DTN Early Word Opening Livestock

Cattle: Steady-$2 HR Futures: 10-30 HR Live Equiv $147.60 + $0.60* 
Hogs: Steady-$1 LR Futures: Mixed Lean Equiv $ 79.61 - $0.17**
*based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue 

GENERAL COMMENTS:

Last week's cash cattle market turned out to be an extremely narrow window. A light round of dressed business surfaced late Friday afternoon at $214, steady to $2 higher basis Nebraska and Iowa weighted averages. Yet scattered sales in the South at $136 ($1 lower) had to wait until after dark on Friday and Saturday morning. It will be interesting to see negotiated trade officially recognized by Livestock MandatoryPrice Reporting around midday. Assuming small numbers at this point, it seems reasonable to speculate that packers are starting the week very close to the knife. Additionally, it's a good bet that new showlists distributed through the day will be at least some larger, inflated by unsold steers and heifers carried over. Our guess is that initial asking prices will be around $138 in the South and $218 plus in the North. The live and cattle futures are expected to open moderately higher, boosted by follow-through buying and seasonally positive fundamentals.

Look for the cash hog market to open the first full week of March with bids steady to $1 lower. While ready numbers of barrows and gilts have slowly tightened since the first of the year, we're still waiting for a consistent slaughter pattern that tracks below 2015 totals (i.e., as promised by the Dec. 1 Hogs & Pigs report). Needless to say, the reluctance of late-winter pork production to fall at a faster pace has made it more difficult for carcass value to rally. Lean futures are staged Monday to begin with mixed prices tied to a combination of light bull spreading and profit-taking.

BULL SIDE	BEAR SIDE
A surge in new buying has spurred a larger net-long position in live cattle futures by noncommercials, rising to 13,900 contracts during the week ended March 1, up 8,000 from a week earlier and nearly 20,000 higher than two weeks earlier.	Late-week feedlot leverage and packer appetite proved to be somewhat disappointing. Though some northern buyers agreed to buy limited numbers in parts of Nebraska and Iowa (i.e., $214 dressed, steady to $2 higher), some sellers in Kansas threw in the towel Saturday morning at $136, $1 lower. Furthermore, new showlists are likely to be larger this week thanks to unsold cattle carried over.
The economy added a better-than-expected 242,000 jobs in February while the unemployment rate held steady at 4.9%. Revision to previous months added 30,000 jobs, with December going from 262,000 to 271,000 and January pushed up to 172,000 from 151,000.	National feeder receipts through February totaled 1,092,000 head, 14% greater than 2015. Early-bird guesses anticipate that placement activity last month exceeded 2015 by 5% to 6%..
The lean hog market structure is positive with spot April trading premium to the current cash settlement index value and the premium reflected in the June contract represents a normal seasonal advance in cash values over the next 60 to 90 days.	While April lean hog futures continue to hold firm right near $70 to $71, the spot contract has failed to penetrate overhead resistance near $72, keeping the long-term bearish trend in place.
For the week ending March 1, noncommercial traders were net buyers in lean hog futures, extending their long position to 26,900 contracts, the largest long position in over a year.	The weekly pace of hog slaughter continues to run well above expectations with last week's kill totaling 2,225,000 head, .6 percent more than the previous week and .5 percent greater than 2015.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Cargill) -- People in the eastern United States love good beef burgers and beginning this spring Cargill will be able to better meet those needs through the acquisition of the FPL Food, LLC ground beef processing plant in Columbia, S.C. Purchase of the 100,000-square-foot plant, which employs more than 200 people, complements Cargill's meat processing facilities in Georgia and Pennsylvania. The acquisition enhances the company's ability to serve eastern retail and foodservice customers. Terms of the purchase were not disclosed, and the transaction is expected to close around the end of March.

"Cargill ground beef customers served by this plant will benefit from closer proximity to supplies and improved transit time for their orders," said John Keating, president of Wichita-based Cargill Beef.

"We are acquiring an excellent facility, with outstanding people and capabilities. This acquisition underscores our ongoing commitment to grow our protein business and will enable us to better serve retail and foodservice customers in a region where people love ground beef."

"As the founder of FPL Food, I am delighted our ground beef plant will be in the hands of a company that truly values the products and people who produce them, as well as the customer relationships that nurture a continuous drive for excellence to generate profitable business growth," said Francois Paul Léger. "We're looking forward to the opportunity to remain a key supplier of quality beef to the plant and know that the fine people working there will become part of Cargill's terrific beef team. This sale allows FPL Food to focus on its core business of raising and harvesting cattle. It is a win-win scenario for ground beef customers, plant employees, the community, FPL Food and Cargill."

Cargill's North American beef business is one of the largest producers of ground beef products in the world, with numerous processing plants in the U.S. and Canada. Ground beef is versatile and used for dishes ranging from premium gourmet hamburgers to an ingredient in chili and meat sauces, taco filling, meatballs, meatloaf and many other recipes.

"Ground beef is a staple in the diet of most U.S. consumers and we've recently seen encouraging trends, including a resurgence for premium gourmet burgers," stated Keating. "Rebuilding the U.S. beef cattle herd from the severe multiyear drought suffered in Texas and the southern plains is well underway, which will result in an increased beef supply later this year and beyond. The increased supply should benefit our customers and consumers over the next few years.

"Forecasts tell us global beef demand continues to increase significantly, and U.S. demand is solid. Given the needs of our customers, purchasing this facility in South Carolina will help us expand our capabilities, including better utilization of the beef we generate at our other plants. Synergies make this acquisition very attractive to our beef business."

HOGS: (agebb.missouri.edu) -- The average live slaughter weight of barrows and gilts in Iowa-Minnesota for the week ending February 27 was 284.7 pounds, up 0.1 pound from the week before and up 0.5 pound from a year ago. This is only the second week in the last 11 months in which Iowa-Minnesota slaughter weights have been above the year-ago level.

Last week's hog slaughter was 2.225 million head, up 0.6% from last week and up 0.5% from the same week last year. Since December 1, hog slaughter has been just slightly above the level implied by the December hog inventory survey. USDA's recent inventory estimates have usually been close to the mark.

USDA's next Hogs and Pigs report will be released on Friday March 25. Hogs have been unprofitable in recent months indicating we may see a decline in the breeding herd. Sow and gilt slaughter has been up slightly thus far in 2016, but the increase is less than the increase in barrow and gilt slaughter. If producers are cutting the herd, it is likely a modest cutback.

Last week in the hog market was a quiet round with hog prices a bit lower than last week. The national negotiated barrow and gilt price averaged $61.21/cwt on the Friday morning report Monday, down 20 cents from last Friday morning.

Friday morning's pork cutout value was $75.44/cwt FOB the plants. That is up $1.16 from the week before and up $6.86 from a year ago. Loin, ham and belly prices were each higher though the week.

John Harrington can be contacted at john.harrington@dtn.com

For more from John Harrington, see www.feelofthemarket.com

(BAS)

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