Wednesday Morning Livestock Market Summary

GENERAL COMMENTS:

Is the cash cattle trade set for another round of midweek magic? To be sure, Wednesdays have been close to cash heaven for nearly a month. While time will tell, the impressiveness of this recent pattern will at least encourage sellers to dig in their heels through the day with sharply higher asking prices (e.g., $130 to $131 in the South; $214 in the North). Bullish hopefuls will also be keeping an eye on the FCE internet auction. Live and feeder futures should open moderately higher, supported by follow-through buying and generally positive cash expectations.

Look for the cash hog market at midweek to begin with generally steady packer bids. Early ideas point to a Saturday slaughter totaling close to 135,000 head. This week's kill is expected to be close to 2.29 million head, approximately 6% larger than 2016. Lean futures seem geared to open moderately lower, checked by residual selling interest and sluggish fundamentals.

	BULL SIDE		BEAR SIDE
1)	Cattle futures demonstrated Tuesday that the bullish flame still burns. Spot April managed to nose over $120 before closing as high as $119.90, the most promising settlement for a spot month since late February.	1)	Not only did the live board continue to attract significant selling interest around $120 basis spot April, many feedlot managers seem quick to show interest in selling cattle over the next two to four weeks at significant discounts.
2)	Beef cutouts moved back in the passing lane on Tuesday, closing significantly higher with box demand described as "moderate to good."	2)	Tuesday's closing box report described as "moderate to heavy," possibly suggesting that retail demand is beginning to tire.
3)	Wednesday's Cold Storage report (set for release Wednesday at 2 p.m. CDT) is expected to document 15% less frozen pork as of the end of February than last year. Also, most analysts predict record low belly stocks.	3)	The pork carcass valued stumbled with moderate losses on Tuesday, pressured by softer demand for bellies, butts and picnics.
4)	In anticipation of next week's Hogs & Pigs report, short-covering and position evening prior to official numbers should be somewhat supportive of deferred lean futures.	4)	Weaker cash hogs and lower overall wholesale pork product values along with concerns in regard to pork demand in the months ahead continued to weigh on lean futures Tuesday.

OTHER MARKET SENSITIVE NEWS 

CATTLE: (The New York Times) -- Death comes with raising cattle: coyotes, blizzards and the inevitable trip to the slaughterhouse and dinner plate. But after 30 years of ranching, Mark and Mary Kaltenbach were not ready for what met them after a wildfire charred their land and more than one million acres of rain-starved range this month.

Dozens of their Angus cows lay dead on the blackened ground, hooves jutting in the air. Others staggered around like broken toys, unable to see or breathe, their black fur and dark eyes burned, plastic identification tags melted to their ears. Young calves lay dying.

Ranching families across this countryside are now facing an existential threat to a way of life that has sustained them since homesteading days: years of cleanup and crippling losses after wind-driven wildfires across Kansas, Oklahoma and the Texas panhandle killed seven people and devoured homes, miles of fences and as much as 80 percent of some families' cattle herds.

But for many, the first job after the fire passed was loading a rifle.

"We did what had to be done," Mr. Kaltenbach, 69, said. "They're gentle. They know us. We know them. You just thought, 'Wow, I am sorry.'"

"You think you're done," he said, "and the next day you got to go shoot more."

For decades and generations, ranching has defined people's days. Mr. Kaltenbach would wake up at 4:30 a.m. without an alarm clock. Another family down the road, the Wilsons, checked on the cows between jobs at the hospital and the telephone company. The Wilsons invited their whole family over each spring to round up the calves, vaccinate and tag them.

"It's our life," Mrs. Kaltenbach, 57, said. "We lost our routine."

Beyond the toll of the fire, a frustration also crops up in conversation after conversation. Ranchers said they felt overlooked amid the tumult in Washington, and were underwhelmed by the response of a new president who had won their support in part by promising to champion America's "forgotten men and women."

"This is the country that elected Donald Trump," said Garth Gardiner, driving a pickup across the 48,000-acre Angus beef ranch he runs with his two brothers. They lost about 500 cows in the fires. "I think he'd be doing himself a favor to come out and visit us." Mr. Gardiner voted for Mr. Trump, and said he just wanted to hear a presidential mention of the fires amid Mr. Trump's tweets about the rapper Snoop Dogg, the East Coast blizzard and the rudeness of the press corps.

