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Wednesday, January 31, 2018

Wednesday Closing Livestock Market Summary - Feeder Cattle Futures Crash With Triple-Digit Losses

GENERAL COMMENTS
Light-to-moderate trade developed in the Northern tier of cattle feeding country with most dressed deals marked at $200, steady with last week. The Jan. 1 cattle inventory came in close to trade expectations, documenting the fourth consecutive year of growing numbers. Total cattle numbers were up 1% from the prior year. The beef cow herd was up 2%, as was the 2017 calf crop. According to the closing report, the national hog base is $0.77 higher ($62-$72, weighted average $70.34). Corn futures closed generally flat after a round of lackluster trading. Equities closed higher with the Dow up 72 points and the Nasdaq in the green by 9.
LIVE CATTLE
Live issues slumped 57 to 125 points lower, checked by long liquidation and technical-selling. Such sluggishness suggests that may work if the early year cash trade is maxing out. Beef cut-outs: mixed, up $0.37 (choice: $210.06) to off $0.05 (select: $204.32) with light-to-moderate demand and light offerings (66 loads of choice cuts, 23 loads of select cuts, 10 loads of trimmings, 25 loads of ground beef).
THURSDAY'S CASH CATTLE CALL:
Steady with midweek. Clean-up action could surface on Thursday and/or Friday, but the lion's share of the week's business could already be completed.
FEEDER CATTLE:
Feeders closed sharply lower, off 140 to 212. Besides the defensiveness of deferred live issues, feeders may have been pressured by the expansionary news likely to be contained in the Jan. 1 inventory. CME cash feeder index: 01/30: $147.51, off $0.15.
LEAN HOGS:
Spot Feb lean closed 77 points higher, supported by news from the country of strength bids. But most lean issues settled 15 to 65 lower with selling tied to longer-term demand uncertainty. Positively, summer contracts continue to hold about 100-day moving averages. Carcass value closed modestly higher as gains in ribs, bellies and picnics overshadowed losses in fresh cuts and hams. Pork cut-out: $82.73, up $0.17. CME cash lean index for 01/29: $73.84, up $0.01 (DTN Projected lean index for 01/30: $73.85, up $0.01). 
THURSDAY'S CASH HOG CALL:
Steady to $1 higher. The cash trade should open with a firm undertone in the morning with some short-bought packers still working to fill holes in Friday and Saturday kill schedules.

Wednesday Midday Livestock Market Update - Live and Feeder Futures Sink Lower Near Midday

GENERAL COMMENTS: 
The feedlot trade is very quiet near midday with just a few scattered bids noted in parts of the North. Asking prices on the balance of showlists are priced around $128 in the South and $205 in the North. According to the midday report, the national hog base is 0.86 higher ($62.00-71.50, weighted average $69.51). Corn futures are a penny or so lower moving toward the noon hour thanks to profit taking and caution ahead of possible interest rate changes to be announced this afternoon. The stock market at midday is higher with the Dow up 137 points and the Nasdaq positive by 22.
LIVE CATTLE:
Currently, live contracts are 50 to 102 lower. It would appear that some traders are worried that the early-year cash rally is running out of gas. While some are saying Southern cash is already done for the week, more business is expected in the North, the tone of which could eventually make a difference here. Beef cut-outs are moderately higher at midday, up 0.29 (select, $204.66) to 0.66 (choice, $210.35) with light to moderate box movement (37 loads of choice cuts, 13 loads of select cuts, 5 loads of trimmings, 17 loads of coarse grinds).
FEEDER CATTLE:
Feeders seem to be following the live market lower. Prices are 75 to 145 lower near the top of the noon hour. Some of the defensiveness may be tied to caution ahead of the January 1 inventory doe out this after noon (2:00 CST). Having said that, inventory data is rarely considered to have market-moving potential.
LEAN HOGS:
Spot February is 72 points higher as of this writing, supported by the premium of the cash index as well as further reports of cash strength in the country this morning. Yet the balance of the lean field is 20 to 70 lower thanks to long liquidation and technical selling. Carcass value is moderately higher at midday, supported by stronger demand for butts, picnics, and ribs. Pork cut-out: $83.03, up 0.47. CME cash lean index for 01/29: 73.84, up 0.01 (DTN Projected lean index for 01/30: 73.85, up 0.01).

Wednesday Morning Livestock Market Summary - Cattle Futures Staged to Open Moderately Higher

GENERAL COMMENTS:
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 SIDEBEAR 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.
OTHER MARKET SENSITIVE NEWS
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.

