Tuesday Morning Livestock Market Update - Cattle Weakness Expected

GENERAL COMMENTS:

Firm pressure is expected to redevelop during early trade as limited support in the April contract Monday is sparking some uncertainty surrounding fundamental support. With April contracts closing Monday at $128.35 per cwt, continued pressure may develop until traders find any sense of support or can trigger any technical market shifts. The current gains the last couple of weeks could allow prices to wander in a wide $3 per cwt trading range without any significant market technical moves. The inability to move through long-term support may be the main hurdle traders have to face in the coming weeks. Cash cattle trade remains undeveloped with bids and asking prices still hard to pin down. This is likely to keep active trade from developing until the last half of the week.

Cash hog business is expected to get done with prices generally steady Tuesday morning. The full range of bids is expected to be steady to $1 per cwt lower as traders remain focused on the renewed support in pork values as well as the firm market rally developing in April contacts. Futures trade is expected mixed with follow-through support likely to slowly develop in April contracts as traders continue to move into the market through the week, distancing themselves from previous support levels just below $53 per cwt. Tuesday slaughter runs are expected at 477,000 head.

	BULL SIDE		BEAR SIDE
1)	Continued buyer support is moving into wholesale beef values, with firm triple-digit gains developing in the last several days. This may help limit additional nearby live cattle pressure.	1)	There is no short-term end in sight for the below normal temperatures in much of the country. This will continue to hinder beef production and impact cow/calf herds through most of the Midwest. The increased snow in most of these areas will create even more challenging production issues once warm weather arrives and leaves lots and yards a muddy mess.
2)	Weather concerns surrounding the impact on young beef calves is sparking firm fall and winter gains through feeder cattle trade. The full impact is not yet know, but deferred price levels are taking precautions, moving prices higher.	2)	Strong triple-digit losses in April live cattle trade sparked underlying pressure through the entire complex. This added even more weakness to the entire cattle complex during early March.
3)	April lean hog futures have moved nearly $4.50 per cwt higher the last the two weeks, allowing for renewed commercial and noncommercial interest to focus on potential market strength through the entire lean hog complex.	3)	Cash hog values have shown limited support through the last two weeks as futures and wholesale pork values have worked prices higher. This overall lack of support continues to limit the upside market due to the amount of hogs available to packers.
4)	The underlying concern of African swine fever in China and other Asian areas, combined with the fear that this could move into other areas is helping spark some additional underlying firmness as traders look at continued long-term demand support.	4)	Lack of support in deferred contracts is causing even more uncertainty as traders focus on the potential support from any trade deal struck with China. Trade agreements would have a long-term impact, but the limited interest in these summer and fall contracts shows underlying concern.

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Monday Closing Livestock Market Summary - Limited Buyer Support Continues

GENERAL COMMENTS: Limited buyer support continues to hold in nearby lean hog futures despite trade eroding initial gains as the day continued. Cattle markets shifted lower as traders are backing away from previous market support due to lack of follow-through buying. Corn futures are higher in light activity. May futures added 1 cent per bushel. Dow Jones Index is 206 points lower with Nasdaq down 17 points.

CASH MARKETS: Cash cattle activity remains at a standstill Monday afternoon following the higher prices seen last week. Bids and asking prices are unlikely to develop until Wednesday or so, but both sides are expected to hold their positions with initial bids and offers. With trade likely to be pushed off to the last part of the week, both sides are closely focusing on futures trade direction. National Daily Direct afternoon hog report is $0.19 higher with a weighted average of $45.06 per cwt. Full range of $41.50 to $48.00 per cwt on 6,989 head sold.

LIVE CATTLE: Market pressure developed as traders quickly pulled away from recent highs (futures closed $1.20 lower to $0.30 higher). Sharp losses developed in all but one live cattle contract as traders quickly adjust markets lower after being unable to break through resistance levels last week. This inability of prices to continue to skyrocket higher took an abrupt turn as markets seemingly ran out of gas near 2018 highs. The continued fundamental support seen in cash and beef values is not counting future gains totally out, but traders have quickly pulled back from the market, allowing for a correction. This could allow prices to move to $127 per cwt in the April contract without any significant technical resistance. Beef cut-outs: higher, $0.42 higher (select, $217.21) and up $2.26 (choice, $223.55) with fairly good demand and light offerings, 79 loads (41 loads of choice cuts, 13 loads of select cuts, 5 load of trimmings, 21 loads of coarse grinds).

