DTN Early Word Opening Livestock

Livestock Futures Geared to Open Moderately Higher

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

Cattle: Steady Futures: 50-100 HR Live Equiv: $137.30 - .25*

Hogs: Steady-$1 LR Futures: 50-100 HR Lean Equiv: $ 88.79 - .09

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

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

GENERAL COMMENTS:

It's "do-or-die-time" in feedlot country once again with cattle buying and sellers running out of time to trade at least moderate numbers before calling it a week. Look for opening bids around $108 live and $173 to $175 dressed, well below asking prices of $115 and $182 to $184. Live and feeder futures seem set to open moderately higher Friday, supported by follow-through buying and the possibility of cash stability.

Look for the cash hog trade to cap weekly business with steady/weak bids on the opening. Saturday's kill is estimated to total close to 38,000 head. If this guess turns out to be close, this week's kill should come in just shy of 2.25 million hogs, surpassing last year by a little over 3.5%. Lean futures look ready to open moderately higher as well, supported by late-week short-covering and technical buying.

BULL SIDE BEAR SIDE
1)

The World Board made several price-friendly adjustments in new supply and demand tables for beef released Thursday. Forecast 2019 beef production is reduced from the previous month on lower expected steer and heifer slaughter the first half of the year. Additionally, the 2019 beef export forecast is also raised from last month.

1)

Actual beef exports last week fell to 15,300 MT, down 17% from the previous and from the prior four-week average.

2)

Net beef export sales last week recovered to sales of 16,200 metric tons (MT) for 2018,up 25% from the previous week. Increases were primarily for Japan (6,300 MT, including decreases of 2,500 MT), South Korea (4,000 MT, including decreases of 900 MT), Mexico (1,800 MT), Hong Kong (900 MT, including decreases of 200 MT), and Taiwan (800 MT, including decreases of 100 MT).

2)

For the week ending June 30, steer carcasses jumped to 865 pounds, 7 pounds more than the prior year and 6 pounds more than 2017.

3)

Pork trade forecasts for 2018 and 2019 are unchanged from the previous month. Lower pork product prices are expected to help offset increased competition in key markets in 2019.

3)

Net pork export sales last week dropped to 9,200 MT, down 44% from the previous week and 43% from the prior four-week average. At the same time, actual pork exports totaled 18,500 MT, down 9% from the previous week and 4% from the prior four-week average.

4)

For the reporting week ending July 3, commercials reduced their short position in lean hog futures by 2,200 contracts now short 3,300. The CFTC will update these totals Friday afternoon, but a further reduction could be documented if the board's large discounts are encouraging hedgers to take profits and move risk-taking into cash.

4)

Forecast 2018 pork production is raised from last month as higher expected second-half hog slaughter more than offsets lower second-quarter slaughter. A more rapid pace of hog slaughter is expected in the third quarter and USDA's quarterly Hogs and Pigs report estimated the March-May pig crop was 4% above 2017, which will result in higher fourth-quarter hog slaughter.

OTHER MARKET SENSITIVE NEWS:

CATTLE: (McDonald's Canada) -- McDonald's Canada is supporting responsible beef production after a four year journey to help define beef sustainability standards in Canada

In a major nod to the quality of Canadian beef, McDonald's Canada announced Friday that it will be the first company in Canada to serve Canadian beef from certified sustainable farms and ranches, beginning with its Angus line-up.

This means that for the first time ever, McDonald's 3 million daily guests will soon be able to enjoy Angus beef sourced from farms and ranches certified sustainable according to world-class standards set by the Canadian Roundtable for Sustainable Beef (CRSB). More specifically, over the next 12-months, more than 20-million Angus burgers will be sourced according to the CRSB standards.

"This is a big step in our beef journey -- not just for McDonald's Canada and the Canadian beef industry, but around the world," said John E. Betts, President and CEO, McDonald's Canada. "Without the support from the industry and the incredible work Canadian ranchers do every day, beef sustainability in Canada would not be possible. This partnership, combined with McDonald's scale, is creating change and encouraging responsible beef production for years to come that will benefit all Canadians."