Tuesday, January 30, 2018

Tuesday Closing Livestock Market Summary - Cattle Futures Conclude Choppy Session With Mixed Prices

GENERAL COMMENTS
Light cash cattle activity Tuesday surfaced in most area with some live biz marked at $126, roughly $1 lower than last week's weighted averages. Such unusual early week business seemed to be prompted by attractive basis opportunities. According to the closing report, the national hog base is $0.18 higher ($62-$71, weighted average $69.34). Corn futures closed nearly 3 cents higher with spot March hitting the best close in two months. Dry conditions in Argentina as well as spillover strength from K.C. wheat and beans were given much of the credit. Spook in part by the fear of rising interest rates, the stock market took it on the chin with the Dow closing 362 points lower and the Nasdaq losing 64.
LIVE CATTLE
Market watchers got their money's worth here as prices seemed to be all over the place. Live contracts broke hard in the early going, apparently swamped by long liquidation and outside market rumbling. Yet the sell-off moderated a good deal after midsession, perhaps supported by commercial short-covering and profit-taking. When the dust settled after the close, prices were no worse than mixed, up 22 to off 87 (most contracts finished 150 points or more above session lows). Beef cut-outs: higher, up $0.24 (select: $204.37) to $0.58 (choice: $209.69) with light-to-moderate demand and moderate offerings (56 loads of choice cuts, 34 loads of select cuts, zero loads of trimmings, 19 loads of ground beef).
WEDNESDAY'S CASH CATTLE CALL:
Steady to $2 higher. While price potential could take on greater definition at midweek, significant trade volume could still be delayed until Thursday or Friday. On the other hand, much may depend of further board action and basis opportunities.
FEEDER CATTLE:
Feeders experience a similar type of choppiness as the live market. Yet the recovery was a bit more impressive with issues settling mostly higher (up 17 to 95). CME cash feeder index: 01/30: $147.66, up $0.16.
LEAN HOGS:
Lean hog futures closed narrowly mixed, up 15 to off 52. Summer contracts are dipping toward 100-day moving averages. Bulls hope to draw a line in the sand near those levels, but the jury clearly remains out in that regard. The carcass value closed lower as softer demand for butts, picnics, ribs, and hams overshadowed loin and belly strength. Pork cut-out: $82.56, off $0.25. CME cash lean index for 01/26: $73.83, up $0.06 (DTN Projected lean index for 01/29: $73.84, up $0.01). 
WEDNESDAY'S CASH HOG CALL:
Steady. Look for the cash trade to open near steady at midweek with country offerings and packer demand in rough balance.

Tuesday Midday Livestock Market Summary - Cattle Futures Struggle at Midday, but Recover Some from Early Lows

GENERAL COMMENTS: 
Oddly, the cash cattle trade is showing some life early in the week. Indeed, a few scattered sales have been reported in Kansas and Nebraska at $126, roughly $1 lower than last week. Additionally, we've seen a few bids in the North at $198. Some showlists in the South have been priced around $130. Meaningful trade volume could develop earlier than normal with week if stringer basis realities trigger selling interest. According to the midday report, the national hog base is .21 higher ($62.00-70.50, weighted average $69.37.). The corn market near high noon is several cents higher, supported by HRW and drought concerns. The stock market is pulling sharply lower at midday with the Dow off 335 points and the Nasdaq down by 58.
LIVE CATTLE:
Although live issues have been under pressure for most of the morning, prices appear to be recovering some as we head toward the top of the noon hour. Some hedged cattle have traded this morning, so this midday boost could be tied in part to commercials covering shorts. After being socked by triple-digit losses earlier, prices are now off only 17 to 70. Beef cut-outs are moderately higher at midday, up .67 (select, $204.80) to .82 (choice, $209.93) with light to moderate box movement (30 loads of choice cuts, 20 loads of select cuts, zero loads of trimmings, 8 loads of coarse grinds).
FEEDER CATTLE:
Feeders have also recovered significantly from early selling. Prices are currently no worse than mixed in light trade volume.
LEAN HOGS:
Unlike the choppy action in the cattle complex, lean hogs have been consistently lower through midday. Currently, prices are off 25 to 90. Spot February is seeing the least damage, holding close to steady thanks to the premium of the cash index. Carcass value at midday is modestly lower as better loin demand is overshadowed by weakness in butts, picnic, and ribs. Pork cut-out: $82.73, off 0.08. CME cash lean index for 01/26: 73.83, up 0.06 (DTN Projected lean index for 01/29: NA).

Tuesday Morning Livestock Market Summary - Live Cattle Contracts Likely to Open on Firm Basis

GENERAL COMMENTS:
Don't expect any cash cattle business to speak of Tuesday with both buyers and sellers killing time by monitoring board action. Bids and asking prices should remain poorly defined, possibly not changing until Thursday or Friday. Feedlot managers will surely be pricing cattle higher, but exactly how much higher may depend upon the ability of the board to firm. Live and feeder futures should open higher, supported by cash premium and improving carcass value.
Hog buyers are likely to resume business Tuesday with bids steady/firm with Monday. Monday's country run was quite small, a reality that could force packers to show a little more money in the country. Lean futures should open on a mixed basis thanks to a combination of long liquidation and short-covering.
BULL SIDEBEAR SIDE
1)Although new showlists circulated by cattle feeders are mixed (i.e., smaller in the South, larger in the North), the aggregate offerings looks somewhat smaller than last week.1)Though cattle futures closed generally higher Monday, the board's reaction seemed relatively flat compared to Friday's cash explosion (i.e., as if to say this bullish momentum can't be maintained).
2)
Beef cutouts jumped sharply higher on Monday with early-week box movement described as "moderate to fairly good."
2)If live futures remain below recent feedlot sales, such a strong basis will make it difficult for beef producers to ask for higher prices.
3)Monday's hog kill of 466,000 head was the most aggressive start to a slaughter week seen so far in 2018. This reflects decent processing margins and a need to preserve current marketings.3)Iowa live hog weights were released a day late due to the government shutdown and revealed animals were roughly one-half pound heavier than the week before. Weather-related hog harvest delays may have backed up some numbers.
4)The seasonal index for February lean hog futures does have a tendency of moving higher into expiration and with cash at a premium that potential does exist this year.4)Deferred lean hog futures have definitely lost their early-month zip, possibly reflecting more and more nerves over longer-term pork demand (e.g. the future of NAFTA).
OTHER MARKET SENSITIVE NEWS
CATTLE: (SBS) -- American farmers say they are being left behind after President Donald Trump withdrew the US from the TPP with Australia, New Zealand and nine other nations.
American beef producers and wheat farmers are furious US President Donald Trump's abandonment of the Trans-Pacific Partnership has given Australia and other nations major advantages in key markets including Japan.
The US National Cattlemen's Beef Association branded the move by Australia, New Zealand, Japan and eight other Pacific Rim nations to move ahead to form the TPP without America as "a missed opportunity" for US farmers.
US Wheat Associates and the National Association of Wheat Growers warned Mr Trump's TPP withdrawal "puts overseas demand for US wheat at serious risk".
The pressure appears to be working with Mr Trump last week at the World Economic Forum in Davos, Switzerland, making the shock announcement he might consider re-joining TPP.
"Withdrawing from TPP was a missed opportunity for the United States to gain greater access to some of the world's most vibrant and growing markets," Kent Bacus, the National Cattlemen's Beef Association's director of international trade and market access, said.
"As we now enter a pivotal round of NAFTA negotiations, the last thing we need is to take a step backwards in our relationships with Canada and Mexico."
US beef producers have repeatedly warned America's lack of a free trade agreement with Japan put it at a disadvantage with Australia.
US beef is hit with a 38.5 per cent tariff in Japan.
Wheat growers want the heat turned up on the Trump administration.
"As expected, the remaining members of TPP are moving forward without the United States," NAWG president Gordon Stoner said.
"If nothing else, this announcement should serve as a rallying cry for farmers, ranchers and dairy producers calling for the new trade deals we were promised when the president walked away from TPP.
"The heat needs to be turned up on the administration and on trade negotiations with Japan.
"An already stressed agriculture sector needs the benefit of free and fair trade now."
US wheat growers estimate after full implementation of the new TPP Japan's import tariffs on Canadian and Australian wheat would drop by about $US65 per tonne.
Mr Trump rode into the White House on a campaign that slammed the TPP as a "catastrophe" and on his third day in office withdrew the US from the proposed pact.
Australian Foreign Affairs Minister Julie Bishop said in Los Angeles on Friday a way to make the TPP look "like a win-win" for Mr Trump would be to rename it.
"How far the 11 will be prepared to go to admit the United States in a way that would enable President Trump to claim triumph?" Ms Bishop asked the audience.
"I don't know.
"But the point we are making to the United States is others are seeing the TPP as an enormous economic and strategic advantage."
HOGS: (Argus Leader) -- A proposed rule change from the nation's top food safety agency could give more inspection authority to one of Sioux Falls' largest employers.
The New Swine Inspection System (NSIS) is meant to "modernize" pork slaughterhouse operations through an opt-in program that would pull federal inspectors from the kill line, remove maximum line speeds and update bacterial testing schemes on either end.
Instead of using federal inspectors to look at carcasses on the line, the NSIS would see on-site regulators reviewing facility safety plans and give them more time to monitor operations throughout the facility.
If the rule takes effect after the current 60-day comment period, the John Morrell plant in Sioux Falls could adopt it.
The plant employs about 3,400 people, and five million hogs are slaughtered each year -- double the number of hogs produced in the state. That makes it 1 of 27 in the United States classified as "large facilities" by the United States Department of Agriculture.
Supporters say the new rule would free operators to use new technology to prevent contamination and federal employees to work more efficiently.
"It doesn't jeopardize food safety or animal welfare by any means," said Glenn Muller, director of the South Dakota Pork Producers. "If anything, it enhances it."
Critics worry that the USDA's Food Safety andInspection Service (FSIS) won't watch closely enough to catch problems, however, and that line speed increases could make already-dangerous jobs more treacherous.
Both sides point to the results from a 15-year pilot project to back their positions.
How the change plays out in the real world is an open question, according to Bill Marler, a lawyer and food safety advocate who spent much of the 1990s and early 2000s suing food companies after bacterial outbreaks.
Moving from visual testing to bacterial testing is a wise move, Marler said, but the public has to trust companies to create safe procedures and the government to insure that.
"It's not simple in that it's either good or bad," Marler said. "It's all in how it's administered."
The update has been in the works since the mid-1990s, said Carmen Rottenberg, the United States Department of Agriculture's Deputy Undersecretary for Food Safety.
The agency adopted a similar inspection update for poultry last year after monitoring 20 large-scale facilities for well over a decade, and 76 plants have opted in so far. Of those, 66 have seen their plant safety plans approved and implemented.
"It really puts the onus on the establishment taking responsibility for effective sanitation and pathogen performance control, and then having our inspectors verify that the establishment was doing what's in its plan," said Rotte. "That's the basic principle."
Rottenberg said the current rules for line speeds and generic E. coli and salmonella testing are outdated and don't match up with what's now known about food safety.
"We can't see the pathogens that make people sick," Rottenberg said.
The new FSIS rules wouldn't remove federal employees from pork plants but would shift their duties. Plant employees would be responsible for removing unfit carcasses before they get to federal inspectors.
"Nobody loses their job over this," Rottenberg said. "You take the additional people and put them in other parts of the plant where they're in higher-graded positions doing other things related to food safety."
More bacterial testing would be required at all plants, Rottenberg said, whether they opt in to the NSIS or not.
The line speed rules, written based on the speed at which federal inspectors could move from one task to the other, would be removed.
Speeds could increase, Rottenberg said, but only if the plant operators can prove to FSIS that that it can be done without sacrificing food safety.
"Any kind of line speed cap really has nothing to do with allowing establishments to go as fast as they want to go," Rottenberg said. "They shouldn't be looking to what their maximum line speed is, they should be looking at the rate at which they can go and maintain process control."
Smithfield Foods, the owner of the Sioux Falls plant, deferred all comments to the North American Meat Institute, which emailed a prepared statement from its CEO, Barry Carpenter.
The statement said the trade group would "thoroughly review" the rule before offering input during the 60-day comment period, but generally endorses "models that better utilize government resources while maintaining strong food safety standards."
Carpenter said the results of the pilot program show that it's "proven to be a strong inspection model."
"Those five pilot plants have produced millions of pounds of safe pork," Carpenter said. "We look forward to working with the agency as it develops a final rule that maintains a strong level of food safety in the most efficient manner."
Not everyone is convinced that the pilot proved the program's value.
Debbie Berkowitz of the National Employment Law Project issued a statement on behalf of her organization last week, as well. The workers' rights group is concerned that ditching fixed line speeds at slaughterhouses puts workers in an already-dangerous profession at risk.
Slaughterhouse workers have "some of the highest worker injury rates in the nation," she wrote.
An audit of pork slaughterhouses from the Office of the Inspector General from 2013 found that inspectors had overlooked food safety violations and sometimes failed to slow down line speeds in accordance with FSIS policy.
"In the 15 years since the program's inception, FSIS did not critically assess whether the new inspection process had measurably improved food safety at each (pilot) plant, a key goal of the program," the audit said.
The audit also found that plants using the voluntary system during the pilot project were more likely to be tagged with noncompliance reports. Three of the 10 audited plants with the highest number of reports from 2008-11 were among the five using the new system.
The USDA reacted to that 2013 report with plans to increase oversight. But Rottenberg said the audit results could be seen as a sign that moving inspectors off the line and into other positions makes them better at catching problems.
"I don't think that points to anything other than that the fact that the agency is looking for things around the task and freed up to do exactly the kind of tasks that we're talking about," she said.
Oversight is a legitimate concern, Marler said, but there's a measure of self-interest at play for companies, as well.
Food companies have a strong market incentive to produce a safe product, he said, given the expense of recalls for foodborne illness and the potential loss of market share when outbreaks go public.
"The question is 'can there be abuse by the fox guarding the henhouse?'" Marler said. "Yes, there can be. But the hope is that their self-interest in not being the focus of foodborne illness lawsuits and recalls is that they'll do the things that are correct."

Monday, January 29, 2018

Monday Closing Livestock Market Update - Beef Futures Settle Mostly Higher Thanks to Stronger Cash News

GENERAL COMMENTS
Activity in feedlot country at the top of the week was limited to the distribution of new showlists. Ready numbers appear to be mixed, larger in the North and smaller in the South. Overall, the late-month offering looks somewhat smaller .09 higher ($62.00-70.00), weighted average $69.23). The corn market finished generally 2 cents higher, supported by hot and dry conditions anticipated for Argentina. The stock market closed lower with the Dow off 177 points and the Nasdaq down by 39.
LIVE CATTLE
While live issues closed mostly higher (up 2 to 110), price action certainly started the trade day better than it ended. Only spot Feb finished with significant progress, supported by the major improvement in packer spending that surfaced late Friday. The lackluster tone of deferred contracts suggested skepticism relative to the sustainability of early year bullishness. Beef cut-outs: sharply higher, up $2.20 (choice: $209.11) to $2.30 (select: $204.13) with moderate to good demand and moderate offerings (45 loads of choice cuts, 17 loads of select cuts, 7 loads of trimmings, 14 loads of ground beef).
TUESDAY'S CASH CATTLE CALL:
Steady to $2 higher. Look for a typically slow Tuesday with neither bids nor asking prices well defined.
FEEDER CATTLE:
Feeders popped higher on the opening, but soon faded into a lackluster trading range. At the close, contracts settled 35 higher to 15 lower. On an estimated run of 8,000 head (off from 9,868 last week and 10,581 in 2017), Oklahoma City sold feeder steers mostly $1 to $4 higher. On a light test, their female mates were marked $3 to $7 higher. Steer and heifer calves sold $1 to $2 higher. CME cash feeder index: 01/26: 147.50, up .44.
LEAN HOGS:
Lean futures closed on a mixed basis, up 22 to off 27. Monday's slaughter totaled 466,000 head, the most aggressive Monday seen since 2018 began. Carcass value held about steady with higher bellies and butts checked by lower loins and hams. Pork cut-out: $82.81, up .03. CME cash lean index for 01/25: 73.77, unchanged (DTN Projected lean index for 01/26: 73.83, up .06). 
TUESDAY'S CASH HOG CALL:
Steady to $1 higher. Opening bids in the morning should be steady/firm, perhaps supported somewhat by Monday's light country run.

