DTN Early Word Opening Livestock

 
Cattle: Steady Futures: 10-30 HR Live Equiv $127.74 - .64* 
Hogs: Steady-$1 LR Futures: Mixed Lean Equiv $ 86.29 - .64**
* 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 market psychology is definitely on the mend thanks to the sustained bounce in live and feeder futures from the extreme lows of last week. Whether this positive swing in expectations will translate into better action in the cash market remains to be seen. Such a question is not likely to be seriously addressed Tuesday. We don't believe bids or asking prices will be well defined until sometime later this week. In the meantime, both sides will be cautiously watching the board, looking for reliable clues regarding price potential. Live and feeder contracts should open moderately higher, supported by spillover buying and further short-covering.

Monday's cash hog combination of lower money and decent trade volume suggests that the country trade is likely to remain on the defensive for the foreseeable future. Look for opening bids to be steady to $1 lower. This week's slaughter will probably be near 2.3 million head, 1% larger than 2015. Lean futures should open on a mixed basis with spot October holding up better than deferreds.

	BULL SIDE		BEAR SIDE
1)	Cattle interest in aggressive short-covering and technical buying encouragingly lived through the weekend, lifting live and feeder contracts sharply higher once again on Monday. Spot October live close wasat its highest since Aug. 31 and above its 10-day moving average high for the first time since Aug. 9.	1)	Beef cutouts remain on the defensive despite last week's holiday-shortened production and seemingly decent retail beef margins.
2)	New showlists distributed by cattle feeders look generally smaller with only Colorado showing fewer ready steers and heifers.	2)	The pork carcass value closed moderately lower Monday, pressured by softer demand for picnics, ribs, and hams.
3)	From now through expiration of the October lean hog contract, the tendency is for the board to trade higher to sharply higher.	3)	The World Board continues to increase expectations for total meat production, both for 2016 (estimated in September at 214.8 pounds, .3 lbs. more than the August guess) and 2017 (estimated at 217.6 lbs. in September, .3 lbs. greater than the previous month's projection).
4)	Seasonally, hog prices tend to increase in the last half of September and on into early/mid-October as demand for pork builds prior to Octoberfest.	4)	Furthermore, the World Board showed no significant desire to back away from the corn crop potential. A 15 billion bushel crop continues to feed the likelihood of livestock expansion and heavier carcass weights.

OTHER MARKET SENSITIVE NEWS
CATTLE:

(Bloomberg.com) -- The hamburgers and cheese that come from U.S. cattle may be favorite fare at many summer cookouts, but the methane the same cows produce is significantly less appetizing.

That's especially the case for sustainable investors looking for a low-emission place to park their cash. "Enteric fermentation," or livestock's digestive process, accounts for 22 percent of all U.S. methane emissions, and the manure they produce makes up 8 percent more, according to the U.S. Environmental Protection Agency.

And although agriculture is a growing industry as the world looks to feed its swelling population, some investors are reluctant to support a sector with such a hefty methane footprint.

"There are a lot of factors or buckets that go into agricultural emissions, but livestock tends to be one of the largest focuses," said David Nicola, portfolio manager of the Gratitude Railroad Farmland Fund, which launched this week and is targeting $40 million in capital commitments focused on regenerative agriculture.

It's also an issue for Michael Landymore, a senior portfolio manager at Impax Asset Management responsible for the firm's food and agriculture strategy. "We tend not to invest in companies that are solely focused on growing livestock," he said in an interview Wednesday.

Methane, like carbon, is a greenhouse gas, but methane's global warming impact per molecule is 25 times greater than carbon's, according to the EPA.

In June, scientists from the Consultative Group for International Agricultural Research found that the agricultural sector must reduce non-CO2 emissions by 1 gigatonne per year by 2030 if it's going to help meet the two degree limit on increases in global temperature required by last year's United Nations climate agreement in Paris. Almost 130 countries that arrived in Paris last year to agree on emissions reductions included agriculture in climate change mitigation targets, according to CGIAR.

But while many agree lower emissions are an important goal for the livestock industry, just how they get there is still up for debate. It doesn't help that there isn't even a uniform way to measure cow-produced emissions.

For meat producers, "monitoring greenhouse gas emissions from cattle is challenging as there are more than 700,000 cow-calf stocker ranches in the U.S." beef supply chain, Cargill Inc. spokesman Michael Martin said in an e-mail.

