Tuesday, January 30, 2018

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."

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