Comments from the cow side on the trade war...

Discussion in 'Commodity Futures' started by Overnight, May 13, 2019.

  1. Sig


    Except we're spending $10B more (total of $16B) on ag subsidies this year to protect the overproduction!
    #21     Jun 24, 2019
  2. Overnight


    I love this stuff...

    "A reversal in price direction for cattle futures was spurred by optimism over trade talks with China. The rally shut down trading as sellers raised asking prices and buyers raised bids. The expectation bar has been raised following the rally in futures. Seller asking prices of $112 were ignored as packers hope the rally is short lived. Packers are purchasing for a holiday shortened week but pent up cook out demand, caused by a late summer warm up in much of the nation, will likely help beef sales and box prices that were higher this morning.

    President Trump is traveling to the G20 meeting where he and Chinese President Xi will be meeting soon. Both entrenched sides of the trade dispute would benefit from a deal and both want to have any deal appear to be a win for their respective sides. News from the meeting should be favorable for the markets, but also there will not be a deal take place during this trip so most information will be promotional only."

    And their latest weekly blurb...

    The advent of plant based proteins has arrived like a Tsunami. The press coverage has been unrelenting and favorable. The introduction onto food service menus has been rapid. Most restaurants have either posted an addition to their menus or promise to soon. The exception is Shake Shack that has refused to add a alternative meat product. The media is full of stories of problems keeping sufficient inventory on hand. Consumers are reminded of the self serving assertion that the product is helping save the planet from global warming partially caused by the livestock industry. Most supermarkets have announced plans to start selling alternative meat products.

    The business side also has been a boon to investors. Beyond Meat's stock went public at $25 and is trading currently at $150 after having reached $200. The business stories are daily and also favorable suggesting a new disruptive business model. Beyond Meat and Impossible Foods are the leaders but giant Tyson has now joined the fray promising new meat alternatives in the future. Most supermarkets are adding plant based proteins to their inventories.

    The beef industry has met the onslaught with complaints about "Fake Meat". The attacks have focused on labeling, hoping once people realize the new products are not real meat, they will go away. They are dead wrong. The beef industry was outraged when the burger shops introduced a chicken burger. The chicken burger remains today. The food outlets will offer whatever they can sell and bad mouthing the competition is a failed strategy.

    Alternative meats, both plant based and cell based, are here to stay and the beef industry needs to compete by offering a better product at a better price. The industry also needs to educate consumers on the role of beef animals on the planet and in the diet. Every instance of someone ordering an alternative meat product is a lost sale, and unless there is a plan in place to replace that sale, beef demand will decline. Expanded markets abroad is the most logical replacement.

    The nutritional value of beef is superior to those offered by alternative plant based proteins. The body doesn't store protein so it is necessary to replenish it daily through diet. When eaten proteins break down into amino acids that are used for almost every metabolic process in the body. The proteins source matters because animal proteins provide more balanced amino acids than plant based proteins that sometimes have low levels of certain amino acids and sometimes not all the nutrients provided by animal based proteins -- especially red meat. For example plant based proteins are low in methionine, tryptophan, lycine and isoleucine. Amino acids are classified as essential and non-essential. Animal proteins, because they resemble your body more closely, deliver essential amino acids. Animal proteins also tend to be high in other nutrients often not as prevalant in plant based proteins. Those include Vitamin B-12, Vitamin D, Omega 3s, Meme-Iron, and Zinc.

    Price will always play an important role in consumer choices. Currently plant proteins cost more than a beef burger. That may change as competition develops in this space. Beef will always need to compete for price but it also can compete by providing the information about the product that is honest and tells the factual story of beef and how the nation's grasslands are converted by ruminants to protein. Beef is an energy dense food that is known as brain food. The supply chain data desired by consumers must be provided through animal identification.

