DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv $149.99 +0.26* 
Hogs: Stdy-$1 LR Futures: Mixed Lean Equiv $ 77.64 -0.21**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cash cattle buyers and sellers will slowly retake the same cash positions on the field they left late last week. Actually, activity Monday will be pretty much limited to the distribution of new showlists. The late-month fed offering is likely to be steady to somewhat larger than last week. Beef processing margins are decent at the start of the week, and we assume that slaughter could be somewhat larger than last week, probably around 605,000 to 610,000. If feedlot managers continue to feel confident enough to turn a blind eye toward the discounted board, initial asking prices should be around $129 in the South and $207 plus in the North. Live and feeder futures are likely to open on a mixed basis with the board torn between residual selling and large country premiums.

The cash hog market should open with bids steady to $1 lower. Late winter/early spring slaughter levels remain quite ample. Indeed, we believe weekly kills will be 2.4 million well into early April. Given such tall production levels, it will be tough for carcass levels to hold the high ground. Lean futures seem likely to begin with uneven price action with spot April probably set to losing more ground on deferreds.

	BULL SIDE		BEAR SIDE
1)	While beef carcass appreciation slowed at midmonth (i.e., from Friday to Friday, choice and select cutouts moved up $1.45 to off .40) packers were largely successful in holding decent margins. Furthermore, it's a good bet that beef demand will improve through the 30 days following Easter.	1)	Fed cattle supplies will probably be underscored this Friday when the March 1 Cattle on Feed report confirms another increase in placement activity. Most analysts are expecting a 9% to 10% increase over February of 2017.
2)	More specifically, while the middle meats (i.e., loins and ribs) could briefly pause from their aggressive increases seen this month, seasonal charts suggests significant gains still ahead.	2)	In the week ending March 13, noncommercials again liquidated many more long positions in live cattle futures than short, reducing their net-long position to 88,200, a decline of 8,000.
3)	Students of market seasonality are expecting a strong advance in cash hog values over the next 90 days. Furthermore, anticipation of the March Hogs and Pigs Report to be released on March 29 could prompt serious short-covering over the next few weeks.	3)	For the week ending March 13 noncommercial traders also reduced their net-long position in lean hog futures by an additional 5,800 contracts, reducing it 9,400.
4)	The April lean hog futures contract typically moves higher into late March and early April trading prior to expiration.	4)	Cash hogs and the nearby April contracts both lost more than $2 last week, and many expect this weakness to continue easing for the remainder of March.

OTHER MARKET SENSITIVE NEWS

CATTLE: (cbsnews.com) -- A large cattle industry lobby group is fighting to defend the traditional meaning of the word "meat." The U.S. Cattlemen's Association filed a petition last month with the Department of Agriculture arguing that "lab-grown and plant-based products should not use the terms 'meat' or 'beef'" on their labels.

Kelly Fogarty, whose family has raised Black Angus cattle for five generations, represents hundreds of ranchers as the executive vice president of the U.S. Cattlemen's Association. For them, defining meat is easy.

Rice industry says cauliflower "rice" is misleading consumers

"We don't want them to think of a laboratory. We don't want them to think of something that's created under a microscope," Fogarty told CBS News' Jamie Yuccas.

The association is concerned about the increase of animal-free products that have names like beef-less ground beef.

The Cattlemen's federal petition argues "the labels of 'beef' or 'meat' should inform consumers that the product is derived naturally from animals as opposed to alternative proteins such as plants…artificially grown in a laboratory."

But Ethan Brown, the CEO of Beyond Meat says it's time to rethink that definition.

"The reason we want to use the word meat is that we firmly believe that this is a piece of meat. That if you look at meat not in terms of its origin... but if you look at meat in terms of composition -- we are hitting all of those key points of composition," Brown said.

At Beyond Meat's Los Angeles-area lab, Brown's team is working to replicate the texture, color and sensory experience of eating a traditional hamburger.

"I think it's a mistake to dictate to the consumer what language they can use," he said.

This isn't the first fight over food labeling. Dairy farmers have, so far, been unsuccessful in their battle to make the word "milk" exclusive to products from cows. In some stores, these animal-free alternatives are currently sold alongside their competitors.

"We just don't want there to be any confusion when it comes to our product," Fogarty said.

Brown gives consumers more credit saying, "I think the consumer is smart. I think the consumer knows what plant-based meat is."

Meat alternative sales were up six percent last year and are valued at around $500 million, but that's still crumbs compared to the real meat industry which makes more than $50 billion annually. The USDA says it's considering the cattle rancher's petition and could finally decide which foods meet the definition.

"The consumer is moving in a direction where they say, 'Look if I can continue to eat meat but it's a plant-based meat and I know I get all these benefits, health, environment, animal welfare, etc. -- why wouldn't I do that?'" Brown said.

HOGS:(porkbusiness.com) -- Commercial pork production is expected to be 26.9 billion pounds in 2018, 5.2% above a year ago. This forecast represents an increase of 25 million pounds from last month's forecast and is due to higher than expected dressed weights of slaughtered hog carcasses.

This upward revision is notable because the pace of slaughter so far this year has been slower than expected. Higher carcass weights have more than offset lower than expected slaughter numbers. The figure below shows weekly averages of daily carcass weights for federally inspected slaughtered hogs. A number of factors likely explain the year-over-year higher weights registered so far in 2018. First, despite recent feed price increases related to South American weather events, costs of feeding hogs -- which typically constitute more than half of production costs -- remain moderate, and producer returns in the first 2 months of the year have been positive. Further, winter weather conditions in principle hog production areas have not been unduly harsh. In addition, most packer pricing grids tend to favor heavier carcasses, which drive down processing costs.

Apart from these factors, two additional elements, related to the recent expansion of Midwestern processing capacity, may help to explain higher first-quarter dressed weights. The first is likely a timing issue: although many sow farms are currently in multiple stages of start-up, hog-finishing capacity associated with the ongoing industry expansion -- which requires far less complex facilities to site, permit, and construct --may be running ahead of sow farms' current ability to supply pigs. This would leave excess finishing space, creating somewhat less pressure to market existing animal inventories.

This relative absence of "push-through pressure" is likely to disappear, however, once sow farms come online and begin to supply animals to finishing barns constructed for that use. A second factor likely contributing to higher dressed weights is the apparent ongoing tug-of-war between producers and packers to maintain processing margins. Margins have been under particular pressure since the increase in processing capacity late last year. There is anecdotal evidence suggesting that since early February, some packers have slowed slaughter rates and limited Saturday slaughters in efforts to boost margins, which started out the year sharply lower than a year earlier. Producers, for their part, likely have some added leverage with excess finishing capacity, which may allow more marketing flexibility.

It is notable that processor margins have recovered since early February. Although both hog prices and the wholesale pork carcass cutout fell during the month, the decline in wholesale pork values was more than offset by lower hog prices. Most of the February decline in the wholesale value of the hog carcass was attributable to lower belly prices. While belly prices remain below a year ago -- when depleted stocks drove prices to record highs -- prices into March are above 3- year averages. Belly prices are likely being supported by moderate cold stocks volumes and the year-over-year higher retail-wholesale bacon price spread.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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