Monday Midday Livestock Market Summary - Strong Gains Sweep Through Live Cattle Trade

GENERAL COMMENTS: 
Moderate to strong buyer support has developed through the cattle complex with triple-digit gains still holding in front-month live cattle futures. Strong cash market support last week is still helping to bring needed support to the entire complex. Corn prices are higher in light trade. March corn futures are 2 cents higher Monday. Stock markets are higher in light trade. The Dow Jones is 83 points lower while Nasdaq is down 12 points.
LIVE CATTLE:
Triple-digit gains have quickly moved through the live cattle complex. This is bringing additional support back to the market although some traders have slowed the buyer interest due to the pullback in the rest of the market. Trade is likely to remain sluggish through the rest of the session although current gains may continue to hold. Cash cattle activity remains undeveloped with show list distribution and inventory taking the main order of business through the entire day following higher prices last week. It is likely that trade will hold off until midweek or later this week. Boxed beef cut-outs at midday are higher, $1.95 higher (select) and up $1.28 per cwt (choice) with light movement of 58 total loads reported (32 loads of choice cuts, 11 loads of select cuts, 5 loads of trimmings, 10 loads of ground beef).
FEEDER CATTLE:
Firm gains are seen in a narrow to moderate trading range although prices have backed away from previous gains with markets 10 to 50 cents per cwt higher at midday. The back and forth shifts in live cattle trade during the morning has caused some traders to focus on the potential for additional market activity and this could bring about increased buyer support through the next several days.
LEAN HOGS:
Lean hog futures remain mixed in a narrow trading range as very limited activity is seen across the complex. The inability to bring additional direction to the market may not only keep prices in a narrow range, but could keep most traders on the sidelines through much of the week. Cash prices are higher on the National Direct morning cash hog report. The weighted average price is up $0.25 at $69.39 per cwt with the range from $62.00 to $70.00 on 3,153 head reported sold. Cash prices are unreported due to confidentiality on the Iowa/Minnesota Direct morning cash hog report. The National Pork Plant Report posted 139 loads selling with carcass values falling $0.66 per cwt. Lean hog index for 1/25 is at $73.77 unchanged with a projected two-day index of $73.83, up 0.06.

Monday Morning Livestock Market Update - Sharply Higher Opening Expected to Rock Cattle Futures

