DTN Early Word Opening Livestock
Look for Cattle Futures to Open With Mixed Prices
GENERAL COMMENTS:
Cattle: Steady-$2 HR Futures: Mixed Live Equiv $137.54 + .23*
Hogs: Steady-$1 LR Futures: 25-50 LR Lean Equiv $ 85.74 -1.23**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Cattle futures could start to throw out a few bids Wednesday (e.g., $116 in the South, $187 in the North), but we really don't expect much definition before Thursday or Friday. A few isolated trades were actually reported on Tuesday in parts of Colorado and western Nebraska at $116 to 116.50. Such limited business seem prompted by the sharp drop in spot February live and basis opportunities. Most asking prices remain firm at $120 plus in the South and $195 plus in the North. Live and feeder futures should open on a mixed basis tied to a combination of spillover selling and short-covering.
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Expect the cash hog market to begin Wednesday with another round of steady/firm bids. Interestingly, new-year fundamentals have started pulling in the opposite direction (i.e., cash higher, carcass value lower). Given great margins, packers can live with the stretch for quite some time -- if they have to. Lean futures seem staged to open moderately lower, pressured by follow-through selling and pork demand worries.
| BULL SIDE | BEAR SIDE | ||
| 1) | Much of livestock production country will be stuck in the deep freeze for the first week or so of January, a winter reality that will continue to check slaughter weights. | 1) | New showlists distributed on Tuesday were mostly larger than the prior week with only Nebraska cattle feeders offering fewer ready steers and heifers. |
| 2) | While the wholesale beef trade saw few fireworks on Tuesday, it held a firm undertone. Retailers and food managers typically return from the late-year holiday period hungry and needing to replenish depleted meat inventories. | 2) | As nearby live cattle futures closed significantly lower Tuesday, the basis went from strong to stronger, further weakening the potential of feedlot leverage and the country's determination to hold for higher fed prices. |
| 3) | The cash hog trade opened the week on a firm note with negotiated business Tuesday characterized by both respectable price strength and decent volume. To see such a positive profile so early in the month (i.e., when packers are typically better covered with contracts and captive supplies) seems to be an encouraging sign that leverage is shifting more in the favor of producers. | 3) | The U.S. dollar stepped into 2017 on Tuesday with an impressive show of strength, thereby dulling the appeal of U.S. beef and pork to foreign buyers. This reality played a big part in tripping nearby live cattle and lean hog futures sharply lower. |
| 4) | Although pork production in 2017 got off to a slightly delayed start, profit-minded packers are wasting no time in cranking-up chain speed (e.g., launching a huge kill of 444,000 Tuesday and shooting for 360,000 or more on Saturday). As long as buyers keep sweeping the country so aggressively, weights will remain relatively light, finishing floors will stay current, and producers should steadily inch toward greater leverage. | 4) | The pork cutout closed sharply lower on Tuesday, pressured by eroding demand for loins, picnics and hams. |
CATTLE: (kmaland.com) -- Area beef producers should make plans to attend the 32nd annual Three-State Beef Conference, held January 10, 11 and 12, 2017 with locations in Iowa, Missouri and Nebraska.
Topics and speakers for the conference are as follows: "Cows in need of a career change: culling strategies to maximize returns", Dr. Patrick Gunn, state extension cow-calf specialist, Iowa State University; "Managing common forage toxicity issues of beef cattle", Dr. Chris Clark, DVM, Iowa State University Extension; "Developing a herd health program", Dr. Craig Payne, DVM, state extension veterinary specialist, University of Missouri.
The first session of the conference will be held in Creston, Iowa at Southwestern Community College on Tuesday, January 10 with registration at 5:30 p.m. and the program beginning at 6:00 p.m. The Missouri session will be held on Wednesday, January 11 in Albany at the MU Hundley-Whaley Learning Discovery Center. It also begins with registration at 5:30 p.m. and the program following at 6:00 p.m. On January 12, the session will be held in Nebraska at the Gage County UNL Extension Center in Beatrice, Nebraska. Registration for the Beatrice location will begin at 5:30 p.m. and the meeting will start at 6:00 p.m.
The Three-State Beef Conference (formerly the Four-State Beef Conference) is designed to give beef cattle producers and others in the beef industry in Iowa, Missouri and Nebraska a regular update on current cow-calf and stocker topics. The conference provides a forum of specialists from three of the United States' leading beef cattle land grant universities as well as other industry experts.
Conference officials request that attendees pre-register by Friday, January 6, 2017. Calling or e-mailing with your reservation helps with meal plans and also helps keep costs down. The registration fee is $25 per person and it includes a meal and copy of the conference proceedings.
HOGS: (Smithfield Foods) -- Smithfield Foods, Inc. announced on Tuesday that Fitch Ratings, a leading provider of credit ratings, commentary and research, has assigned Smithfield an investment grade Issuer Default Rating (IDR) of BBB, with a stable outlook. Fitch is the second rating agency to formally assign an investment grade rating to Smithfield, following Standard & Poor's assignment of a BBB- Corporate Credit Rating in October 2016.
In its assignment of a BBB IDR, Fitch noted Smithfield's leading position in the global pork industry, its continued improvement in product mix towards higher margin packaged meats, as well as Smithfield's and its parent company's prudent approach to leverage and liquidity.
"We are pleased to achieve this rating from Fitch," said Kenneth M. Sullivan, president and chief executive officer of Smithfield Foods. "This rating is a clear recognition of Smithfield's continued strong operating performance, prudent financial management, the power of its integrated business model, and the clear benefits of its relationship with its parent company in setting a path towards future growth and success."
Smithfield's rating was upgraded one level due to the relationship with its parent company, WH Group, a Hong Kong-based and publicly traded company with shareholders around the world, including numerous investors in the United States. Fitch assigned a BBB+/Stable rating to WH Group while Smithfield earned a stand-alone of BBB-. Recognized by Fitch in its analysis, Smithfield's relationship with WH Group provides the world's largest hog producer and pork processor with greater access to China, the largest and fastest growing pork market.
John Harrington can be reached at feelofthemarket@yahoo.com
Follow John Harrington on Twitter @feelofthemarket
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