"Two sentences would go a long way," Mr. Gardiner said.

Weeks without snow or rain and late-winter temperatures scraping 80 degrees are threatening to create even more blazes in Western states grappling with the growing fire danger posed by climate change. Hundreds of homes were evacuated this weekend because of a wildfire that erupted in the dry hills near Boulder, Colo. By Monday, the fire was about 80 percent contained.

The Kansas fires — the largest in state history — burned more than 400,000 acres here in Clark County alone. Ten days later, Mr. Gardiner was still burying cows on his family's ranch. One by one, an orange loader scooped them off the bare sandy soil and trundled them to a pit being dug by a backhoe.

Ranchers said the cattle they had lost were worth more than the $2,000 they could fetch at an auction. Each cow was an engine that drove their farms and finances, giving birth to new calves every year or producing embryos through artificial insemination that could be implanted into other cows.

Emergency programs run by the federal Department of Agriculture — which is facing 21 percent cuts under Mr. Trump's budget proposal — will help ranchers, up to a point. One provides up to $200,000 per rancher for replacing burned fences. Another offers up to $125,000 for livestock losses. In response to the fires, the department is planning on Tuesday to announce $6 million in aid to affected farmers and ranchers to help restore their land, water and fences.

But at about $10,000 per mile, Mr. Gardiner said, new fencing alone may cost his ranch about $2 million. His total losses could reach $5 million to $10 million. Like many ranchers out here, he had insurance on his home and equipment, but said insuring so many livestock and so much fence was impossibly expensive.

"We're not asking for freebies here," he said. "We're going to work our tails off to get this thing rebuilt. We're going to get the blisters on our hands and roll up our sleeves and do the labor."

He added, "We could use a little help."

Aaron Sawyers, an agriculture extension agent with Kansas State University, got so upset with the delays in and strings attached to getting relief, and what he called a lackluster response from Washington, that he wrote a Facebook post on Tuesday urging friends to barrage lawmakers to loosen up government money for ranchers to replace fences and rebuild their devastated herds.

"This is our Hurricane Katrina," Mr. Sawyers said. The political response to the fires convinced him that Washington, even with an administration supported by 83 percent of Clark County voters in the election, was still "out of touch and didn't care about us."

"None of them are worth a damn, Republicans or Democrats," he said.

The governors of Texas, Oklahoma and Kansas have declared emergencies, and members of Congress from the affected states have toured the damaged area and promised help. In Kansas, Gov. Sam Brownback's office said that officials were adding up losses to request a presidential disaster declaration.

But help did arrive. Thousands of donated hay bales, to feed surviving animals bereft of their grasslands, have been rolling into town on the backs of tractor-trailers. Firefighters arrived from Colorado to help contain and extinguish the blaze. Farming and ranching groups from across the Great Plains sent skeins of fence wire and new metal posts to drive three feet into the soil. Members of 4-H clubs and National FFA Organization chapters drove down to help with the cleanup, sleeping in guest bedrooms and on living-room floors around the towns of Ashland, Meade and Protection.

"We don't like to receive," said Kendal Kay, the mayor of Ashland and president of a community bank here. "It's a time we're realizing we need to receive."

Mary Kaltenbach, 57, said she was not a hugger, but had been embracing neighbors for much of the past week. "You just do it," she said.

In all, the Kaltenbachs lost 130 cows and about 70 calves. About a dozen of their heifers — younger females — are now penned in just behind their house, which was spared, near the scorched foundations of two barns that did burn. One evening, the couple grabbed a bucket of feed pellets to check on them. Most romped to eat, but two smaller black cows hung back behind a gate, hobbling forward.

"Feet hurt," Mrs. Kaltenbach said grimly of one. "She's not going to work."

About seven miles east, the house that Matt Wilson's forebears built when they homesteaded in 1884 had withstood financial panics, droughts, the Dust Bowl and other fires, but it burned to ashes in the wildfires. His family also lost eight cows and calves, part of a small herd of about 100 that the family raises in addition to holding full-time jobs.

The newer house where the Wilsons and their six children lived also was destroyed. But they managed to save 1890s photographs of Mr. Wilson's great-grandfather: standing in front of the original house, atop a horse on an empty plain, at a county rodeo. They are planning to rebuild and keep ranching.

