September 2017 and is processing around 10,000 head a day on its first shift.
Local sources indicate that difficulty in attaining the needed workforce is the primary reason for the delay in starting the second shift. The company's website has for some time been showing it is hiring and training workers for second shift operations.
Some industry sources said the tight labor situation in that region may force the company to hold off starting the second shift until 2019.
Hog producers are hoping for an earlier startup of the second shift because some had planned to be shipping most or all of their hogs to the Sioux City plant by this summer and are now being forced to sell animals to other packers instead, according to livestock dealers and market managers in the region. It's not so critical that the second shift be operating now because supplies in June and July are typically the smallest of the year, sources said. But seasonal expansion will occur this fall and into the winter, a time when the additional processing capacity may be needed to keep up with the number of animals coming to market.
Another new plant is scheduled to open in north central Iowa later this year. The Prestage Foods facility has been under construction since the spring of 2017 and will employ about 1,000 people.
John Harrington can be reached at harringtonsfotm@gmail.com
Follow John Harrington on Twitter @feelofthemarket
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