Wednesday Morning Livestock Market Update

GENERAL COMMENTS:

Given the placement of the July Fourth holiday, significant cattle trading could be delayed until Thursday or Friday. It may take that long for buyers and sellers to get a decent handle on the board's relative stability and the success of holiday meat clearance. Our guess is that asking prices will start out around $122 in the South and $190 to $192 plus inthe North. Live and feeder futures are expected to open moderately lower, pressured by follow-through selling and the seasonal challenge of midsummer fundamentals.

Hog buyers should return from the holiday with cash bids steady to $1 higher. Processing margins remain decent as product demand keeps pace with the appreciation of live inventory. At this point, it sounds like packers are planning a Saturday kill close to 200,000 head. The fact that weekend plans are not even more ambitious probably speaks to the relative tightness of ready numbers. Lean futures should open moderately higher, girded by residual buying interest and still bullish fundamentals.

	BULL SIDE		BEAR SIDE
1)	Now that Independence Day has come and gone, retailers can assess holiday meat clearance and move to restock depleted meat cash inventories. Hopefully this will put a break on the recent slide in beef cutout values.	1)	New showlists distributed in feedlot country appeared to be generally larger with only Nebraska offering fewer ready steers and heifers.
2)	Between last week's relatively light movement, the need to secure slaughter inventory for the first full week of July, and this week's holiday-shortened procurement window, cattle buyers may need to turn relatively aggressive in the near future and lend at least moderate support to the cash trade.	2)	Beef cutouts once again closed sharply lower on Monday with box supplies described as "heavy."
3)	The post-Hogs & Pigs report rally continued on Monday with August, December, and February lean hog futures setting new contract highs. Apparently, traders think that deferred issues are excessively discounted given the supply picture painted on June 1.	3)	The quarterly hog inventory did suggest that large supplies will develop in the months ahead, so the market will be looking at pricing in potential fall lows over the next several weeks.
4)	The pork carcass value set a new multi-year high on Monday, spiking as high as $104.32 with all major primals making significant contributions.	4)	Seasonally, the pork cutout could be at or near the top in price this week and gradually start to descend through the balance of the summer. Belly strength has been a driving force of late, but that market should be nearing its summer peak.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Sioux City Journal) -- The settlement of Beef Products Inc.'s $1.9 billion defamation lawsuit against ABC and one of its correspondents is likely to reach far beyond the operations of both companies.

Media companyes, beef and agriculture organizations and the food production and safety industries paid close attention to the case as it went to trial, anticipating a jury verdict that was sure to shape future decisions made by leaders of all those industries.

The case didn't have a public resolution -- both sides agreeing to a confidential settlement agreement on Wednesday, ending the trial after 17 days of witness testimony -- but the overall case and its resolution provided those interested in its outcome with messages that could have a temporary, if not lasting, effect on how they do business.

"I think the case in some ways highlighted the disconnect between people and agriculture production and food production and how it works," said Jennifer Zwagerman, associate director of the Agricultural Law Center at Drake University. "I view it as an opportunity in some ways to continue to provide education to consumers and the media into food production and agricultural production in general."

The case, by now, is well known: ABC and correspondent Jim Avila reported a series of stories in March and April 2012 about BPI's signature product, Lean Finely Textured Beef. The network's repeated use of the term "pink slime" to describe BPI's product, which was blended with ground beef to lower fat content, led consumers to question what was in their food. Though LFTB has U.S. Department of Agriculture approval, ABC's coverage caused consumers to question its safety and nutritional value.

Suffering the loss of approximately 80 percent of its business and the closure of three of its four plants, BPI sued ABC in Union County District Court in September 2012, claiming the stories contained information the network knew was false. That bad publicity, BPI said, led to the loss of hundreds of millions of dollars, and the Dakota Dunes-based meat processor sought up to $5.7 billion in damages.

Terms of the settlement are unknown. BPI lawyers can't comment on whether there was a financial component to the settlement, saying only that company owners Eldon and Regina Roth are pleased with the resolution. ABC has not retracted or apologized for the coverage.

The result is seen by many in the agriculture industry as a win, and it may embolden other companies who feel they or their products have been portrayed negatively to take action.

"This is a milestone. The industry hasn't had a win like this for some time. It shows how to go on the offensive and attack detractors with factual information," said Russell Cross, a professor in the Department of Animal Science at Texas A&M University and a former administrator of the U.S. Department of Agriculture's Food Safety and Inspection Service who played a role in the department's approval of the definition of LFTB as meat in the early 1990s. "I hope the industry takes note of it and realizes it's possible to win some of these cases."

Chuck Baldwin, journalist in residence at the University of South Dakota Media and Journalism Department, foresees reporters, editors and producers taking a closer look at how they report such stories, and he said they should present those reports in an open, transparent way. Though the BPI settlement might encourage lawsuits against media companies, Baldwin doesn't see the media backing away from public-interest pieces.

"I don't think this is going to lead anybody to cut them out," Baldwin said. "I think we're going to be more careful with how we do things."

