DTN Early Word Opening Livestock

Look for Early Pressure on Lean Hog Futures Tied to Expansion News

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

Cattle: Steady/Weak w/Wed Futures: 50-100 LR Live Equiv: $140.65 - .94*

Hogs: Steady Futures: 50-200 LR Lean Equiv: $ 92.91 - .07**

* 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 late-week feedlot trade should be quite slow with business probably limited to scattered sales of steers and heifers at price levels essentially established at midweek (i.e., $106 live; $169 to $170 dressed). Live and feeder futures should open moderately lower, pressured by struggling carcass value and a lack of follow-through buying interest. Spot June live is scheduled to expire at high noon.

Hog buyers should wrap-up procurement chores Friday with basically steady bids. Assuming a Saturday kill around 25,000 head, the weekly slaughter should total close to 2.2 million. This week and next are expected to be the lowest harvest levels for this summer season, probably moving higher after the holiday week. Lean futures are expected to open significantly lower thanks to the pork production challenges confirmed by the June 1 Hogs & Pigs report.

BULL SIDE BEAR SIDE
1)

Finally, in its last trading hours, spot June live has spot $2 over feedlot cash. While the promise of leadership came too late for June (it expires at noon Friday), the new spot price closed above its 40-day moving average on Thursday.

1)

Wholesale beef prices continue to fail with the choice cutout quoted more than $2 lower on Thursday. Seasonally, the beef trade typically doesn't bottom below late July or early August.

2)

Net beef export sales last week totaled 18,400 metric tons (MT), up 10% from the previous week. Actual exports for the same period totaled 18,200 MT, down 2% from the previous week, but up 5% from the prior four-week average.

2)

For the week ending June 15, steers carcasses averaged 856 pounds, 5 pounds more than the previous week; heifers averaged 791 pounds, 4 pounds more than the week before.

3)

Net pork export sales last week totaled 24,300 MT, up noticeably from the previous week and up 77% from the prior four-week average.

3)

The USDA confirmed Thursday a record large spring pig crop of 33.2 million head, 4% larger than the spring of 2017 and the largest since the data series began in 1970.

4)

While still relatively poor, pork processing margins seem to be slowly improving. The Saturday kill now looks close to 25,000 head, small but larger than last week as well as early-week estimates.

4)

Actual pork exports totaled 14,700 MT, down 25% from the previous week and 28% from the prior four-week average.

OTHER MARKET SENSITIVE NEWS:

CATTLE: (brownfieldagnews.com) -- The Senate is in the process of considering amendments to its version of the farm bill, including one to restrict checkoff programs.

New Jersey Senator Cory Booker says the checkoff programs only represent the interests of a small number of farmers.

"That's what the amendment would do: prohibit conflicts of interest, require more transparency, mandate that the USDA publish budgets and expenditures that the USDA approves," he says. "The amendment would prohibit anti-competitive behavior."

Also commenting on checkoff programs, North Dakota Senator Heidi Heitkamp, said it's critical that they function as intended.

"In order to be preserved and protected from necessary scrutiny," she says. But Indiana Joe Senator Joe Donnelly tells Brownfield the ag community usually knows what works in checkoff programs.

"I've found on the checkoff programs, in large measure, as long as the farm community helps to lead the checkoff programs, they know what works and what doesn't," he says.

Utah Senator Mike Lee and New Hampshire Senator Maggie Hassan also worked on the amendment.

HOGS:(Hoosier Ag Friday) -- Agriculture Secretary Sonny Perdue in Chicago this week says he is hopeful his aid program for farmers will be released by Labor Day and the harvest season. Perdue spoke at the United Fresh event Tuesday and told the Chicago Tribune that while farmers want "trade, not aid," the Department of Agriculture is following the trade war on a "weekly basis," and assessing the impacts of trade disputes while having a plan ready to assist farmers. Perdue continues to hold off on announcing those plans, but conceded he has "probably" given himself a "Labor Day deadline" with the corn and soybean harvest looming.

Perdue says he and USDA see the trade environment as "temporary." A 25 percent tariff on U.S. soybeans as part of the trade dispute will take effect next week. While there may not be enough export capacity globally for China to stop all U.S. soybean purchases completely, Brazil's production and exports are growing, and China is seeking alternatives to U.S. agricultural products.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington