DTN Early Word Opening Livestock

 
Cattle: Steady-$2 HR Futures: 25-50 HR Live Equiv $139.86 + .60* 
Hogs: Steady Futures: Mixed Lean Equiv $ 87.14 -1.00**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle-buying interest could start to take shape Thursday with a few preliminary bids on the table (e.g., $120 in the South; $190 to $192 in the North). Yet we don't expect to see buying interest hot enough to trigger any selling interest. Given the firm behavior of live futures seen so far this week, asking prices will probably be stated around $126 to $127 in the South and $200 to $202 in the North. Significant trade volume may not surface until sometime Friday.

The cash hog trade should open with generally steady bids. Wednesday's kill of 465,000 head finally seemed to return to normal after early-week adverse weather. Yet despite the week's slow start to chain speed, it really doesn't appear that packers are planning to make up for a long time on Saturday. Lean futures should open on a mixed basis tied to both long liquidation and short-covering.

	BULL SIDE		BEAR SIDE
1)	Nearby live futures kept climbing at midweek, landing moderate gains and further weakening the cash basis (and thereby stiffening the resolve of feedlot managers in terms of pricing showlists).	1)	If a trade war with China takes off, the potential of U.S. beef exports could really be checked. Although trade has barely just began, China could raise their health and safety standards and make life far more difficult for the U.S. beef exporting businesses that are looking to capitalize on middle-class Chinese consumers.
2)	Beef cutouts closed solidly higher Wednesday with box demand once again described as "moderate to good."	2)	For the week ending Jan. 20, U.S. hatcheries set 224 million eggs in incubators, up 2% from a year ago. At the same time, chicks placed totaled 181 million chicks; up 1% from 2016.
3)	The structure of the lean hog futures market and the overall market structure is positive. Spot February is trading at the low end of historical trading values and as January comes to an end, there is a tendency for the board to undergo a modest rally.	3)	The pork cutouts lost a full buck on Wednesday, pressured by softer demand for loins, picnic, ribs, and hams.
4)	The pork cutout is forecast for modest gains the next four weeks or so, but could move significantly higher on stronger belly demand.	4)	Once again, plans for a relatively modest Saturday slaughter of 137,000 head suggests a general lack of market confidence by pork producers.

OTHER MARKET SENSITIVE NEWS

CATTLE: (NCBA) -- Kent Bacus, the National Cattlemen's Beef Association's Director of International Trade and Market Access, has issued the following statement in response to news reports that eleven nations have finalized a revised version of the Trans-Pacific Partnership without the United States:

"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. 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.

"We encourage negotiators in Montreal to continue building on the progress made in previous rounds so the United States can focus on tearing down trade barriers in Asia and around the world.

"Unfortunately, the U.S. Senate's unwillingness to confirm key negotiators like Gregg Doud as the Chief Agricultural Negotiator, leaves the ag sector unfairly underrepresented at the world's negotiating tables. It's imperative that the Senate confirm Doud and the many other unconfirmed nominees as soon as possible."

HOGS: (nationalhogfarmer.com) -- Every year, the list of issues gets longer, the regulatory battles get larger and the anti-meat movement voices get louder. The cost of promoting pork and protecting the U.S. pork industry rises. Looking at the time, money and effort that the National Pork Producers Council and National Pork Board spend just on trade issues and foreign promotions alone is the inclination of what the price is to keep U.S. pork competitive.

Is it time to take a serious look at funding of U.S. pork industry's organizations? Something producers from the state that raises nearly one-third of the nation's pigs are deliberating.

Iowa pork producer Charles Wirtz brings forward a bold resolution to increase the Pork Checkoff to $0.50 per $100 valuations or raise it 10 cents per $100 above the current checkoff rate. If passed the resolution moves to National Pork Board delegate for considerations by U.S. pork producers.

Wirtz says, "We need to get serious about fighting these battles. We should be building a war chest for the war we are about to face."

Every year delegates from the top pork-producing states raise the question: is the Pork Checkoff rate enough, but no formal action is taken. Proactively, Wirtz presents the resolution to Iowa Pork Producers delegate body to take a positive action forward, asking them to increase the Pork Checkoff rate.

John Weber, Iowa pork producer and NPPC past president, says during the floor debate over the proposed resolution, "Time is running out and now is time to discuss how we as producers are going to fund our business, our organizations. We are going to have some serious budget issues in five to seven years."

However, he can't support the resolution as it is written and presented to the body during the IPPA's annual meeting held Jan. 23, because it leaves one important organization out of the picture-- National Pork Producers Council.

Many delegates share Weber's concern that an increase in the Pork Checkoff rate could jeopardize future funding of the NPPC's strategic investment program. SIP is a valuable program that funds the work of NPPC, the pork industry's legislative arm, to defend opportunities for U.S. pork producers. Pork producers participate in SIP by voluntarily investing a percentage of the sales of each market hog sold.

As discussed by Weber, many attempts to erode the freedom to farm can only be defended by the NPPC, not the National Pork Board.

"We spent Wednesday during our Iowa board meeting roughly two-thirds of the time talking about issues that your checkoff can't spend one cent on," he notes. "We have to know in three to five years from now how are we going to fund people to address these issues."

While Weber can't give his thumbs-up to a proposed resolution Thursday, he recommends a healthy discussion on the future funding of both organizations. Weber, along with others sharing his concern, is not against a Pork Checkoff increase; they are asking for time to research and discuss expanding the checkoff and SIP rates.

Gene Noem, IPPA board member, commends Wirtz for bringing the issue to the table but also echoes Weber's request for more time. "It is time to have a discussion. In an Iowa membership survey, one-third of membership was in support of expansion in rates of both SIP and Checkoff and two-thirds against. I am little concerned that we will try to go forward right now with only one-third of our membership in support of the expansion."

He suggests going back to the membership to have an open discussion about increasing these rates.

After open debate on the resolution, Dale Moody motioned the Pork Checkoff resolution to be referred to the membership committee to work on gathering grassroots feedback on expanding both SIP and Checkoff rates. A motion was overly approved by the IPPA delegate body.

While the resolution to increase Pork Checkoff rate is held, for now, the dialogue on how U.S. pork producers can sustainably fund the National Pork Board and National Pork Producers Council is open in Iowa and beyond. Only time will tell, how America's pig farmers will react-- sit in silence or engage in conversation.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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