FEEDER CATTLE: Strong gains developed in deferred contracts with cold weather affecting calving and the young calf crop (futures closed $0.02 lower to $1.07 higher). Strong buyer activity quickly moved into most feeder cattle contracts despite pressure in live cattle markets and early grain market support. The focus moved from the overall availability of current supply represented by nearby contracts to the latest round of bitter winter weather affecting calving season in many northern areas. With extreme cold weather patterns expected to hold for the next week or two, concerns of calf and cow death loss has started to hit fall and winter feeder cattle prices. CME cash feeder index for 3/1 is $139.59 up $0.36.

LEAN HOGS: Initial hog market rally helped support spot April futures with all contracts closing $0.40 lower to $0.92 higher. April futures held onto early gains Monday as traders quickly and aggressively moved back into the complex. April futures posted a 92-cent-per-cwt rally as traders quickly stepped into the previously oversold complex and focused on increased market interest through the rest of hog market. Initial support helped to push prices higher in all contracts, but continued uncertainty as to what will be involved in a proposed trade deal with China and how it will filter down to the pork market seemed to leave most traders more worried than excited at the end of the session. Pork cutouts continue to advance with increased underlying primal market support developing across the pork complex. Pork cutout values added $1.01 per cwt, moving to $62.93 per cwt on 306 loads. CME cash lean index for 2/28 is $52.13, down $0.51. DTN Projected lean index for 3/1 $51.93, down $0.20.

TUESDAY'S CASH HOG CALL: Steady to $1.00 lower. Limited additional direction is expected although packers will continue to move to gain access to market-ready hogs. Limited weather disruptions are expected over the next few days, potentially allowing packers and shippers to stay on track. Tuesday slaughter is expected at 477,000 head.

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Monday Midday Livestock Market Summary - Selling Sweeps Through Live Cattle Trade

General Comments

Firm pressure in live cattle trade has started to bring additional widespread pressure to the cattle complex. April futures are leading the cattle market lower in limited activity. Feeder cattle futures are steady to firmly higher as cold weather is causing concerns to the cow/calf herd. Strong early morning gains in hog futures have started to erode as emotional buying based on potential china trade deals have faded due to lack of information. Corn futures are higher in sluggish trade. May corn futures are 2 cents lower. Stock markets are lower in light trade. Dow Jones is 354 points lower with Nasdaq down 71 points.

LIVE CATTLE:

April live cattle futures are eroding through the morning Monday although limited selling pressure is seen at midday as prices have pulled off of session lows due to lack of follow through selling. April futures have moved to $128.40 following a $1.15 per cwt loss at midday. The inability to break through long-term resistance levels has traders quickly reassessing market positions and the inability for further short term gains. Despite fundamental support in the complex, a potential retraction could push prices to $127 per cwt or lower without any significant technical challenges. Cash cattle markets are quiet Monday morning with bids and asking prices undeveloped and likely to remain quiet until midweek or later. Active trade will likely be pushed to the end of the week once again. Boxed Beef cut-outs at midday are higher, $1.02 higher (select) and up $2.11 per cwt (choice) with light movement of 32 total loads reported (17 loads of choice cuts, 3 loads of select cuts, no loads of trimmings, 12 loads of ground beef).

FEEDER CATTLE:

Moderate to firm buyer support is holding in deferred feeder cattle trade. This is helping to solidify additional interest in summer and fall contracts with prices 50 to 80 cents per cwt higher. Even though nearby trade is holding single-digit losses based on pressure in live cattle trade, the focus on bitterly cold weather affecting the cow herd and calving season and young calves is sparking some price support for fall contract months.

