DTN Early Word Opening Livestock

 
Cattle: Sty/fr with Thurs Futures: 50-100 HR Live Equiv $137.63 + .91*
Hogs: Steady-.$1 LR Futures: mixed Lean Equiv ___FCKpd___0nbsp; 86.36 - $1.18**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

General Comments: In a shocking display of packer hunger for ready cattle, the feedlot trade suddenly exploded on Thursday. Dressed sales in Nebraska and Iowa were marked fully $10 higher at $190. Live deals in Colorado and Western Nebraska were made at $118, $2-3 higher. On the other hand, cash business in the South remained at a standstill as bullish producers passed bids as high as $118, holding for $121 or better. So while Northern trade could be done for the week, we expected at least moderate trade volume will finally surface sometime today before buyers and sellers call it a week and year. Live and feeder futures should open significant higher, supported by cash strength and follow-through buying.

Look for the cash hog trade to open this morning with steady/weak bids. Plants appear to have adequate numbers as the chain moves toward the New Year break on Sunday and Monday. The Saturday kill is now expected to total close to 305,000 head. Lean futures should begin on a mixed basis with nearby better supported than deferred.

	BULL SIDE		BEAR SIDE
1)	Beef packer spending exploded on Thursday with Northern dressed sales surging to $190, $10 higher than last week's weighted average basis Nebraska and the best area business seen since early July. Tight fed supplies and strong late year beef demand are working together like a well-oiled team.	1)	Although the cattle board has looked quite shiny this week, the strong price gains have been accomplished on light volume with limited changes in open interest, suggesting guarded new buying interest from noncommercials and creating some doubt regarding the sustainability of recent gains.
2)	Beef cut-outs continued to roll higher yesterday with the choice box jumping to its highest level since July 15 (i.e., $203.47, up $1.63).	2)	The significant rally in beef cut-outs seen since before could very easily take the place of traditional strength usually seen through the first half of January.
3)	Psychology in lean hog futures has remained surprisingly positive given the negative Hog Report that was issued late last week. There appears to have been very little liquidation of the modest net noncommercial long in the market.Furthermore, cash values have actually been working higher in the wholesale trade, creating an expectation for very strong pork demand heading into the new year.	3)	The pork carcass value lost more than a buck on Thursday with erosion noted in all primals except the butt.
4)	Relatedly, some appear to be questioning the accuracy of the USDA assessment of hog numbers. For example, why has the isowean market (weanling feeder pigs) been on fire since the first of the month if the latest weight breakdown is to believed.	4)	Given the wholesale action seen over the last several weeks, the buying energy of grocers and food managers seem to shifting away from pork and toward beef.

OTHER MARKET SENSITIVE NEWS

CATTLE: (foodmarket.com) -- The retail situation in 2016 has been a

gradual shift from the all-time high prices seen in previous years to

lower price levels and a more modest price gap between competing

proteins. In 2017, the case appears to remain much the same, with a

large supply situation giving cause to see retail prices move lower

still.

Lower prices at retail benefits the consumer for obvious reasons,

but will also help alleviate the glut of meat supplies in the U.S. by

generating increased interest and sales. Wholesale prices came down at

a much quicker rate than retail but that continued, albeit slow,

decline will be key in motivating consumer purchase decisions,

especially for beef, in 2017.

Urner Barry's Weekly Retail Feature Beef Index is currently running

at a three year low. YTD average feature prices have come down roughly

6% from a year ago so far in Q4 2016. Meanwhile, wholesale prices are

down around 18% from a year ago late October. The drop in retail beef

feature prices, though subtle, did manage to compete better with cheap

pork and chicken, renewing consumer interest after years of record

high prices.

While the spread between the overall Beef Retail Index and other

protein indices remains fairly wide, when looking at comparable items

it's plain to see that beef is now offering some stiffer competition.

Most notably, 80% lean ground beef has been featured, on average, at

prices below that of boneless skinless chicken breasts 31 out of 43

weeks so far this year.

With further erosion of retail beef prices, the goal of the complex

would be to entice consumer dollars on a more regular basis. Beef has

all too often fallen into the "special occasion" purchase category, as

higher prices have branded beef a premium protein in consumer minds,

instead of an everyday meal option. Gaining back shopper loyalty and

increasing purchase frequency through lower feature and everyday

prices will greatly help the domestic supply situation for beef in

2017.

Looking at the pork complex, UB's Weekly Retail Feature Pork Index

has generally trended steady alongside 2015 levels this year. The YTD

average is currently $3.62 per lb., versus $3.65 in 2015. In addition,

the retail pork situation has eased in terms of volatility post PEDv.

In 2014, we saw a $1.28 per lb. spread between the high and low prices

over the course of the year. In 2015, this spread was $0.76 per lb.,

and in 2016 fell back to just $0.52 per lb. Consistently low everyday

prices and features have helped to promote pork at the meat case in

2016 and, barring any market changes or impacts, should continue to

command attention in 2017 as a top competing protein.