    The bottom line message to consumers is the value of a balanced diet. Veggie burgers have been around a long time. You can soak two pieces of bread in butter and put almost anything in-between and the result will deliver a satisfactory taste.
    #22     Jun 27, 2019
  3. JSOP


    Which the US government was supposed to stop doing long time ago. Not China's problem that the US government chooses to live in the ag industry's lobby group's pocket for so long while ignoring basic economic principle. If the US government stops the subsidy and instead spend that money on improving infrastructure and other much-needed areas, US' economy and people's welfare would've been in much better shape.
    #23     Jun 30, 2019
    Sig likes this.
  4. Overnight


    This week's blurb from the cow folks might be important for the ag traders...


    July 1 Cattle Inventory Unchanged

    All cattle and calves in the United States on July 1, 2019 totaled 103 million head, unchanged from the 103 million head on July 1, 2018.

    All cows and heifers that have calved, at 41.7 million head, were slightly below the 41.8 million head on July 1, 2018. Beef cows, at 32.4 million head, were unchanged from a year ago. Milk cows, at 9.30 million head, were down 1 percent from previous year.

    All heifers 500 pounds and over on July 1, 2019 totaled 16.4 million head, 1 percent above the 16.3 million head on July 1, 2018. Beef replacement heifers, at 4.40 million head, were down 4 percent from a year ago. Milk replacement heifers, at 4.10 million head, were down 2 percent from previous year. Other heifers, at 7.90 million head, were 5 percent above a year earlier.

    Steers 500 pounds and over on July 1, 2019 totaled 14.7 million head, up 1 percent from July 1, 2018. Bulls 500 pounds and over on July 1, 2019 totaled 2.10 million head, unchanged from July 1, 2018. Calves under 500 pounds on July 1, 2019 totaled 28.1 million head, down 1 percent from July 1, 2018.

    Cattle and calves on feed for the slaughter market in the United States for all feedlots totaled 13.6 million head on July 1, 2019. The inventory is up 2 percent from the July 1, 2018 total of 13.3 million head. Cattle on feed in feedlots with capacity of 1,000 or more head accounted for 84.4 percent of the total cattle on feed on July 1, 2019, down slightly from previous year.

    The combined total of calves under 500 pounds and other heifers and steers over 500 pounds (outside of feedlots) is 37.1 million head. This is slightly above the 37.0 million head on July 1, 2018.

    Calf Crop Down Slightly The 2019 calf crop in the United States is expected to be 36.3 million head, down slightly from last year's calf crop. Calves born during the first half of 2019 are estimated at 26.5 million head, down slightly from the first half of 2018. An additional 9.80 million calves are expected to be born during the second half of 2019.


    The mid-year inventory confirmed the fact that national herd growth has come to an end. Amid all the data released and available additional warning signs are on the horizon for the beef industry. Beef demand that has been driven by a healthy economy and job growth, may be slipping. The prospect of selling less beef in the future at lower prices looms large as a risk factor.

    Alternative proteins are the buzz. They are cutting into beef's marketshare. The lackluster beef demand this summer has been blamed on a cold spring and cool June that slowed backyard grilling. Summer heat is upon us, and now, it is too hot to cook. Consumers complain they need to know more about the beef they eat and beef producers are unable to provide it without animal identification.

    Exports of beef are down from last year. Trade wars with China and a failure to negotiate a bi-lateral trade agreement with Japan have put the breaks on exports. Moreover, the U.S, is losing sales every day to countries requiring ID on all cattle. The U.S. remains the only major beef producing country not requiring ID.

    The problems with beef demand are trickling down to the producers in the form of price. All classes of cattle are selling at substantially lower prices than last year. The danger is this may not be over. The feeders and stocker operators who are simply middle operators in the beef chain have nowhere to push back -- except on the breeder. Breeders are at the tipping point when more price reductions for calves will trigger liquidation. With lower calf prices some breeders will switch to stocker operations and operate in the middle of the beef chain.

    USDA could write the rule next week requiring ID on all cattle sold in commerce but this is nearing the election year and no one wants to offend a vocal minority. NCBA and some state breeder groups are fearful of membership loss if they advocate ID. The result is nothing happens and the industry rolls over and accepts declining demand for beef and lower prices.

    #24     Jul 24, 2019
  5. Overnight


    And this is how you can tell that the report is written by a human...