LEAN HOGS:

Initial strong gains which flooded through lean hog trade Monday morning has been slowly eroding during the morning. There is expected to be some additional market shifts during the next couple of weeks, although April futures are still showing support in order to bounce off recent support levels. The potential for a trade deal with China is creating some underlying optimism through the entire complex, but the lack of details on any deal as well as uncertainty of China's desire to import pork continues to create uncertainty through the complex. Cash prices are unreported due to confidentiality on the National Direct morning cash hog report. Cash prices are unreported due to confidentiality on the Iowa/Minnesota Direct morning cash hog report. Pork carcass values firmed in limited early week buying. Pork cutouts added $1.29 per cwt at $63.21 per cwt with 140 loads traded. Lean hog index for 2/28 is $52.13, down $0.51, with a projected two-day index is $51.93, down $0.20.

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Organic livestock rule withdrawal court challenge advances

Court confirms USDA caused organic industry harm by withdrawing organic livestock rules.

The U.S. District Court for the District of Columbia agreed with the Organic Trade Assn. (OTA) that the U.S. Department of Agriculture’s failure to put new organic livestock standards into effect has caused harm to the organic sector and that the association has the legal standing to contest the agency’s withdrawal of the rule, OTA said in a statement Thursday.

“The court has recognized the harm to organic producers, to organic businesses and to the integrity of the organic seal that the USDA’s arbitrary and capricious stance against this important organic standard has already had and the potential for even greater damage,” OTA chief executive officer and executive director Laura Batcha said. “Our case will now advance. We are confident our case is strong, and we look forward to winning this legal battle to uphold organic standards.”

USDA countered that the Organic Food & Production Act (OFPA) does not give the National Organic Program the authority to regulate animal welfare. OTA is arguing that this claim is a radically different view from any administration since the adoption of the National Organic Program and one that cannot be legally supported.

In its ruling, the court rejected USDA’s arguments that the case against the withdrawal of the rule should be dismissed, saying the Organic Livestock & Poultry Practices (OLPP) withdrawal rule "drops the baseline for USDA certification and alters the regulatory landscape to the detriment of OTA’s members. Just as OTA’s members would have had standing to challenge any rollbacks of USDA’s organic certification program before the final OLPP rule, so, too, they have standing now to challenge rollbacks of the USDA’s certification program as constituted after the final OLPP rule.”

In its lawsuit, OTA also argued that USDA violated OFPA by failing to consult with the National Organic Standards Board. In refusing to dismiss this argument, the court said, “The final OLPP rule was the largest and most important organic rule promulgated since the 2010 access to pasture rule, and USDA consulted over its development with the board. As such, … § 6503 may have required USDA to consult on a timely basis with the National Organic Standards Board before finalizing the OLPP withdrawal rule, which is similarly large and important.”

Batcha said, “It’s been almost two years since we stood up on behalf of the entire organic sector to protect organic integrity, advance animal welfare and demand the government keep up with the industry and the consumer in setting organic standards. We will continue to insist that organic standards be robust, consistent and clear in order to stay meaningful.”

The court vacated an order calling for oral argument on the motion and chose to rule solely on the pleadings to advance the case.

In March 2018, USDA withdrew the final OLPP regulation, which was to go into effect in May. The agency contends that OFPA does not give the National Organic Program the authority to regulate animal welfare.

“Significant policy and legal issues were identified after the rule published in January 2017,” USDA said in a statement at the time of the rule's withdrawal. “After careful review and two rounds of public comment, USDA has determined that the rule exceeds the department’s statutory authority and that the changes to the existing organic regulations could have a negative effect on voluntary participation in the National Organic Program, including real costs for producers and consumers.”

Greg Ibach, USDA undersecretary for marketing and regulatory programs, added, “The existing robust organic livestock and poultry regulations are effective. The organic industry’s continued growth domestically and globally shows that consumers trust the current approach that balances consumer expectations and the needs of organic producers and handlers.”

According to USDA reports for 2017, the number of certified organic operations increased 7% domestically and 11% globally. Industry estimates show that organic sales in the U.S. reached almost $47 billion in 2016, reflecting an increase of almost $3.7 billion since 2015.

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