GENERAL COMMENTS:
Look for typically slow activity in feedlot country this morning as packer focus exclusively on the colllection of new showlists. We expect the late month offering to be about steady with last week. While producers will be in no hurry to price cattle, it goes without saying that they will be thinking higher money again (e.g., $130-132 on the South; $206 plus in the North). Live and feeder contracts seem likely to open sharply higher, jacked by higher feedlot sales and technical buying interest.
The cash hog trade should launch the week with generally steady bds. Inclement weather, for a third week in a row, While hog harvest levels have been disrupted by weather for the last three weeks with hogs gaining weight accordingly, chain speed is expected to normalize next week. Lean futures are staged to open moderately higher, supported by short covering and spillover enthusiasm from the cattle trade.
BULL SIDEBEAR SIDE
1)Feedlot has bolted sharply higher on Friday, another impressive sign of country leverage, curent marketings, and positive packer perceptions of longer-term beef demand.1)Though the January 1 on feed was fairly well anticipated, the December placement total was somewhat larger than expected. According to the DTN placement model, big lots now have 9 percent more steers and heifers to finish in April than the early spring of 2017.
2)For the week ending January 18, net beef export sales surged to 28,100 MT, the largest weekly total reported since2)Beef processing margins took another big hit last week (gross margin tightening another $50 per head), slammed by sharply higher cattle costs and lackluster product demand. Packers may soon be forced to slow chain speed.
3)At the same time, net pork export sales soared to 35,000 MT. Increases were reported for Mexico (15,800 MT), South Korea (8,000 MT), Japan (3,900 MT), Australia (2,500 MT), and Canada (2,200 MT).3)Easing cash hog prices and concerns whether the strong domestic and export pork demand that the industry has enjoyed will continue weighed on the market.
4)Hog weights are expected to move lower for the next five or six weeks, The plrk cutout should move higher consistent with a normal seasonal movement.4)For the week ending January 23, noncommercial traders decreased their net long position in lean hog futures by 1,900 contracts on long liquidation, reducing it to 53,600.
OTHER MARKET SENSITIVE NEWS
CATTLE: (Bloomberg News) — Japan's beef purchases are set to climb this year as growing demand for affordable meat counters the first rise in import duties in 14 years.
Japan's beef imports are likely to increase to the highest level since 2001 after growing more than 10 percent last year, Shiro Ohashi, executive director of the Japan Meat Traders Association, said in an interview in Tokyo on Thursday. Foreign beef is sought as a cheaper alternative to Japanese meat and fish, he said.
Beef consumption rose 6.8 percent in the seven months to Oct. 31, heading for the fastest annual expansion in at least 12 years, according to the latest data from the Agriculture Ministry. Japanese producers are unable to keep up with demand as elderly farmers are retiring without successors and as the domestic herd shrinks.
Premium Wagyu beef is becoming too expensive to buy for many Japanese as demand from overseas buyers is expanding, buoying prices, Ohashi said. Less fatty beef from Australia and the U.S. is becoming popular, especially among senior consumers, Ohashi said.
U.S. beef imports are expanding at a faster pace than Australian shipments, even as Japan increased tariffs on U.S. frozen beef in August, because U.S. prices remain competitive, Ohashi said. In the 11 months through November, imports of U.S. beef climbed 26.6 percent from a year earlier and purchases from Australia rose 5.5 percent, according to the Agriculture Ministry. The U.S. accounts for 42 percent of total imports.
Noodle-shop operator Kourakuen Holdings Corp. decided last year to turn some of its restaurants to steak houses through a franchise agreement with Pepper Food Service Co Ltd, the operator of popular "Ikinari Steak" shops. Bronco Billy Co Ltd expects a 20 percent increase in operating profits this year as the company expands its steak restaurants.
"Regardless of the tariff increase, yen-based prices of U.S. beef have stayed low thanks to a weakening dollar," he said. Low feed-grain prices in Chicago and an expanding American herd have also kept U.S. beef affordable, he said.
Imports are likely to expand in the medium term after Japan's trade agreements with 10 Pacific nations and the European Union.
"Ireland is eager to boost beef shipments to Japan, taking advantage of the trade agreement, as the nation expects to lose sales in the U.K. because of Britain's withdrawal from the EU," Ohashi said. Shipments from Canada and Mexico will probably increase after the Trans-Pacific Partnership agreement is implemented.
HOGS: (Farm Futures) — A 2017 study conducted and released by Harry Kaiser, the Gellert Family Professor in the Dyson School of Applied Economics and Management, Cornell University, finds U.S. pork producers receive a positive return on their checkoff investment.
An economic analysis of Pork Checkoff programs is commissioned every five years by the National Pork Board. The study quantifies the returns generated by Pork Checkoff investments in research, pork promotion and producer education programs. The latest results, published in 2017, cover 2011 to 2016 programs.
"It's important to producers -- those who directly fund the Pork Checkoff -- to understand and quantify the value of their investments," said Terry O'Neel, National Pork Board president and a pig farmer from Friend, Nebraska. "The results indicate a positive impact of all aspects of the Pork Checkoff, from conducting production-focused research to growing consumer and export demand for pork."
Key points from the survey:
•Each dollar invested in production research to benefit on-farm practices yielded $83.30 in producer value.
•Each dollar invested in developing foreign markets yielded $24.70 in producer benefits.
•Other pork promotion resulted in benefits of $14.20 for advertising and $12.40 for non-advertising promotion.
•Research on market drivers returned $8.30 for each $1 invested.
•The overall return of checkoff program activities is $25.50 for each dollar invested.
USDA requires a return on investment analysis every five years. The 2001 to 2006 study showed an overall return of $13.80 to $1 invested, and the most previous study, released in 2012 for the time period of 2006 to 2011, found a return of $17.40 to $1 invested.
"This analysis provides a comprehensive review of program development, and more importantly, efficiency of our checkoff program administration," O'Neel said. "The net return of 25 to 1 on checkoff investments demonstrates that we are meeting producer needs in the areas that drive sustainable production and grow consumer demand."

Friday, January 26, 2018

Friday Closing Livestock Market Summary - Cattle Bulls Take Back Midweek Loss With Vengeance