    "...have put the breaks on exports..."

    Yes, the writer meant "brakes". It is a common error that only humans make. Hehe.
    #25     Jul 24, 2019
  6. Overnight


    Latest blurb...

    The Chinese trade wars have the feeling of reaching a final stage. The back and forth, tit for tat, and overheated rhetoric seems to be reaching a culmination where either common sense brings them back to the negotiating table or both sides walk away like school kids having a backyard fight. Fed Chairman Powell weighed in from Jackson Hole, where he hosted an annual conference on monetary policy, by saying, “There are no recent precedents to guide any policy response to the current situation. Moreover, while monetary policy is a powerful tool that works to support consumer spending, business investment and public confidence, it cannot provide a settled rulebook for international trade.”

    The language has ratcheted up with more threatening rhetoric, more name calling, more emotional and emotive language, mostly from our President, and few signs that either is willing to stop, listen and reason together. Both sides need a deal, and each thinks the other needs it worse. The Chinese are suffering more economically, and Trump is suffering politically, with an election year on the horizon. For the President, it is personal, and the need is to demonstrate his person power.

    The Chinese announcement Friday of more tariffs sent all the markets lower. This was followed by a Trump tweet instructing U.S. companies to find new sources for products sourced in China. A subsequent tweet cited both Chairman XI and Chairman Powell as “an enemies” in a tweet. Finally at the end of the day Trump raised additional tariff percentages on Chinese goods.

    Trump is having a hissy fit but the victims are us. Those operating in the ag space find our daily lives and markets roiled by this childish behavior. Cattle prices were poised for a rebound possibly taking cash prices from the low the prior week in the south of $105 up to at least $108. Northern markets had already moved from $172 dressed to $178 on Thursday. The fall out, from the trade wars to the markets was evident, and cattle owners felt little motivation to fight for higher prices when ag producers are cannon fodder for the trade negotiators. The week ended with only modest gains of a dollar.

    In an era when victimhood and oppressed people are canonized in the media, it is hard not to feel beef producers are taking it on the chin at every turn. Government programs offer pig producers $11 per pig, farmers $150/acre for their crops, and beef producers are left holding the bag. This may be cry baby and it probably is, but in a more normalized environment, one would expect some good things to happen along with the bad. It has been a long time since something good has happened to the live portion of the beef business.

    Some believe this is all part of a plan for the President to draw out the trade war with the Chinese until next year and then arrange for him to champion a trade deal that will then propel him into the White House for another 4 years. The problem is the Chinese will not be interested in playing a role in his playbook, and gambling with the lives and livelihood of ag producers is no way to run a railroad.

    The world’s two largest economies have many differences -- culturally, economically, and politically. These differences don’t negate the importance for each to develop trade policies maximizing their relative positions in the world. Each country has different strengths and each a differing need. Out of this recognition, must come accommodation."
    #26     Aug 26, 2019
  7. Overnight


    Snippet from today...

    The tone of news from both sides in the trade wars has changed. Both countries need an agreement and pressures are on both for something -- sooner rather than later. This has led to a warming tone of announcements leading up to next months trade talks in Washington.

    The blustery rhetoric of the past few weeks has been replaced with respectful tit for tat. The Chinese signaled intent to purchases U.S. ag products on Tuesday and this was followed by yesterday's announcement by President Trump that he would delay tariff increases, set for October 1st, for two weeks.

    Trade negotiators from both sides pledged behind the door secrecy, to begin next week, when lower level negotiators attempt to work out language for an agreement..."

    "...Futures continued upward with the spot month failing to fully participate. The interplay between cattle and hog futures is interesting to watch.

    Lean hogs closed limit up yesterday and continued surging upward today. It is likely we will see more linkage between the two competing meats as global trade impacts price..."

    #27     Sep 13, 2019
  8. Overnight


    This week's blurb...