Bill Marler, managing partner of Marler Clark, a Seattle-based food safety law firm, and a food safety advocate, said companies also should learn that openness and cooperation with the media could head off public outcry before it reaches the level seen in the aftermath of ABC's reporting on LFTB.

"I hope companies learned it's better to be transparent than not. I think when consumers feel something's being hidden from them, they overreact," Marler said. "My advice to companies is to be transparent, be honest, tell your story and deal with it."

As a result of BPI's lawsuit, the media may have learned that repeating a controversial story may bring legal consequences, Marler said. ABC broadcast 14 stories in 28 days. Those same stories also were published on the network's website and social media sites. BPI lawyers counted more than 300 instances in which ABC used the term "pink slime."

"Maybe in cases going forward, a media outlet will do a story, but pounding it into the ground like ABC did isn't something worth doing," said Marler, who represented two former USDA scientists who were interviewed for the ABC reports and initially included in BPI's lawsuit but later were dismissed.

The case shined the light on a broader issue, Zwagerman said, and that's the balance between agricultural and production practices deemed safe by regulatory agencies vs. what the public wants. She sees debates similar to those about LFTB being raised about the use of genetically engineered food products. Since ABC's reporting on LFTB, Zwagerman said she's seen an increase in consumers' demands to know what's in their food.

The industry is responding, she said.

"I think what we'll see is more voluntary labeling. That's more in response to consumer demand," Zwagerman said. "We're seeing more and more where consumer demand is trickling down into labeling products."

Some companies are trying to engage consumers even more, said Tamika Sims, director of food technology communication at the International

Food Information Council Foundation, a Washington, D.C.-based nonprofit, nonpartisan education foundation that aims to distribute science-based information about health, nutrition and food safety.

More companies are reaching out to consumers on various social media platforms rather than sit by when a food controversy is in the news.

"The industry has tried to be in the conversation more on social media," Sims said.

Based on comments made on stories on the Journal's website and Facebook page, the "pink slime" stigma attached to BPI's product still exists to some degree. Sims said it's hard for companies to undo negative publicity, and she hopes that in the wake of the company's settlement with ABC, media companies make sure they're presenting accurate information to their audiences.

"I think that as far as the industry goes, it's difficult to garner consumers' trust and hold it. I think it's possible for a bad story to linger," she said. "I'd hope that with media coverage of any issue related to food production or food safety, that they really check their facts before they air it or print it or post it.

The settlement leads to three questions:

Will it lead to an increase in similar cases? Zwagerman said it might, Marler said he didn't expect to see more.

Will the media shy away from doing stories for fear of being sued? It's hard to say what discussions will occur in newsrooms when such stories present themselves.

"I hope the news media continues to uncover stuff that the public has the right to know," Marler said.

And, finally, has BPI's name and LFTB been cleared of controversy? BPI lawyer Dan Webb said after the settlement was reached that it vindicated the company's product.

Zwagerman said words can have a lasting effect, and it could be hard for the "pink slime" moniker to ever disappear in reference to LFTB.

Cross said he hoped the settlement leads to renewed confidence in BPI's product and the company sees increased sales and demand for its product.

"I think it (the settlement) should go a long way toward clearing the name," Cross said. "I think we should abolish the words 'pink slime.'"

HOGS: (northiowaWedneday.com) -- Robots will be used in the Prestage Foods slaughterhouse under construction outside Eagle Grove, a company official tells the media, potentially altering the number and use of employees at the plant. Prestage Foods of Iowa, LLC has officially broken ground to begin construction of its new fresh pork processing plant, though no ceremony was held, the company said March 31.

"With the initial engineering complete, we are excited to be moving into the construction phase of this project," said Jere Null, COO of Prestage Foods of Iowa. "At the peak of construction, we expect over 600 people to be working daily at the site. After construction, we will permanently employ approximately 1000 people. We are proud to be investing and creating opportunities for the people of Wright County, the region and the State of Iowa."

KIOW radio reports that Null is now saying "plans to use advanced robotics for many processes" are in the works. "Null said that the robots are expected to ease the burden on employees and improve efficiency," according to the radio station.

The Charlotte Observer, via the AP, reported more in-depth about possible changes to uses of employees at the plant, saying:

"Imagine you take several frames of a carcass coming by and the computer can distinguish lean from bone from fat," he said. "It can tell that robotic arm exactly how to cut based on what it's looking at."

Robotics will change the type of skills needed in employees, shifting the focus to electronic engineers who can help program and maintain the robots, Null said.

"A lot of the precision cutting we are doing is moving towards robotics," he said. "What would have previously been a laborious, back-breaking type job like holding a heavy saw and cutting and things like that can now be done by a robot."

The company is working with Iowa Central Community College to create a workforce training program, Null said.

Prestage Farms currently raises pigs in over 30 Iowa counties, the company says on its website. The new facility will support these operations and will use state-of-the art systems to clean the air, reduce water and energy needs, provide a safe work environment, and will utilize the latest innovations in processing and automation technology to help ensure that it is a world leader in food, employee, and environmental safety. With construction beginning, the new plant is set for first operations in the fall of 2018.