Beef price

From politico

THE BIG BEEF PRICE-CHECK: USDA officials and federal prosecutors are probing the wide gap between what consumers pay for beef at the grocery store (the highest in decades) and the painfully low prices that livestock producers are paid for their cattle, POLITICO’s Leah Nylen and Liz Crampton report.

By the numbers: The average retail price for fresh beef in April was $6.22 per pound, or 26 cents higher per pound than the previous month, according to the Bureau of Labor Statistics. But the average price for a steer at the end of April was less than $100 per hundred pounds. The five-year average for that same week was about $135 per hundred pounds, according to USDA’s weekly summary.

According to meatpackers, beef prices are up during the pandemic because processing plants have scaled back operations as workers fall ill, meaning less meat is making its way to grocery store shelves. The reduced capacity also means less demand for live cattle from farmers and ranchers, pushing livestock prices lower.

But farmers and lawmakers think there’s more afoot than simple supply-and-demand shifts in an industry that has been a focus of federal antitrust efforts for more than a century. One hundred years ago, the five largest meatpackers accounted for 82 percent of the beef market, before agreeing to antitrust measures. Today, four companies control about 85 percent of the market: Tyson Foods, JBS, National Beef and Cargill.

“It’s evidence that something isn’t right in the industry,” said Sen. Chuck Grassley (R-Iowa). He’s one of 20 senators and nearly a dozen state attorneys general who have asked the Trump administration to take a closer look at the beef market.

USDA has been investigating potential price-fixing since last August, and the Justice Department is now reviewing the so-called Big Four beef processors, according to a person with knowledge of the probe. A group of ranchers is also suing the four companies for allegedly colluding to depress cattle prices since 2015, a case that is pending in Minneapolis federal court. The four meatpackers did not respond to requests for comment on the federal probes.

Prices at supermarkets are rising at the highest rate in eight years, as the coronavirus constricts meat production and grocery chains limit sales, said the USDA in a monthly forecast. Grocery prices will rise by a higher-than-average 2.5% this year, double the previous estimate.

“The closure of many meat-processing facilities has put upward pressure on retail meat prices despite abundant farm-level meat supplies,” said the USDA’s Food Price Outlook, released on Friday. Beef prices surged by 4.2% and poultry by 4.7% in April……According to day compiled by FERN, at least 55 meat industry workers have died and more than 17,000 employees have tested positive for COVID-19 as of Friday at midday. At least 220 meatpacking and processing plants have had outbreaks..(Successful Farming)

Morning 5-26

Risk ON……. Spoos above 3000 +56 handles, +1.9%, Nasdaq +1.6% Dow +2.1%, Russell +3.1%…Crude +2.4%, Gold -.4% Copper +1.5%. plenty of chatter of short covering here in Spoos

 Optimism regarding vaccine news from Merck and further steps by states to lift lock down measure the cause for such euphoria. 200-day MA in SPX roughly 3000 something to watch on 8:30 open    treasury’s lower, big range in Bunds almost 100 handles currently down 70 …. Dollar index -.8%  testing the 99 handle in spot 98.64 is the area to watch   a break below this level  would be a big deal…Not all good news U.S.- China rhetoric still hot as  China Accuses U.S. of starting a new Cold war and not to cross Red line regarding Taiwan.. Germany plans to lift travel warnings for 31 European Countries and Japan ended her Nationwide state of emergency

 Economic calendar today filled with Second tier data today … 2-year auction at noon… Congress on break so politics and Stimulus bill chatter moved to back burner

WSJ: The worst may be over… “Truck loads are growing again. Air travel and hotel bookings are up slightly. Mortgage applications are rising. And more people are applying to open new businesses. These are among some early signs the U.S. economy is, ever so slowly, creeping back to life,” the Wall Street Journal writes. It also has an editorial titled (Pro Farmer)

Morning 5-22

End of Hong Kong Autonomy?  Surprise Announcement overnight by China sent stocks Lower  and Bonds higher   …

China looks to tighten its control over Hong Kong. China signaled it will impose new national-security laws on Hong Kong, dealing a blow to the territory’s autonomy as Beijing seeks to stamp out widespread pro-democracy protests that have challenged leader Xi Jinping.
Hong Kong stocks tumble. Global stocks fell, with Hong Kong shares leading regional declines. The Hang Seng Index closed down 5.5% in its worst day since July 2015.(WSJ)…China Communist party for the first time in 25 years did not release a GDP Forecast (BBG)  does this indicate the forecast to gloomily to release?… Shanghai Composite Index closed 1.9% at 2813, Shenzhen Component down 2.2% and Chinext index down 2.5%. (Mizuho)   NEWS

