After being beaten to a pulp over the last two weeks, cattle feeders are desperate to find a corner they can defend. Monday's triple-digit rally in futures may be a promising serving of hope in that regard. Needless to say, the board will need to do more work before it can lend cash potential any legs. Accordingly, bids and asking prices will probably remain poorly defined Tuesday with both sides monitoring the board for greater credibility. Our guess is that significant trade volume will not surface until Wednesday or Thursday. Live and feeder futures should open higher, supported by follow-through buying and ideas of cash stability.
Hog buyers are expected to resume work Tuesday with basically steady bids. This week's slaughter should be close to last week's level (i.e., 2.14 million head). Supplies continue to tighten on a relative basis and should be tighter throughout June and the tightest in July, year over year. Lean futures seem staged to open some higher with nearby once again advancing at a faster pace than deferreds.
| BULL SIDE | | BEAR SIDE |
| 1) | New showlists distributed in feedlot country on Monday were generally smaller than last week with only Colorado showing about the same number of ready steers and heifers. | 1) | The volume of out-front booked beef sales last week dropped to the lowest level seen since mid-January. |
| 2) | Live and feeder contracts impressively reversed from a lower opening on Monday to close with triple-digit gains. Most months closed above moving average highs for the first time since early June. | 2) | As nice as it was to see triple-digit gains in cattle futures Monday, the action may represent nothing more than a big dead cat bounce. Surpassing last week's high of 118.50 basis is key to fueling a sustained rally. Tough resistance at 40-day moving averages need to be taken out. |
| 3) | With the cash hog index digging in above 90, the discounts of spot July and August will keep would-be bears nervous, warning them of the danger of getting too bearish and/or overstaying their negative welcome. | 3) | Uncertainty regarding the rate of herd expansion is likely to keep lean hog traders defensive before Thursday's Hogs & Pigs report. |
| 4) | Bellies had another round of aggressive price movements upward last week, with risk that more price hikes could occur. Currently, at price points rivaling last February's highs, the seasonal risk to price is higher right now than during a typical February timeframe.
| 4) | The spread between spot July lean hogs and August is aggressively expanding, suggesting a fear among traders that a major supply shoe will drop somewhere around midsummer. |
CATTLE:(Food Safety News) -- The jury trial involving the South Dakota Agricultural Food Products Disparagement Act continues Monday, beginning its fourth week of courtroom action in Elk Point, SD.
Dakota Dunes, SD-based Beef Products Inc. (BPI) is suing Disney-owned ABC Television and reporter Jim Avila under the Disparagement Act for calling its beef product "pink slime" on more than 350 occasions during a 27-day period in 2012.
Under the Disparagement Act, were BPI to prevail, its $1.9 billion claim against ABC could be tripled to a breath-taking $5.7 billion. The overall narrative was known before the trial began on June 5. After Avila and others on ABC News aired and posted a series of reports on "lean finely textured beef," repeatedly calling it "pink slime," and keeping tallies on which retailers still sold it, BPI experienced an immediate and dramatic loss of sales that resulted in the closure of three of its four production facilities and layoffs of about 750 workers.
How this all stacks up with the facts and law has been left to a Union County, SD, jury and four alternates. Those 11 women and five men are being asked to be ready to decide when the trial, scheduled for eight weeks, finally comes to an end. They will have only the exhibits and their memories to go on. The judge has allowed note-taking, so long as notes are held by the County Clerk when court is not in session. At the end of the trial, the jurors who did take notes will have the option of taking them home or having them destroyed by the clerk.
The trial in the newly constructed basement courtroom continues Tuesday with BPI's Chicago attorneys still putting on their case. Winston & Strawn attorneys Dan K. Webb and J. Erik Connolly have a sort of layer cake approach going, while still having to defend against ABC's lead attorney Dane H. Butswinkas of the Williams & Connolly firm in Washington D.C.
Last week, the beef-packer's legal team began with Rich Jochum, BPI's corporate administrator, still on the stand. His job was to testify about how outrageous the ABC reports were from the company's standpoint, and how depressing it was to be forced to lay off employees, including some who'd worked for BPI for 30 years. Jochum said Avila was taking credit for it.