    The President and his trade ministers announced an agreement with the Chinese. The agreement was billed as Phase I of a three phase agreement, but all of the issues pertaining to agriculture were contained in Phase I. The core of the agreement for agriculture was a pledge by the Chinese to purchase $40-50 billion dollars of American agricultural products. The U.S. would shelve plans to increase tariffs on imported Chinese goods set to go into effect on October 15.

    The rough framework of the deal on ag products was short of details. The total dollars of purchases were announced but little information on what products and what time frame. The Chinese has sought to break the trade deal into components and resolve various issues separately in stages but the Americans resisted until now. President Trump portrayed Phase I as the largest part of an overall trade agreement with only smaller portions to follow.

    There is little doubt that pork and soybeans will be the initial focus for Chinese purchases. The decimation of the Chinese pig population must be replaced by imported pork and likely larger supplies of beef given the scope of the red meat requirements. With rough estimates of a loss of half of the pigs in China, and China having half of the world's pigs, this represents a large shortfall for red meat in China.

    Pork prices have been skyrocketing in China and emergency reserves have been accessed and are nearing depletion. Free market supplies of pork in the world may not be adequate to satisfy Chinese demand. Chinese subsidies are working to rebuild the pig population but even with litters every three months and 10 pigs to the litter, a rebuilding of this size takes time. This also does not recognize the spread of the disease already reported in countries around the world.

    The opportunity for beef exports to China is enormous. Beef currently only represents 10% of Chinese red meat consumption but is growing. Turning Chinese taste in red meat from pork to beef could result in long term demand similar to strong beef exports to Japan and S. Korea. Chinese beef import regulations requires all cattle used in export programs to use an ID tag providing traceback to the original breeder.

    Beef plants and beef plant suppliers will be working with USDA to conform to export requirements for beef exported to China. Suppliers must subscribe to an EV [Export Verified] USDA program and be subject to audit once or twice a year. Animals must be under 30 months of age and be traceable to the birthplace of the animal. Cattle imported from Mexico or Canada must be traceable to the port of importation.

    Many details will need to be added to the sketchy outline provided in the initial announcement. Chinese officials are already calling for additional meetings on Phase I prior to the official signing in a month. While it is prudent not to call the deal and agreement until it is signed, it must be viewed as positive for beef demand and ultimately prices.

    #28     Oct 16, 2019
  9. piezoe


    It's close to zero but on the other side of zero. It's a net loser. Alcohol from sugar cane makes sense; but not from corn. We knew that from the outset. Did it anyway to "help" Grassley's constituents. Other than locally, there is no such thing as "free markets", which is not necessarily a bad thing, though it often is. Everything is for a reason, but the reason is not always transparent, nor benign.
    Last edited: Oct 19, 2019
    #29     Oct 19, 2019
  10. Overnight


    Interesting thoughts...

    "...In Nebraska additional cattle sold at $116 live and $182 dressed after passing $115 bids yesterday. Packers won't want to jeopardize formula pricing in the south so no additional purchases are expected. While box prices faltered yesterday, gains for the week remain at $4 with packers able to buy cattle at steady prices. Uncertainty remains for the Chinese trade deal but beef demand remains strong despite a build up in fed cattle inventories. Every purchase of beef by the Chinese from South America, New Zealand or Australia means less meat headed our direction. Global demand for red meat is not specific to one country or one trade agreement.

    China is hesitant to put a dollar figure on purchases of American farm products unless the President commits to abandoning tariffs set to go into effect the middle of December. If Chinese negotiators were parties involved with the cattle trade, it would be unlikely they would be able to find any trading partners in a business that relies on the integrity of the trade. The Chinese negotiators believe the initial commitment is only a framework to be tweaked as you go..."

    ...There has been skepticism among commercial firms regarding the size of this year's corn crop. Harvest is mostly complete and government estimates have held to the larger estimates of this year's production. The wild card is year ending corn stocks. [crop year ending in August 2020]. Use of corn for livestock and poultry feed will be at record levels due to ramping up of pork and poultry in response to global demand for meat. The unknown is corn exports and no one can forecast what will occur with the trade wars..."

    @kanellop on the corn side...
    Last edited: Nov 15, 2019
    #30     Nov 15, 2019