… But Stocks have rallied back to almost unchanged, White House will not idly sit by be on Guard for anti-china tweets and tape bombs from the White House….Fitch Changed Australia’s ratings to Negative…. India Unexpectedly cut Interest rates as fears of the first negative print to GDP in 40 years looms…Chains including Starbucks, Chipotle and Shake Shack are seeking delayed or reduced rent payments for June, a sign of the financial trouble facing both restaurant operators and their landlords(WSJ)….

“A number of states reported above-trend increase in cases  yesterday, including Arizona, Delaware, Illinois, Mississippi and North Carolina, but none of the numbers were startlingly bad and it would be very premature to worry about a shift in the trends. … For the first time since the crisis began, not a single state reported cases rising by 5% or more. The median state increase in cases was 2.1%, down from 2.7% a week ago. (Politico)….

“A bipartisan group of senators reached agreement on a bill that would ease restrictions on emergency small business loans that are designed to curb massive layoffs during the Covid-19 pandemic. (Politico)…

On Moderna’s announcement of a vaccine that worked in a very small study, Dr. Anthony Fauci acknowledges the full data have not been “peer reviewed.” But he tells @NoelKing: “Having looked at the data myself, it is really quite promising.” @Morning Edition @NPR…

Trump says he won’t close the country if second wave of coronavirus hits… Trump said “we are not closing our country” if the U.S. is hit by a second wave of coronavirus infections. “People say that’s a very distinct possibility, it’s standard,” Trump said when asked about a second wave during a tour of a Ford factory in Michigan. “We are going to put out the fires. We’re not going to close the country,” Trump said. “We can put out the fires. Whether it is an ember or a flame, we are going to put it out. But we are not closing our country.” (Pro Farmer)

Markets:

 Spoos Higher now 49 handle range Nasdaq Unchanged, European Bourses mixed Mib +1.3% …Dax unchanged Bunds also Little changed…   Treasuries higher but well off session highs  The Yuan off session lows but not by much trading 7.15 Oil looking at first red day in 7 Gold and Silver back on the bid after yesterdays profit taking trade Dollar bid  +.4%  Not a surprise with Yuan Weakness

No Economic releases today So Tweets and China related comments will be the driver of Flows Opex for treasury Complex

Breakeven Inflation

Inflation or deflation argument of late reminds me of the old Lite beer commercial taste great or Less Filling.Plenty of opinions on the subject and rightfully so as short to medium term forecast depend on which one you may believe in. I myself believe Dis- Inflation will be around for a bit longer then 2022 but just my opinion. Below are two charts that show what break even inflation markets are pricing in for inflation, in the short term :

1 year inflation breakeven

Horizontal line=Zero or Inflation below Zero Deflation but notice that trend is turning higher

2 year Break even rate

2 year Break even inflation almost back above zero and this to trending higher.A very Simple look at inflation expectations if both 1 and 2 year move and stay Positive less need for negative Fed funds rate,but if these maturities stay persistently below zero=Deflation maybe the negative fed funds chatter perks back up.

All 50 States open..

all 50 states in one way shape or form are reopening as Connecticut becomes the last state to do so …Florida reporting new cases increased 1.1% vs 7-day Average of 1.6%(Mizuho) IRS reporting employees can return to work in three states Kentucky,Utah and Texas beginning early June (Politico).Tests in the U.S.,over the last week have averaged 350K a day(Morning dispatch) traders optimism outweighs pessimism.

Commentary from Morgan Stanley

Macro: Lows in Growth Are in. ‘U’ Is Fine, ‘W’ Is Not
We think April saw the lows for growth in this cycle, and data will
now start to improve from that low base. In this early phase of the
cycle, we think rate of change matters more than level; a ‘W’ is the
problem, not a ‘U’. Our cycle model is in ‘repair’, and suggests better
risk asset performance once the data lows are in
. “Factor exposure – long value, neutral on momentum: Our trade portfolio has a value bias and
is short momentum.”

Bloomberg financial conditions appear to be showing a “V” shaped recovery as metric moves closer to positive territory