Isolating the impact of direct livestock emissions versus indirect emissions such as fertilizer, crop production, and transport for animal feed is also a challenge, companies and investors say. "The issue for agriculture is identifying the actors and creating levers for change," Cynthia Simon, senior manager of investor initiatives at CDP, a not-for profit focused on corporate carbon and water measurement, said in an e-mail.

Some big producers are banding together to try to tackle the issue. The U.S. Roundtable for Sustainable Beef, which includes companies such as McDonald's Corp., Wal-Mart Stores Inc., Tyson Foods Inc., JBS USA Holdings Inc. and Cargill, launched in 2015 with the aim of finding better ways to measure the environmental impact of cattle. Greenhouse gas emissions is one of its six "high priority" indicators for sustainability, but "it is a challenge to align the entire value chain," to get emissions measurements, said John Butler, chair of the roundtable, in an interview.

Some companies are also taking matters into their own hands, getting creative when it comes to cutting emissions from their herds. Cargill, for example, uses domed lagoons to capture some of the methane released from biodegrading cow manure. Yogurt maker Danone found through its research that adding Omega-3 fatty acids to a cow's diet — largely through infused flax seed — can reduce methane emissions from cows by up to 30 percent. Further research, however, found that while the flax additive reduced methane, it also reduced milk production, pushing Danone to focus on other ways to cut farm emissions.

"We're really actively engaged in supporting research in this area," said Britt Lundgren, Director of Organic and Sustainable Agriculture at Danone-owned Stonyfield Farm Inc. "Our understanding of this I think is still just at the tip of the iceberg and we've got a lot to learn before we feel like we have all the answers on how to reduce emissions from our farms."

In Argentina, home to over 50 million cows, researchers from the Argentina National Institute of Agricultural Technology (INTA) are attempting to use "methane backpacks," plastic contraptions attached to cows, to capture methane from a cow's digestive tract. The technology is in its early stages, but so far the backpacks have been able to extract 300 liters of methane a day, enough to power a car or refrigerator, according to INTA.

Creating tools that will help farms identify opportunities to reduce emissions, while maintaining or improving profitability is "the holy grail," Lundgren said.

Impax, whose food and agriculture strategy has about $178 million in assets under management globally according to its website, is investing in companies that breed livestock that produce less methane, develop emissions-reducing feeds and provide consumer alternatives to dairy, Landymore said. But it's going to be consumers, not investors, whose involvement results in real change, said Gratitude Railroad Farmland Fund's Nicola.

"Where the pressure to measure these emissions more thoroughly will come from are consumers. It's not likely to come directly from investors," he said. "The opportunities that are created in sustainable agriculture nowadays, it's generally based on the consumer waking up and realizing that they would like to have a higher quality product."

HOGS: (koreatimes.co.kr) -- Brazil and Korea should widen their respective market for each other's top export items to vitalize economic cooperation, a top Brazilian government official said in Seoul last week.

Blairo Maggi, Brazil's minister of agriculture, livestock and food supply, said the two countries can benefit from their respective major industries.

Brazil is one of the world's largest exporters of agricultural and livestock products, including sugar, coffee, orange juice, soybeans, beef, chicken and maize.

Korea leads in international sales of electronic goods, cars and other manufactured goods.

"Their respective key industries are complementary and can benefit each country, and that's why opening markets will be important for both sides," Maggi said through an interpreter during an interview with The Korea Times in Yeoksam-dong, southern Seoul, Wednesday.

Accompanied by other officials, he visited Korea as a part of an Asia trip to promote Brazil's agricultural and livestock and offer business opportunities in his country. The other destinations included China, Hong Kong and Vietnam.

During his two-day stay from Tuesday, he met Lee Jun-won, Korea's vice minister of agriculture, food and rural affairs, to discuss sales of Brazilian pork, mangoes and beef.

The negotiation concerning pork and mangoes are in their final stages, and wrapping up all relevant procedures will be a pre-condition to begin discussions on beef imports, according to Maggi.

Brazil is the world's second- and fourth-largest producer of beef and pork, respectively. But Korea has been refusing to open the markets, citing sanitary reasons.

Calling them "high-value products," Maggi said meat should be among the Brazilian products that Korea should buy to increase bilateral trade volume, which has been declining after reaching a peak at $18.16 million in 2011.

"For instance, the meat producers in Brazil will see their income rise if Korea increases imports of Brazilian meat. And more income means they will have more purchasing power for cars, smartphones and televisions made in Korea."

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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