People will also soon see a new Canadian Roundtable for Sustainable Beef (CRSB) certification logo alongside McDonald's Mighty Angus® line-up on the menu.

This is all possible because McDonald's Canada has positioned itself to meet the requirements of the CRSB's Certified Sustainable Framework. The CRSB Sustainable Beef Production and Processing Standards include more than 60 indicators across five principles for beef sustainability and are upheld by-on-site certification audits.

"Sustainability is good business. Consumers are increasingly inquisitive about the food they're eating and want to know it was produced in a socially responsible, economically viable and environmentally sound manner," said Cherie Copithorne-Barnes, Rancher and Chair of the CRSB. "As we all strive to make continuous improvements, it's important to recognize achievements made along the way. We celebrate with McDonald's Canada on their significant progress and acknowledge their role in supporting the establishment of a clear vision for beef sustainably."

For example, a few of the indicators a farmer or rancher must achieve include:

Grasslands and grazing are managed in a way that maintains or improves soil health and protects watershed areas.

Outcomes related to feed/water, animal care, shelter, herd health and handling procedures are met as per requirements outlined in Canada's Code of Practice for the Care and Handling of Beef Cattle.

As a founding member of the CRSB, established in 2014, McDonald's Canada was a driving force and strong supporter in developing Canadian standards for beef sustainability. The CRSB consists of a diverse group of stakeholders representing academia, government, food and agricultural businesses, producer associations, processors like McDonald's supplier, Cargill, retail and foodservice as well as NGOs like the World Wildlife Fund U.S., Nature Conservancy of Canada and Ducks Unlimited Canada.

Sourcing sustainably doesn't just benefit McDonald's; the entire ecosystem stands to gain. As more producers have their operations certified sustainable, McDonald's looks forward to growing the volume of available beef sourced from CRSB-certified sustainable operations, with other companies also joining the journey.

"Cargill recognizes that consumers want to know that their beef is raised and processed responsibly," said Pete Richter, Cargill global foodservice group leader. "And we believe the framework developed by the Canadian Roundtable for Sustainable Beef can provide the information they are seeking. By applying this framework to our Canadian beef supply chain, we look forward to becoming the first major Canadian processor to provide farm-to-fork traceability of beef from certified sustainable sources."

HOGS: (Tuoi Tre Newspaper) -- As the U.S.-China trade war continues heating up, so are concerns that frozen pork from the States will prevail in the Vietnamese market, which will in turn slash the high prices of domestic swine.

The United States' imposition of tariffs on US$34 billion worth of Chinese imports is putting serious pressure on the American market as eyes turn to Beijing, which readies itself to fire back with tariffs of its own on U.S. goods across several industries, particularly on automobile and agricultural products.

Likewise, Mexico is taking aim at the United States with an announcement that it will institute a 20-percent duty on frozen pork products imported from the United States.

As Mexico and China constitute the two largest importers of American pork, U.S. pig farmers are scrambling to find a market for their meat.

In Vietnam, where the price of live pigs is hitting a two-year high of VND48,000-50,000 ($2.06-2.15) per kilogram, swine producers are beginning to worry that their U.S. counterparts will flood the local market with their newly-found pork surplus and send the price of domestic swine into a tailspin.

Industry experts are already speculating on how heavy the spillover from America's trade war with China will hit Vietnam -- and it is not looking good.

In May 2018, the Southeast Asian country's U.S. meat and meat-related imports reached 10,870 metric tons valued at $13.05 million, a 47.8 percent increase in volume and 24.4 percent rise in value month-on-month.

According to the director of a food trading company in Ho Chi Minh City, live pigs from the U.S. currently sell for VND27,000 ($1.16) per kilogram. Even with the current 25-percent tax it still fetches a lower price than domestic pork.

"The price of live pigs is currently very attractive but farmers still worry about reproducing en masse," said Thang, a pig farm owner in the southern province of Dong Nai.

"Despite the current prices, they're worried that their price may drop in the near future."

As the cost of breeding stock and animal feed is also quite high, starting a new herd when the risk of a price slump lingers could lead to serious losses, he explained.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

John Harrington