Butswinkas, however, brought up documents showing BPI lost customers before March 7, 2012, when ABC's reports began. The ABC attorney also pointed out that USDA's Food Safety and Inspection Service (FSIS) does not support referring to lean finely textured beef (LFTB) as meat because of the low-temperature rendering and centrifugation used in its production.
Jochum and Butswinkas also sparred over BPI's loss sales prior to 2012. The ABC attorney asked the witness if there was concern about 60 percent of BPI's business being "gone" prior to February 2012. Jochum said that kind of customer turnover is an opportunity and the trend was up going into March 2012.
After Jochum's lengthy testimony, BPI's attorneys presented a series of video depositions from beef industry players who, for the most part, added their voices to those who feel that ABC did an injustice to BPI with its "pink slime" reports.
National Beef continued to buy LFTB from BPI, but had to reduce its purchases by 80 percent. The company's vice president for business planning and analysis, said: "It was devastating. Not only losing our ability to sell LFTB in our ground beef, we also lost the ability to sell our trimmings to BPI to make it. We ended up having to render a lot more.
After this week, the jurors will get a four-day break from the trial with the courthouse closed and the trial in recess until July 5.
HOGS: (National Hog Farmer) -- You don't have to pay real close attention to the happenings in our nation's capital to know that there is constant motion. Of course, at other times it seems as though there is no activity taking place in the legislative chambers.
Constant motion is one thing true of most bills as they work their way through the process, such as we will find out as the health care debate ensues shortly.
Hog producers will be happy to hear that Mandatory Price Reporting, though authorized for five years, is a fluid, living and breathing rule.
As hog markets evolved over the years, MPR was seen as a way to improve transparency of markets and price discovery. Initially approved in 1999 as the Livestock Mandatory Reporting Act, MPR was reauthorized in September 2015, and is up for reauthorization in 2020.
Five years can be a long time to live with rules, especially when dealing with hog producers' markets. Recent changes to the law have added prices for wholesale pork cuts, export sales data, a new "Negotiated Formula" category, and a requirement that hogs sold after a 1:30 p.m. reporting deadline be included in the next day's price report.
During the recent World Pork Expo, Taylor Cox with the USDA Agricultural Marketing Service, told our friends at Swinecast that AMS is always open with industry groups, keeping an open ear and door to their concerns. At the end of March, AMS met with pork industry stakeholders and new reporting guidances already have, or are about to, take effect.
AMS is already accepting emailed inquiries from producers to verify their reported swine trades at LPS-LMRHogs@ams.usda.gov.
Effective July 3, all swine packing companies subject to Livestock Mandatory Reporting will report their swine purchases under the following new guidance, if applicable:
* Swine purchases based on the CME Lean Hog Index:
* All purchases of swine where the base price is based on the CME Lean Hog Index as the pricing mechanism should be reported as a Swine or Pork Market Formula Purchase. These hogs are currently reported as Other Market Formula Purchases.
* Any swine purchases formulated off of a future or option will continue to be reported as Other Market Formula Purchases. Following implementation, AMS will update the published reports by placing "Futures/Options" underneath the Other Market Formula label as a descriptor on the reports.
* Formula purchases where the base price is known
* Any formula based purchases of swine where the base price is known at the completion of negotiation should be reported as a Negotiated Purchase.
* Any swine purchases using a formula price with an undetermined price at the completion of the negotiation will be reported as either a Negotiated Formula Purchase or a Swine or Pork Market Formula Purchase depending on the terms and times associated with the purchase.
Effective July 7, AMS will begin publishing the National Weekly Negotiated Sales Pork Reports (LM_PK610 and LM_PK611) on Friday afternoon of the current week instead of Monday morning of the following week.
Cox says AMS values to input from the livestock industry, "we enjoy the regular feedback." He adds that some changes in the statute itself will require action from the House and Senate, and though the current MPR authorization is good until 2020, work is already under way for the next version. "We need to report to Congress in March of 2018, so we're working on that now and we look forward to reauthorization," he tells Swinecast. "We like to be adaptive" to the industry.
And who says government doesn't listen?