GENERAL COMMENTS
Although cattle buyers delayed procurement chores until after the on-feed report, late-afternoon business was definitely higher. Light-to-moderate trade volume has been reported in parts of the South at $126-$127, $3-$4 higher than last week. Most dressed deals (moderate volume) in the North were marked at $200, $5 higher than last week's weighted average basis Nebraska. According to the closing report, the national hog base is $0.42 lower ($62-$70), weighted average $69.49). Corn futures settled a penny plus higher, concluding yet another going-nowhere week. The stock market once again popped sharply higher with the Dow up 225 points and the Nasdaq better by 94.
LIVE CATTLE
Price action here through the first hour or so made watchers of drying paint look ambitious. But somehow, just before midsession, live contracts suddenly caught fire. Maybe bulls caught word that short-bought packers would soon have to pay through the nose for immediate slaughter needs. Whatever, live contracts settled 115 to 212 points higher. The late-week rally didn't quite reach Wednesday's peak, but it came pretty close. Indeed, contracts could gap above these high-water markets on Monday, possibly inspired by Friday's sharply higher round of cash business. The Jan. 1 on-feed report landed quite close to trade expectations: on feed, up 8%; placed in December, up 1%; marketed in December, off 1%. Beef cut-outs: higher, up $0.06 (choice: $206.83) to $0.51 (select: $201.83) with moderate demand and light offerings (43 loads of choice cuts, 15 loads of select cuts, 9 loads of trimmings, 15 loads of ground beef).
MONDAY'S CASH CATTLE CALL:
Steady to $2 higher. Monday will be typically slow with packers focused on the assessment of new showlists. It's a good bet that ready numbers will be once again priced sharply higher (e.g., $130-$132 on a live basis) given the impressive late-week cash showing.
FEEDER CATTLE:
Feeders followed their live counterparts sharply higher. Closing settlement were in the green by 210 to 280 points. March closed back above its 40-day moving average, by the 100-day moving average around $147.81 remains formidable chart resistance. CME cash feeder index: 01/25: $147.06, off $0.62.
LEAN HOGS:
For the most part, lean issues closed modestly lower, off 5 to 20. There was some effort to stage a short-covering rally before retiring for the weekend. But even that limited goal could sustain the necessary energy. Looking at the week as a whole, lean hog charts didn't actually sink from Monday to Friday, but they definitely took on water. Both spot February and April closed below 40-day moving averages. Carcass value closed moderately higher thanks to better demand for loins, hams and bellies. Pork cut-out: $80.67, off $0.28. CME cash lean index for 01/24: $73.77, off $0.03 (DTN Projected lean index for 01/25: $73.77, unchanged).
MONDAY'S CASH HOG CALL:
Steady. Look for hog buyers to reconvene early next week with basically steady bids.

Friday Midday Livestock Market Update - Feeder Cattle Futures Hold Triple-Digit Gains

GENERAL COMMENTS: 
Strong gains have developed across the cattle futures complex with traders focusing on the renewed support in feeder cattle futures posting triple digit gains in front of the cattle on feed report to draw traders back to the market. Lean hog futures are mostly lower in narrow trading losses as trade activity remains sluggish. Corn prices are steady in light trade. March corn futures are Steady Friday. Stock markets are higher in light trade. The Dow Jones is 86 points higher while Nasdaq is up 41 points.
LIVE CATTLE:
Firm buyer support is seen across live cattle trade with traders pushing futures 60 to 90 cents per cwt higher. The overall support in the market continues to bring underlying support back to the market, although these moves are not able to offset the aggressive and significant pressure seen Thursday. It is likely that very little additional direction will be seen before markets close Friday, allowing prices to hold current ranges through the weekend. Cash cattle trade is still undeveloped for the week, and is going to move into the afternoon or evening Friday at this point. Likely trade will be pushed off until after the release of the cattle on feed report. Bids have remained steady with levels seen earlier in the week with live bids seen at $122 to $123 per cwt while dressed bids are holding at $192 to $193 per cwt. Asking prices are holding at $126 and higher live basis while dressed asking prices are seen at $200 to $202 per cwt. Boxed Beef cut-outs at midday are lower, $0.48 lower (select) and down $0.01 per cwt (choice) with light movement of 50 total loads reported (29 loads of choice cuts, 9 loads of select cuts, 5 loads of trimmings, 7 loads of ground beef).
FEEDER CATTLE:
Strong triple digit gains have quickly moved back into feeder cattle futures as traders continue to adjust market expectations ahead of the upcoming cattle on feed report, and following the late day market tumble Thursday. Even though front month March futures are holding gains of $1.50 per cwt, there continues to be a sense of market pressure as prices fell nearly $2.50 per cwt earlier in the week. This may add even more softness to the market during the next few days and end of the month.
LEAN HOGS:
Light price pressure is seen in most futures contracts late Friday morning as trade activity remains sluggish across the entire lean hog complex. Nearby futures are holding losses of 2 to 7 cents per cwt as the focus on the market pressure has moved to increased market weakness. Trade levels may continue to widen over the next couple of hours, although the tone of the market is weak leading into the weekend. Cash prices are lower on the National Direct morning cash hog report. The weighted average price is down $0.13 at $69.44 per cwt with the range from $62.00 to $69.81 on 2,717 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price is down $0.94 at $68.68 per cwt with the range from $62.00 to $69.50 on 495 head reported sold. The National Pork Plant Report posted 135 loads selling with carcass values adding $0.73 per cwt. Lean hog index for 1/24 is at $73.77 down $0.03 with a projected two-day index of $73.77, unchanged.

