Cattle: Steady-$2 LR Futures: Mixed Live Equiv: $139.66 + .02*
Hogs: Steady Futures: Mixed Lean Equiv: $ 92.00 - .73**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Expect a typically quiet Tuesday, even though the holiday could put Thursday and Friday more on a fast track. We suspect bids and asking prices will remain poorly defined until after Independence Day. Look for live and feeder futures to open on a mixed basis with slow, lackluster trade volume.
The cash hog trade should proceed Tuesday with mostly steady prices. Processing margins remain tight and packers want to either sell product higher or buy live inventory lower. Lean contracts at the CME seem set to open on a mixed basis with late-summer issues gaining on those of the fourth quarter.
|BULL SIDE||BEAR SIDE|
While new showlists vary from state to state (i.e., smaller in Kansas and Texas, larger in Colorado, and about steady in Nebraska). But overall, the offering of ready cattle in early July seems somewhat smaller than last week.
Although beef cutouts closed no worse than mixed Monday, the description of box supplies as "heavy" suggests that further discounting will probably be necessary in order keep the wholesale channel clear.
Although cattle futures closed just moderately higher Mondayit lent a good deal of credence to the bullish explosion seen last Friday.
The growing patterns of new lows in the corn market could increase days on feed for both hogs and cattle, thereby increasing the probability of heavier carcass and total tonnage.
This week's hog slaughter is expected to be the tightest absolute level of the season, thanks largely to the JulyFourth holiday in the middle of the week. This week's slaughter should not surpass two million hogs and will probably lend the product trade at least short-term demand.
The pork carcass closed moderately lower on Monday, pressured by softer demand for loins, ribs and hams.
This summer so far has been much hotter than last year, and the heat stress should be bringing hog live and carcass weights down at a quicker rate.
The short-term trend is bearish in lean hog futures and the longer-term trend is bearish as well. The structure of the market is considered bearish with the spot contract still at a discount to the settlement index.
CATTLE: (NCBA) -- Kent Bacus, Director of International Trade and Market Access for the National Cattlemen's Beef Association, Monday released the following statement in response to Canada's announcement of higher tariffs on U.S. beef products beginning on Sunday, July 1:
"For the past few weeks Canada has threatened to retaliate against the United States by slapping a tariff on $170 million worth of U.S. beef products in direct response to the steel and aluminum tariffs. Tuesday, they made good on that threat. These retaliatory tariffs were and still are clearly avoidable, and the unfortunate casualties will be Canadian consumers and America's cattlemen and cattlewomen. We may not know the extent of the damage these tariffs may have on our producers, but we believe that cooperation is a better path forward than escalation. As Canadians gather to celebrate Canada Day and we prepare to celebrate American Independence, we encourage our government and the Canadian government to remember that we are allies and we rely on each other for future economic prosperity."
HOGS: (USA Tuesday) -- When McDonald's launched all-day breakfast in October 2016, it was an instant hit, and that was no surprise. The chain was giving consumers something they had long asked for -- the ability to order Egg McMuffins, sausage biscuits and the like whenever they wanted them.
Solving the kitchen-logistics problems that had kept the McMuffins a mornings-only option meant more U.S. customers coming through the doors, and increased same-store sales overall. Yet in the process, the chain may have dropped the ball when it came to the actual morning hours, according to CFO Kevin Ozan. Speaking at the Bernstein Strategic Decisions Conference in May, he described the breakfast daypart as the company's biggest challenge when it comes to comparable-store sales.
"That is not breakfast products, because you know we sell all-day breakfast now, but it's the daypart of breakfast," he said, according to a Seeking Alpha transcript of the event (registration required). "And I think some of that is because with everything else going on, we just lost a little focus on that breakfast daypart." How is McDonald's fixing breakfast?
It's hard to understate the importance of the pre-lunch hours for McDonald's. Roughly 25% of the chain's sales happen during that period, and it's the fast food giant's most-profitable part of the day as well.
"So now there is a new, renewed intense focus on breakfast," Ozan said. "You will have seen 2 for 4 mix and match deals in a lot of the areas around the U.S. You may see different products coming on $1 $2 $3 Dollar Menu related to breakfast. You may see new products by the end of the year. So, it's now an area of focus where I think we took our eye off the ball on breakfast."
The company is taking a number of steps to bolster its morning offerings beyond just shifting its value menu mix. For example, it has added barista-style coffee machines to its U.S. locations, according to CEO Steve Easterbook, who spoke at the Bernstein conference. "So, the espresso-based coffees now are a more important part of our mix as well," he said.
McDonald's is also testing other breakfast changes, such as selling muffin tops and coffee cake at restaurants in the Baltimore area, Ad Age reported. The company has also offered breakfast catering from nearly 200 Florida restaurants, according to the trade magazine.
"The boxed coffee and food can be picked up or delivered," wrote Neil Wallar. "'The "Weekend Warrior' package, which serves six, comes with three Egg McMuffins, three hotcake-and-sausage platters, and six hash browns."
In addition, the chain has been offering all of its small espresso-based drinks for $2, including its newly introduced frozen cold brew coffee.
More:In plot right out of 'Seinfeld' episode McDonald's selling muffin tops in some test markets
The burger giant has more tools available that it could bring to bear on the problem of boosting morning sales. The McDonalds app, for example, has 20 million users in the U.S.: There's no reason the chain could not follow in the footsteps of rivals such as Starbucks, and serve those loyal customers special offers to encourage them to stop by in the a.m. It could also, of course, take more traditional routes, such as ramping up advertising for its morning offerings, or even leveraging its renewed partnership with Disney to offer morning-specific Happy Meal prizes.
While menu innovation and discounting may help, the real key here is that McDonald's recognizes that it has a problem in the morning hours, and plans to bring serious resources to bear on fixing it. It has the tools, and Easterbook has shown that he's a strong operator. If he's focused on the morning hours now, expect that crucial daypart to become a lot less sleepy at McDonald's restaurants in the near future.
John Harrington can be reached at email@example.com
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