Monday Morning Livestock Market Update

GENERAL COMMENTS:

If you think that "March Madness" is only about college basketball then you haven't been watching this month's runaway cash cattle market. Can the feedlot market put together another bullish bracket this week? Our guess is that initial asking prices around $130 plus and $212 to $214 plus will clearly reflect a sure confidence in that exact mission. Needless to say, nothing will be decided Monday until we have a better sense of new showlists and ready numbers as we move into the second half of the month. Live and feeder futures are staged to open moderately higher, supported by follow-through buying and tall feedlot cash premiums.

Hog buyers are expected to resume procurement chores Monday with bids steady to $1 lower. While we look for wholesale pork prices to stabilize through the end of the month, the success of late March may hinge on how much tightening we see in the butcher offering over the next several weeks. This week's kill is expected to fall a bit below 2.3 million head. Lean futures seem likely to open lower, pressured by residual selling and softer cash expectations.

	BULL SIDE		BEAR SIDE
1)	The electric combination of short-bought packers, tight fed supplies, and strong beef demand continued to power feedlot cash higher. We see no indication that this bullish trifecta is getting ready to jump the track.	1)	Although the short- and longer-term trends in live cattle futures have shifted higher, the January highs still pose formidable overhead resistance.
2)	Even though the cost of live inventory jumped last week, beef processing margins did a great job staying ahead of the curve. According to the DTN model, gross packer margins are starting the week around $260 per head, $17 greater than last week, $70 more than 2016, and the highest level since mid-November.	2)	There is mounting evidence that cattle buyers are building larger and larger out-front supplies, a strategy that will eventually afford them much greater leverage in terms of fed cattle procurement.
3)	Surging wholesale beef prices are probably making their pork counterparts look increasingly attractive to retailers and feed managers.	3)	Although cash hogs and lean futures have been struggling of late, noncommercial traders in the week ending March 14 were net sellers of only 100 contracts taking their net long in lean hog futures down to 30,300 contracts.
4)	Ham prices look to firm a bit over the next 10 to 14 days heading into the Easter timeframe. This prospect, in addition to expectations for decent fresh loin sales, explains why overall pork carcass value is forecast to move modestly higher through the balance of March.	4)	The late-winter defensiveness of lean hog futures seems to be tied to the uncertainty surrounding whether or not the recent strong domestic and export pork demand will continue.

OTHER MARKET SENSITIVE NEWS 

CATTLE: (Chicago Tribune) -- McDonald's expanded its test of fresh beef to more than 300 restaurants this week, suggesting the world's largest burger chain could be getting closer to introducing never-frozen beef patties nationwide.

The Oak Brook-based company said it's now offering fresh beef at all of its 325 restaurants in the Dallas area. Previously, McDonald's had been testing fresh beef at 55 restaurants across the Dallas-Fort Worth area and 75 restaurants across northeast Oklahoma. It first started testing fresh beef in a handful of restaurants in the spring of last year.

The test of never-frozen beef only includes Quarter Pounder patties, not the smaller patties that come on hamburgers and Big Macs. It calls the burgers "hot off the grill." The testing process not only measures what customers think of the burgers, but also the price, kitchen efficiency and other factors that will determine whether it's a viable option to bring nationwide, the chain said.

McDonald's always does a trial run when it makes changes to its food or adds new menu items. Ensuring fresh beef fits into McDonald's operation is a complex study that means changes in how it is transported to the restaurants, how it is stored when it arrives and how much it affects employees' process of making burgers.

The burger chain tends to favor the Lone Star state to start tests involving beef because, well, Texans like their burgers. Burgers make up a bigger percentage of average sales at restaurants there. It tends to focus on spots like Atlanta for chicken, the West Coast for salads and the Northeast for coffee.

McDonald's experimentation is part of its effort to change the public's perception of its food quality and freshness. In the past two years, it has made strides to tweak its food to improve the taste and quality, like toasting buns and searing burgers longer, switching to butter from margarine on its Egg McMuffins and stripping antibiotics and preservatives from chicken.

It acknowledged recently that it has lost 500 million transactions in the U.S. since 2012, when it first moved away from the Dollar Menu, and most of those customers went to fast-food competitors like Wendy's and Burger King. Wendy's has capitalized on McDonald's use of frozen beef in a recent ad campaign, where it promotes its use of fresh beef for all its burgers.

HOGS: (AP) -- The little Webster County city of Badger is looking to grow in response to the upcoming construction of a giant pork processing plant near the 550-person community.

Officials have purchased land and plan to build roads and other infrastructure to accommodate housing.

Prestage Foods has plans for a $250 million pork processing plant about 13 miles east of Badger.

"The Prestage plant is coming and there's going to be a need for housing," said Nadine Odor, city clerk. "I think all the towns around are trying to expand, because it's going to bring a lot of people to the area."

The city plans to open bids Aug. 10 for the work's first phase, which will include 16 housing lots in the northernmost part of the addition and a stormwater retention pond. It's expected to cost about $914,000.

"When half the lots are sold and construction has started in Phase 1, we will open Phase 2," Odor said.

The whole project, done in three phases, is expected to cost about $2.45 million and add 35 total new housing lots.

The City Council has created an urban renewal area, which would allow the city to use tax increment financing on the project. TIF districts set aside increased property tax revenue in specific areas to be reinvested in those areas.

"This year we're not expecting the first phase to have to use TIF," Odor said. "Hopefully the other phases we won't either. But we're doing the urban renewal area for the future, if it's needed."