Light cattle trading surfaced Tuesday as some feedlots moved to take advantage of attractive basis opportunity. If the basis weakens Wednesday (e.g., with futures rallying back towards last week's cash market), further cash business will slow with feedlot managers digging in with higher asking prices around $130 in the South and $205 in the North. Such a stiffening of resolve could delay significant trade volume until Thursday or Friday. The semi-annual herd inventory will be released Wednesday at 2 p.m. CST. Generally speaking, analysts are expecting the USDA to confirm a total close to 95.4 million head, 1.5% to 2% larger than last year. Live and feeder futures are expected to open moderately higher, supported by short-covering and cash premium realities.
The cash hog trade is expected to open with generally steady bids. Commercial production is off to its most aggressive start since 2018 began. Needless to say, it will be critical to see how wholesale prices hold up under the increasing tonnage. At this time, Saturday kill plans should total around 115,000 head. Lean futures are geared to open on a mixed basis thanks to residual selling and midweek short-covering.
| BULL SIDE | BEAR SIDE | ||
| 1) | Although live cattle futures closed moderately lower Tuesday, most contracts settled 150 points or more above session lows, thereby underscoring technical support at 100-day moving averages. | 1) | The cash cattle wall has cracked early in the week with light trade volume reported in all areas on Tuesday. Most live trade was marked at $126, $1 lower than the top of last week's market. |
| 2) |
If live and feeder futures quickly rediscover significant buying interest (as they did last week), bullish feedlot resolve and sharply higher asking prices could still rule the market week.
| 2) | The semi-annual cattle inventory set for release Wednesday afternoon will no doubt confirm another leg of significant expansion (e.g., beef cows probably up by at least 500,000 head from last year), virtually guaranteeing mounting commercial beef production at least through the end of the decade. |
| 3) | Pork processing margins remain quite attractive, reflecting plenty of buying incentive to support the late-winter cash hog trade. | 3) | Hog slaughter is finally putting the pedal to the metal this week, probably set to total somewhat over 2.4 million head, likely a 2.4% increase over last week and a 4.3% gain from a year ago. Early-year pork demand is set for its first serious test. |
| 4) | The premium of the cash lean index should lend hog futures support in the near term. The seasonal index for spot February has a tendency of moving higher into expiration from here. | 4) | If the stock market is on the verge of a major correction, the bearish fallout would probably flood over livestock and meat markets. |
CATTLE: (IUS News) -- McDonald's Corporation reported another impressive quarter on Tuesday morning, beating analyst estimates on earnings, revenue and same-store sales in the fourth quarter. McDonald's also says it plans to continue to heavily invest in is Experience of the Future initiative in 2018.
For the fourth quarter McDonald's reported adjusted earnings per share of $1.71 on revenue of $5.34 billion. Both numbers beat Wall Street consensus estimates of $1.59 and $5.22 billion, respectively.
McDonald's also reported U.S. same-store sales growth of 4.5 percent and global same-store sales growth of 5.5 percent, its best growth numbers in six years. Analysts had been expecting 4.3 percent U.S. growth and 5 percent global growth.
McDonald's says its U.S. sales were driven by core menu performance, including the McPick 2 promotion and the new Buttermilk Crispy Tenders. In January, McDonald's brought back a revamped version of its dollar menu for the first time in six years. The new menu launch was not included in the fourth-quarter numbers.
Looking ahead to 2018, McDonald's says it plans to invest another $2.4 billion in rolling out its Experience of the Future, the company's goal of boosting sales via mobile and kiosk ordering. McDonald's installed kiosks in more than 2,500 U.S. restaurants in 2017. Stephens estimates McDonald's generates roughly 10 percent more sales from kiosk orders than traditional orders.
McDonald's is also emphasizing food delivery via a partnership with UberEATS, and says delivery helped drive its same-store sales beat in the fourth quarter. "We plan to continue making meaningful investments in technology to modernize the customer experience and redefine convenience," chief financial officer Kevin Ozan says in a statement. Ozan says McDonald's plans to open about 1,000 new global locations.
Analysts have high hopes for McDonald's promotion menu and Experience of the Future initiatives this year. BTIG analyst Peter Saleh says the promotion menu could help McDonald's regain roughly $2.9 billion in lost sales since 2013. "We believe that this value platform should give traffic back to McDonald's," Saleh writes in a note to investors this month. "After several years of playing defense, we believe McDonald's is finally returning to an offensive strategy."
HOGS: (AgriPulse) -- To pig farmer Thomas Titus, new scientific techniques could bring better disease resistance for his herd, saving baby pigs and potentially millions of dollars for the pork industry.
That is the foremost benefit "when I think about the possibilities of CRISPR (also called CRISPR-Cas9, the leading gene editing technique) and how it could help my farm," says Titus, who raises corn, soybeans and pigs near Elkhart, Ill.
The devastating PRRS virus causes disease in two ways: a respiratory form that weakens young pigs' ability to breathe and a more severe reproductive form that causes pigs to die during late pregnancy. In North America alone, PRRS is estimated to costs producers $600 million annually.
"As a pig farmer, I see that one of the greatest diseases that impacts every pig farm across the United States is PRRS (porcine reproductive and respiratory syndrome). If there's an opportunity for us to eradicate diseases like that -- or have resistance to diseases like that -- it would be just astronomical!"
Indeed, at least two companies say they can deliver just what Titus says he wants. Both Genus, which owns a patent to its technique, and Acceligen, a division of Recombinetics, also involved in developing the trait, report they can infuse pigs with PRRS resistance.
The Genus procedure, for example, deletes a pig gene that the virus needs as a doorway to the animal's cells. But, as with other gene editing (GE) discoveries, those PRRS remedies can't happen until the U.S. government approves these new animals.
More broadly, researchers are eager for the U.S. and other governments to decide how to use science and risk-based criteria to regulate this new approach to genetic engineering (the topic of the next article in this series). That's why commercialization is still a few years out.
For now, the Food and Drug Administration (FDA) defines all intentional DNA alterations in animals as drugs, irrespective of how or why they were changed.
"It's a nonsensical position," says Alison Van Eenennaam, a Cooperative Extension Specialist in Animal Genomics and Biotechnology at the University of California-Davis.
"If I didn't know any better, I would think the (FDA) regulations were written by Greenpeace because they are not science-based," she emphasized during a recent speech at the American Farm Bureau Federation. "We can't run all of these animals through a drug evaluation."
But while the regulatory issues are being sorted out, researchers and industry leaders are marching ahead with these new scientific tools, along with ongoing efforts to use current animal-improving practices like artificial insemination, embryo transfer and genetic selection.
Van Eenennaam says there's an "urgent need to ensure the science-based framework focused on these novel products is adopted. Or else it's going to block U.S. ranchers from having access to this technology."
"We're very excited by the potential for gene editing, and not only against PRRS … a devastating disease to the industry," said veterinarian Dan Kovich, speaking for the National Pork Producers Council.
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