DTN Early Word Opening Livestock

 
Cattle: Steady-$2 HR Futures: 25-50 HR Live Equiv $132.43 + .83*
Hogs: Steady Futures: 25-50 LR Lean Equiv $ 84.10 -1.69**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Look for scattered bids to start surfacing in feedlot country Thursday. Yet the big question may be how long it will take this to firm enough to generate significant trade volume. Asking prices started the week bullish (i.e., $122 in the South, $195 in the North), and we haven't seen anything in recent days to suggest that country knees are weakening. Indeed, the combination of higher cutouts and firming futures (together with a softer basis) seem more likely to crack up expectations rather than water them down. If the country continues to dig in their heels, significant cash business could be delayed until Friday. Live and feeder futures should open moderately higher, supported by further short-covering and ideas of another round of greater packer spending.

The cash hog market seems geared to open with generally steady bids. After a decent run since the first of the year, the country trade may be cooling off a bit. Indeed, cash and futures have virtually converged with spot February, at least momentarily unwilling to anticipate further cash strength. Lean futures are slated to open moderately lower, pressured by long liquidation and more cautious fundamentals.

	BULL SIDE		BEAR SIDE
1)	The Fed Cattle Exchange Auction on Wednesday sold 3,526 steers and heifers on a firm basis, averaging $120.52, $1.36 higher than last week.	1)	While the close of spot February live cattle over 120 Wednesday represented a tonic for bullish psychology, significant overhead resistance between 122 to 123 seems to preclude an extended rally.
2)	Beef cutouts jumped significantly higher at midweek as retailers and food managers responded positively to this week's slow production start.	2)	For the week ending Jan. 14, U.S. hatcheries set 217 million broiler eggs in incubators, up 1% from a year ago. At the same time, chicks placed in the United States totaled 179 million, up 1% from 2016.
3)	For the week ending Jan. 14, Iowa barrows and gilts averaged 281.9 pounds, .6 lbs. lighter than the prior week and 3.4 lbs. smaller than 2016.	3)	The pork carcass value took it on the chin Wednesday with all primals struggling except the belly and rib.
4)	Lean hog futures are trading in the lower 10% of historical trading values and we suspect that lows are in the market while upside potential is huge if the fundamentals are supportive to the cash markets moving into midwinter.	4)	With the latest lean hog cash index (Jan. 17, 66.01) now over spot February futures, the unusually strong basis may work against country leverage in the days ahead.

OTHER MARKET SENSITIVE NEWS

CATTLE: (AFP Relax News) -- US authorities have lifted an embargo on French beef imports after 19 years, the French agriculture ministry said Friday.

France is the fourth EU countr4y to have its beef re-admitted to the US market after a 1998 ban imposed because of fears over bovine spongiform encephalopathy (BSE), also known as mad cow disease.

The others are Ireland, Lithuania and the Netherlands.

The EU Commission welcomed the move, calling it "excellent news for French producers". It was also an illustration that efforts to eradicate BSE in the EU had borne fruit, it said in a statement.

The French ministry warned, however, that administrative hurdles meant it could take time for beef exports to the US to resume.

"We are pleased with this first step, but this doesn't mean that exports will start Friday," the ministry said.

HOGS: (pig-world.co.uk) -- EU agri-food exports in November 2016 reached a new record monthly level of 11.7 billion euros (10.17 billion pounds) with the highest single product increase in export value over the last 12 months being recorded for pork.

"Considering a slight decrease in agri-food imports from third countries, the EU now has a trade surplus in agri-food products at 19 billion euro (16.5 billion pounds) over 12 months," said the EU, adding that major gains in values over the 12-months to November 2016 were achieved in agri-food exports to the USA (+8%) and China (+11%).

"The pigmeat sector is also confirming its recovery after testing times last year. Indeed, the highest increase in export value over the last 12 months was recorded for pork: +1.3 billion euro (1.13 billion pounds) which represents +34% compared to export values in the previous 12 months.

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

Follow John Harrington on Twitter @feelofthemarket

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