Friday Morning Livestock Market Summary - Meat Futures Should Open on the Defensive

GENERAL COMMENTS:

The waiting game in cattle country will probably continue a few more hours Friday before traders seriously take up the necessary chore of marketing. Indeed, it's quite possible that feedlot sales will not surface until after the release of the Jan. 1 on feedFriday afternoon at 2 a.m. CST (trade guesses: on feed, up 7% to 8%; placed in December, off 2% to 3%; marketed in December off 1% to 2%). Opening bids should be around $122 live and $193 to $194 dressed. Live and feeder futures should open moderately lower, initially pressured by residual selling and long liquidations.
Look for the late-week cash trade to open with steady/weak bids. Assuming a kill of 465,000 Friday and 135,000 on Saturday, the weekly slaughter total close to 2.38 million head. Lean futures should open lower, checked by follow-through selling and technical concerns.

BULL SIDE BEAR SIDE
1)
Official scale tickets for the week ending Jan. 13 reflected the negative impact of bitter cold temperatures upon feedlot performance. For example, steer carcasses averaged 896 pounds, 4 lbs. lighter than the previous week.
1) Cattle futures suffered major bearish reversals on Thursday, suggesting that the early-year rally has run out of gas. Thursday's early highs (e.g., 126 basis spot February live) now constitute tough overhead resistance.
2) Given Thursday's crash in cattle futures increases, the odds are it is a friendly reaction to a possible confirmation of reduced placement in December (expected by the trade to fall below the previous year for the first time since last February). 2) The board's big break and the significant strengthening on the basis is negative for feedlot leverage, making it more difficult for sellers to hold for higher prices.
3)
According to the monthly Cold Storage report, wholesalers stocked 489.5 million pounds of beef in commercial freezers as of Dec. 31, essentially steady with the previous month but down 14% from the same time a year earlier.
3) Summer lean hog futures seem to be attracting more selling interest. April through August slumped by triple-digit Thursday with April and June closing below 40-day moving averages.
4) While lean hog futures have turned a bit defensive this week, general trade expectations are that exports are going to expand and temper the impact of larger supplies on the domestic market. 4) Frozen pork supplies as of Dec. 31 were down 2% from the previous month but up 3% from last year. Stocks of pork bellies were up 13% from last month and up 121% from last year. At the same time, total frozen poultry supplies were up 1% from the previous month and up 10% from a year ago.


OTHER MARKET SENSITIVE NEWS

CATTLE: (verineherald.com) -- Competition in global markets is set to become more intense in the coming year, as global beef production is pegged to increase by 1.3million tonnes in 2018, according to Rabobank's latest Global Beef Quarterly report.

With production volumes expected to outpace domestic consumption, the report says exports will become ''more critical'' and ''shift the balance of power in favour of importers''.
The United States and Brazil are likely to see the biggest increases in beef exports, but the report says the expansion in global production will come out of all major producing areas, including Australia.
''In the US, beef exports are expected to increase by seven per cent in 2018, as their cattle herd expands for the third consecutive year,'' Rabobank senior animal proteins analyst Angus Gidley-Baird said.

''While beef consumption is also expected to increase, it will not keep pace with their production growth, and exports are expected to grow to 12 per cent of US production.''

Mr Gidley-Baird said widespread rains across parts of Queensland and northern NSW in spring reignited producer demand, ''shaking cattle prices out of their declining trend to rise through October and into November''.

''Seasonal conditions are expected to drive large swings in prices into the first half of 2018, given the low cattle supplies and producers' desire to restock their herds,'' he said.

''While domestic cattle producers will face some headwinds from increased global competition in 2018, limited domestic cattle supplies should continue to support a strong Australian market.''

Mr Gidley-Baird said Brazil was anticipated to increase its export program by five per cent in 2018.
''Brazil is actively accessing new markets and increasing their presence in existing markets, with plans afoot to accredit an additional 11 beef plants to access the Chinese market.''

If successful, Mr Gidley-Baird said Brazil would have 27 beef plants able to access the Chinese market.

Competition to supply beef into China will become particularly fierce, ''not only for Brazil, but also for the US and Australia''.

''China's import demand will be pivotal to balancing the increase in global exports.
''And next year, China are expected to increase their import requirement to 800000 tonnes of beef, due to the decline in their own cattle numbers.''

HOGS: (radioiowa.com) -- An official with a big pork processing plant, scheduled to open later this year in north-central Iowa, predicts the facility help boost the bottom-line for hog producers in the region.

The new Prestage Foods plant is scheduled to open in November near Eagle Grove. Prestage production coordinator Jesse Sumner says he's been getting a positive response from producers who are currently marketing their hogs through other companies.


"I think you see folks who maybe have not liked the returns the hog industry has seen the last two or three years, as you look at what the cutout for meat has been versus what their share has been, as far as what a hog was worth," Sumner said. "We've seen a spread that's been at all-time highs. There's been some frustration, so they're looking for ways to try and make the math work better." Initially, the plant will slaughter 10,000 hogs per day on one shift, with half of those hogs coming from Prestage's own barns. The other half will come from independent producers. According to Sumner, Prestage will eventually add a second shift to slaughter an additional 10,000 hogs per day, bringing total daily slaughter to 20,000.