As for chicken, our old feathered friend remains a staunch

competitor at the meat case. Looking at the overall picture, the

Weekly Retail Feature Index for chicken is down barely 2%

year-over-year. Wholesale prices are up 22% from a year ago, however,

as components of the market have bounced back somewhat from impacts of

HPAI-related export bans.

Comparing indices, Chicken feature prices overall have been, on

average, 29% lower than pork to date in 2016, and 58% cheaper than

beef. However, as mentioned earlier when comparing like-items, there

have been many instances where chicken lost out to lower priced beef

and pork items this year. Especially when considering that the dark

meat complex is largely responsible for holding prices in the retail

chicken complex down. Boneless skinless chicken breasts, for example,

have averaged $3.62 per lb. in 2016 which is an all-time high for this

item, according to our historical data series. As retail beef prices

come down and comparable pork items like ribs and chops hold steady or

continue to drop, items in the white meat chicken complex will have a

tougher time commanding consumer dollars in 2017 at these levels.

Lastly, according to the Bureau of Labor Statistics' September

Consumer Price Index, the food at home index has declined five

consecutive months so far in 2016. Over the last 12 months, the food

at home index has declined 2.2%, which is the largest 12-month decline

since 2009. In addition, all six major grocery store food group

indices declined over the last year. Meanwhile, the index for food

away from home has risen 2.4% since September 2015. As the cost of

dining out rises while eating at home declines, the retail sector has

much to benefit. With an improving economy, lower unemployment rates

and fuel prices, combined with the industry's expectation for ample

supplies of meat and poultry in 2017, the retail complex will play a

big role in increasing sales and consumption of domestic protein.

HOGS: (Chicago Tribune) -- Gravel crunching beneath their wheels,

cars and pickup trucks pulled up at twilight around the one-room

schoolhouse in Bernadotte Township.

A powerful pork company was planning a 20,000-hog confinement near

the storied Spoon River in western Illinois, and a dozen neighbors

were gathering to fight for their creeks, clear air, one-lane roads

and rural way of life.

They exchanged greetings in the dim light inside, some squatting to

fit onto children's chairs.

"We'll call the meeting to order," began retired schoolteacher

Stuart Harrison, 74.

Efforts like this one have largely failed during the past two

decades as pork producers constructed more than 900 new swine

confinements across Illinois, often brushing aside farm families'

concerns about sickening odors, road damage, depletion of wells and

fouling of creeks.

But this network of farmsteads set amid rolling hills has become

the newest battleground where small-town residents are trying to fend

off a leading U.S. pork producer.

They sent letters to state Agriculture Department officials

alleging errors and omissions in Professional Swine Management's plan

for Runway Ridge Farms LLC, saying it failed to properly account for

the nearby home of 81-year-old farmer Paul Stoops, as well as several

wells and creeks, a riding stable and a bow hunters retreat on the

banks of the lazy green river.

Their efforts paid off at a Dec. 13 meeting at the Fulton County

Courthouse when county commissioners passed a resolution urging the

state to halt action on Runway Ridge and all new large confinements in

Fulton County until "there is meaningful reform" to the state law that

governs the construction and oversight of the massive livestock

operations.

The resolution is only symbolic because Illinois law gives local

communities little if any power over the siting of new confinements.

Even the Illinois Department of Agriculture lacks legal authority to

deny a company's notice of intent to construct. At most, it can send

back the notice with questions.

But the Fulton County resolution urged lawmakers to give

communities a voice and "protect citizens of all counties in the state

of Illinois."

That caught the attention of Illinois Attorney General Lisa

Madigan, whose spokeswoman told the Tribune: "We think it is extremely

important that residents are raising concerns about these operations.

All of the agencies involved in these issues should carefully consider

the residents' concerns."

For now, Professional Swine has put construction of Runway Ridge on

hold as it considers how or whether to respond to the opposition

coming out of Bernadotte Township, population 273.

Company officials declined interview requests and said they would

not comment on their Fulton County plans or any aspects of their

business. "I think at this point we don't have any comment on any of

these items," said Julie Totten, chief financial officer.

If built on a pasture surrounded by fields of row crops, the

facility would include sheds the length of football fields where

hundreds of thousands of gallons of waste would be stored in

10-foot-deep underground concrete pits before being applied as

fertilizer to nearby cropland.

In its August investigation, "The Price of Pork," the Tribune found

hog waste spills accounted for nearly half of the 1 million fish

killed in Illinois water pollution incidents from 2005 to 2014,

killing at least 492,000 fish and impairing 67 miles of rivers and

waterways. No other industry came close to causing that amount of

damage, the Tribune reported.-- John A. Harrington FEEL OF THE MARKET

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