DTN Early Word Opening Livestock

 
Cattle: Steady Futures: 25-50 HR Live Equiv $134.78 - 0.83*
Hogs: Steady-$1 HR Futures: 25-50 HR Lean Equiv $ 85.14 + 0.85**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

The odds seem high this morning that bids and asking prices will remain poorly defined. Between yesterday's board rally and the recent history of board fizzles, neither side wants to commit too early. We assume that asking prices will shake out around $120 plus in the South and $192-plus in the North. Significant trade volume may not develop until Thursday or Friday. Live and feeder futures should open moderately higher, supported by residual buying interest and unusually strong basis levels.

Look for the cash hog trade to restart with steady/firm bids. The country movement on Monday seemed very light, and that will probably necessitate greater packer efforts. At least one plant was dark tied winter weather along the Atlantic Coast, but so far disruptions appear to be minor. Lean contracts are set to open moderately higher, bolstered by encouraging export news and early years cash optimism.

	BULL SIDE		BEAR SIDE
1)	New showlists distributed in feedlot country yesterday were generally smaller than last year, with only Kansas yards offering more ready cattle. This was one factor that helped spark live and feeder contracts sharply higher.	1)	Beef cut-outs closed sharply lower yesterday, extending the slopping demand that seemed to surface soon after New Year's.
2)	November pork exports totaled 225,757 MT, up 24 percent year-over-year and breaking the previous record (218,132 MT) set in October 2012.	2)	Despite Monday's late rally in cattle futures, significant overhead chart resistance continues to limit board potential. For example, spot Feb is once again likely to attract substantial selling pressure near 117.
3)	Export value was $586.8 million, up 30 percent from a year ago and the highest since May 2014.	3)	After two weeks of holiday-shortened pork production, some worry that the early-year wholesale trade we have trouble holding up as chain speed shifts back into high gear.
4)	The pork carcass value opened the week Monday with solid progress, supported by stronger demand for all major primals except the ham.	4)	Weeks after the bearish Dec 1 H&P report, lean hog futures have virtually dismissed supply fears by betting on the maintenance of excellent domestic and foreign demand. If that bet proves to be a bad one over the longer term, pork supplies could cause the board to crash.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Business Korea) -- It has been found that the amount of beef exported from the United States to South Korea exceeded that from Australia in November last year for the first time in 154 months.

According to the Korea Customs Service, the amount of refrigerated and frozen beef shipped from the U.S. to South Korea totaled 13,921 tons that month while that from Australia totaled 10,310 tons.

This can be attributed to a decrease in the supply of Australian beef for a severe drought that continued for three years and an increase in the imports of Australian beef by countries the Middle East, Indonesia, China, etc. On the contrary, the supply and price of U.S. beef are stable these days. In Lotte Marts located in South Korea, the ratio of U.S. beef sales to their total imported beef sales rose from 19.8% to 32.0% between 2014 and last year.

South Korean companies in the industry are showing a quick response to the reduced supply of Australian beef. Lotte Marts, in particular, are planning to increase their contracts with local suppliers by 10% or so compared to the previous year while increasing their contracts with suppliers in the United States by approximately 20% as well. In addition, they are going to launch Korean beef sales promotion campaigns every other month for imported beef price stabilization and an increase in the consumption of Korean beef. HOGS: (NPPC) -- The USDA filed a motion to dismiss a lawsuit brought by the Humane Society of the U.S. against the agency over the sale by the NPPC to the National Pork Board of the Pork, The Other White Meat trademarks. NPPC sold the trademarks to the Pork Board in 2006 for about $35 million. It financed the purchase over 20 years, making the Pork Board's annual payment $3 million. The sale was an arms-length transaction with a lengthy negotiation in which both parties were represented by legal counsel, and USDA, which oversees the federal Pork Checkoff administered by the Pork Board, approved the purchase.

In 2012, the HSUS, a lone Iowa farmer and the Iowa Citizens for Community Improvement filed suit against the USDA, claiming the trademarks were overvalued and seeking to have the sale rescinded. The U.S. District Court for the District of Columbia Circuit dismissed the suit for lack of standing, but a federal appeals court in August 2015 reinstated it, sending the case back to the District Court. Before any proceedings on the merits of the lawsuit, USDA inexplicably entered into settlement talks with the HSUS. USDA conducted a valuation of the trademarks, finding their current worth is between $113 million and $132 million.

Despite the nearly four-fold increase in value, the HSUS decided to continue its lawsuit. In its motion for summary judgment filed with U.S. District Court for the District of Columbia Circuit, the USDA argues that the HSUS lawsuit lacks merit, is barred by the six-year statute of limitations, that the plaintiffs failed to establish standing to file the lawsuit or show that they were harmed by the sale of the Pork. The Other White Meat trademarks and that the agency's evaluation of the sale of the trademarks showed they provided significant value to the pork industry.

John A. Harrington can be reached at john.harrington@dtn.com

Follow John Harrington on Twitter @feelofthemarket

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