By way of explanation, Mr. Wilson pointed to the photos: "They didn't start with much."

HOGS: (National Hog Farmer) -- Hog slaughter has been close to what was implied by the USDA's December hog inventory survey. Average daily slaughter of U.S. raised barrows and gilts was up 3.2% during December-to-February. The Dec. 1 market hog inventory indicated winter market hog slaughter would be up 3.3%. It looks like March slaughter may come in slightly above the 4.5% increase implied by the December Hogs and Pigs report. It doesn't appear there will be any large revisions in the market hog inventory when USDA releases the next Hogs and Pigs report on March 30.

Last year's commercial hog slaughter was a record 118.2 million head, up 2.4% from the year before and up 1.5% from the old record set in 2008. Indications are that this year's hog slaughter total will easily exceed 121 million hogs and may exceed 123 million head.

USDA's latest forecast is that 2017 pork production will total 26.105 billion pounds, up 4.7% from last year's record. The increase in pork production must either come from increased hog slaughter, heavier carcass weights, or both. Given that daily hog slaughter is up roughly 3.7% thus far in 2017, USDA's forecast requires hog slaughter to average close to up 5% for the rest of the year, assuming slaughter weights stay close to last year's level.

Hog weights peaked with the record hog prices of 2014 and have trended lower since. Carcass weight averaged 213.7 pounds in 2014, 212.3 pounds in 2015, and 211.0 pounds in 2016. Thus far in 2017, average weights are down 0.5 pound. The long-term trend is for carcass weights to increase 1.3 pounds per year, so a weight increase is certainly due. Summer weather and hog prices will likely determine if 2017 weights average above or below last year's level. Hot weather and red ink usually push weights down.

Of course, what matters most to producers is the price they get for their hogs. Prices have rebounded from the lows of last fall. In part, this is due to less pork on the market. Pork production was down 2.7% in the first 11 weeks of 2017 compared to the last 11 weeks of 2016. Cutout value is up nearly $10 per hundredweight from mid-October. Equally important is the flip side of that production coin -- reduced hog slaughter. Packer margins have tightened causing hog prices to climb even faster than the cutout value. In late November, hog prices dropped to nearly 55% of cutout. Now hog carcass prices are back above 80% of cutout value.

If USDA's prediction of 4.7% more pork this year than last turns out to be accurate, producers better hope that slaughter weights take a big jump. If weights hold steady, 4.7% more pork will necessitate 4.7% more slaughter hogs. That would be a major challenge for packers. Hog slaughter plants were running at capacity last fall. Since then two old plants are being remodeled and brought back on line (Windom, Minn., and Pleasant Hope, Mo.) and two large new slaughter plants (Coldwater, Mich., and Sioux City, Iowa) are expected to start operations this summer. These four plants are likely to add about 20,000 head per day to this fall's slaughter capacity. That is an increase of 4.5% on the 442,000 daily slaughter of last fall. If fall 2017 slaughter is up 4.5% or more, packers will once again struggle to process hogs in a timely manner which means packer margins will expand and hog prices will drop faster than the pork cutout value.

Saturday hog slaughter is the best indicator of how close packers are to slaughter capacity. Currently, the number of hogs slaughtered on Saturdays is trending down as it always does at this time of year. Saturday slaughter numbers will come back up in the fall. Even with additional slaughter capacity coming on line this summer, Saturday slaughter this fall could exceed last year's record levels.

A case can be made that hog slaughter will not reach 123 million head this year. The December Hogs and Pigs report said winter and spring farrowing intentions were up 1.4% and 1.0%, respectively. If pigs per litter increase by 1.5%, which is in line with the long-term trend, then the December-to-May pig crop should be about 2.7% larger than last year and June-to-November hog slaughter would be expected to be up 2.7%. That would leave 2017 hog slaughter at roughly 122.2 million head which is 3.4% more than last year. If the number of litters farrowed fall short of intentions or if pigs per litter increases more slowly, then packer margins are likely to be much tighter than last year.

As always, producers will want to look closely at the numbers in the March Hogs and Pigs Report. Especially check out litters farrowed and pigs per litter. These surveys are not perfect, but they are the best available indication of future production.