Cattle: Steady Futures: Mixed Live Equiv: $139.29 -.37 *
Hogs: Steady-$1 LR Futures: Mixed Lean Equiv: $ 91.15 -.85 **
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Cattle buyers and sellers return for the holiday Thursday with much work still to be done before calling it a week. Opening bids should start out around $105 to $107 live and $168 to $170 dressed. Asking prices are likely to be floated around $112 live and $175 dressed. Significant trade volume could be delayed until Friday, especially if live futures display a reasonable amount of stability. Live and feeder futures should open on a mixed basis thanks to a cautious combination of follow-through buying and pre-cash long liquidation.
Hog buyers should resume procurement chores Thursday with cash bids ranging from steady to $1 lower. In order to make up for lost time and fill standing orders, pork processors are planning a Saturday kill close to 150,000 head. If packer margins were better, that total would be considerably larger. Lean futures are also set to begin Thursday with mixed price action.
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Short-bought cattle buyers who still need to nail down the slaughter needs of July's first full work schedule should begin to feel pressured as the holiday-shortened week runs out of time.
The choice beef cutout closed sharply lower just before the holiday down $1.62 with total box supplies still described as "heavy." Furthermore, heat wave temperatures across much of the country makes July Fourth clearance "iffy."
The whole beef trade should start to stabilize/firm in the wake of Independence Day clearance as retailers and food managers restock meat cases and coolers.
Although the "official" index roll does not start until Monday, some pre-roll activity is expected late this week. This could check further gains in spot August over the next week.
Though light, pre-holiday trading can be misleading, triple-digit gains in lean hog contracts may suggest that much of the bearish implications of the recent quarterly inventory have already been dialed into the deferred discounted board.
The pork carcass value broke significantly lower on Tuesday with all primals experiencing softer demand except the belly and picnic.
The seasonal trend is for August hog futures to trade higher over the next several weeks.
The weight breakdown of market hogs contained in the June 1 report suggests that we are very close to a seasonal low in chain speed. Some argue that it's already come and gone.
CATTLE: (Wallace Farmer) -- Is the size of your beef cow herd changing this year? More than likely, it depends upon where your operation is located -- and more specifically, how your pastures are faring.
A few months ago in this column [by Scott Brown, a livestock economist with the University of Missouri] concern was raised that many areas of the U.S. would enter spring with a moisture deficit, and that the extent to which dry weather intensified would likely be the determining factor as to whether the national beef cow herd would grow for the fifth straight year in 2018.
Now that summer is upon us, and with a midyear USDA cattle report scheduled for release July 20, it is time to take an updated look at how geography and pasture conditions have affected beef cow slaughter in recent months. USDA provides beef cow slaughter data on a regional basis, and examining slaughter trends in three of the larger beef cow regions points to the impact that year-to-date weather conditions have had on the number of beef cows being sent to market.
Very few areas of the nation east of the Mississippi River are experiencing dry conditions, while large areas of moderate to exceptional drought reside from Utah and Arizona eastward as far as western Missouri, Arkansas and Louisiana.
USDA reports weekly pasture conditions each year from May to October, and weekly data thus far in 2018 show that conditions in Region 6 -- Arkansas, Louisiana, New Mexico, Oklahoma and Texas -- have deteriorated considerably in recent weeks. Meanwhile, Region 4 -- much of the Southeast U.S -- has very little drought stress to manage at this time.
Not surprisingly, beef cow slaughter numbers correspond closely to these varied pasture conditions. Beef cow slaughter in Region 6 is up 10.4% on the year (through early June), with 14% more cows slaughtered since early April than in 2017.
Conversely, beef cow slaughter in Region 4 is down 11.1% year to date, and down 13.5% since early April. Region 7, which includes both relatively dry Missouri and Kansas as well as Iowa and Nebraska, where timely rains have fallen, has seen beef cow slaughter up 6.7% year to date, and 8.8% in recent weeks.
While it is still not clear whether the early spring cold temperatures and subsequent dry weather in portions of the country will be enough to result in a shrinking beef cow herd for the year, it is certain that poor pasture quality is taking a toll on many producers. Watch USDA's July Cattle report and updated pasture conditions throughout summer to provide information on whether the latest round of herd expansion is coming to a close.
HOGS: (Farm Journal) -- U.S. pork producers have borne the brunt of the trade disputes with China and Mexico, and Nick Giordano, vice president and counsel, global government affairs for the National Pork Producers Council is basically saying 'enough is enough.'
Giordano spoke last week at a Global Business Dialogue event: What's in a Name? The Tariffs, National Security, and the WTO. He served on a panel with trade experts and leaders, and explained to them the present situation for pork producers.
"Exports add significantly to the bottom line of each and every producer -- all 60,000 of them, regardless of their size, regardless of where they're located," Giordano told attendees at the event. "Twenty-seven percent of production was exported last year, which added $53 to every pig marketed.
"Because pork is an export juggernaut, it's an attractive candidate for trade retaliation," he told the group. Last year, Mexico was the largest market by volume and the second largest by value, and China was the No. 2 market in volume and the third largest market by value.
What makes the trade disputes even more troublesome is that U.S. producers were counting on these markets -- and others -- in terms of their future growth.
"The U.S. pork industry is in the middle of an export-driven expansion, with production projected to grow by about 5% by the end of 2018," Giordano said. "As the world most competitive producer of pork, the U.S. pork industry was anticipating increases and access to Japan, Vietnam and others through the Trans-Pacific Trade Partnership, and was counting on shipping more pork through prior U.S. trade agreements.
"Obviously, things have changed," Giordano said.
The situation hasn't gone unnoticed. Gregg Doud, lead agriculture negotiator with the U.S. Trade Ambassador's Office, talked with producers at World Pork Expo in June, and also visited with AgDay TV's Betsy Jibben in this article.
"Gregg Doud told producers the lead tip of the spear in all of this right now is your pork, and boy, did he get that right," Giordano said.
"According to Iowa State University economist Dermot Hayes, hog futures have dropped by $18 per animal, amounting to a $2.2 billion loss on an annualized basis, since March 1 when speculation began about U.S. pork access to the Chinese market," NPPC said in its Capital Report. "Last year, the U.S. pork industry shipped more than half of its $6.5 billion in exports to Canada ($792 million), China ($1.1 billion) and Mexico ($1.5 billion)."
Giordano urged the Trump administration to provide producers some relief as soon as possible. He stressed that point in this AgDay interview with Jibben as well. Last week, six members of the Iowa congressional delegation asked President Trump to quickly resolve the trade disputes with China and Mexico, NPPC reported in its newsletter. "They pointed out that farmers are experiencing a five-year, 52 percent downturn in the agricultural economy," the Report said.
John Harrington can be reached at email@example.com
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