DTN Early Word Opening Livestock
Lean Hog Futures Expected to Open Moderately Higher
GENERAL COMMENTS:
Cattle: Steady-$2 HR Futures: mixed Live Equiv $131.82 + 0.33*
Hogs: Steady Futures: 25-50 HR Lean Equiv $86.71 + $2.06**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Preliminary bids in feedlot country could start to sprout at midweek, but it seems unlikely that producers will see anything that trips their trigger. Significant trade volume is not likely to surface before Thursday or Friday. Asking prices are not well defined, though we've seen a few Southern showlist priced around $125. Live and feeder futures should open on a mixed not as specs and commercial continue to cautious weigh further cash potential.
Chances are that hog buyers will resume work this morning with near steady bids. Our hopes for an uninterrupted slaughter week may once again be dashed given the winter storm moving into parts of Northern Iowa and Southern Minnesota (Tuesday's total may have been already checked). It sounds like Saturday's kill should be around 185,000 head. Lean futures seem staged to open moderately higher, supported by Tuesday's surge in carcass value and the stubborn premium of the cash index.
| BULL SIDE | BEAR SIDE | ||
| 1) | The beef carcass value is trying to rebound this week, helped yesterday by a significant jump in the select cut-out. | 1) | Overbought oscillators and the lack of bullish news have tempered buying interest in live and feeder cattle futures. Such apathy seems even more disturbing given the substantial premium status of recent feedlot sales. |
| 2) | According to the most recent retail meat spread data released last month, the average price of all fresh beef in December was $5.445, 2.5% below November, 7.5% cheaper than a year earlier, and the lowest since the first half of 2014. Good news for consumers and stronger demand. | 2) | The cold storage report documented a large stockpile of frozen beef, totaling 567 million pounds as of December 30, the largest on record. |
| 3) | The pork carcass value surged more than $2 higher on Tuesday, powered by all primals except the loin. Yet new belly strength was especially significant, blasting as much as $8.32 higher. | 3) | Lean hog futures remained sluggish yesterday even as the cash index continued to crawl higher (i.e., 67.23 as of January 23, more than $2 above spot Feb). Board players seem nervous about supply or demand or both. |
| 4) | Frozen stores of pork as of the end of December totaled 477.2 million pounds 13 percent smaller than last year. More specifically, the frozen belly stockpile totaled no more than 17.8 million, the smallest in more than 60 years. | 4) | Generally, a market structure with deferred premiums (e.g., current lean hog futures) makes a bullish trend more difficult to sustain than a market structure with deferred discounts. |
CATTLE: (The Orange County Register) -- Lone Star Steakhouse, knownfor its Texas two-step dancing servers and reasonably-priced steaks,has closed three restaurants in Southern California.
Closures in Tustin, Laguna Hills and Corona are part of a string ofnationwide shutdowns for the brand. Other Lone Star locations abruptlyclosed before the weekend in Michigan, Kansas, South Dakota andColorado, according to various media reports.
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A sign posted on the door at the Tustin restaurant said operationsceased Thursday. The rest of the note refers "team members" to a humanresources email, indicating the note was likely the first timeemployees learned of the closure.
Day Star Restaurant Group, the Plano, Texas-based owner of thesteakhouse brand, could not be reached for comment.
On Monday, an employee answering the phone at one of the shutteredSouthern California restaurants said the closures came without warningto most employees. She confirmed a Lake Elsinore restaurant closed inNovember. Lone Star's website lists no locations in California.
The closures come as the casual dining sector has been hit hardestin the post-recession economy. Older, full service brands are having aharder time attracting "new customers and they're slowing down,"Technomic President Darren Tristano said at a recent restaurantconference in Newport Beach.
In a state-of-the industry presentation, Tristano said mid-scalecasual brand are losing share to gastropubs and other contemporarylocations.
Still, steakhouses and sports bars are performing better than theircasual dining peers, according to Technomic. In 2015, Lone Star salesdropped 4.2 percent, while the average sales at all casual diningsteakhouses inched down .5 percent, according to Technomic
Late last year, the Chicago-based market research said "consumereconomic uncertainty, value issues and undifferentiated positions areputting strains on many full service chains."HOGS: (Cargill) -- As consumer demand for pork remains high,millennial consumers say that what pigs eat has a strong influence ontheir pork-buying habits, according to a Cargill Feed4Thought consumersurvey.
The survey, which polled more than 2,000 people in the U.S. andSpain, found that 43 percent of American millennials say that a pig'sdiet influences their purchasing decisions. In Spain, thesecond-largest pork-producing country in Europe, the number was about 65 percent of millennials.
"Many consumers, millennials in particular, are speaking loudlyabout the importance of knowing what is on the dinner table and whereit came from," said Patrick Duerksen, Cargill global marketingdirector, pork. "It is important for Cargill and others in theagricultural supply chain to help consumers understand that the pork they eat was produced in a healthy and responsible manner."
The survey found that, overall, one-third of all U.S. consumers (32percent) say a pig's diet influences their purchasing decisions, asopposed to 60 percent of Spanish consumers. American Baby Boomers andGen Xers place less importance on the diets of the pigs they consume(32 percent and 26 percent say a pig's diet influences theirpurchasing decisions, respectively).
In both countries, millennials place the highest importance onpigs' diets, but also have the lowest trust that the pigs they eat areraised on what they consider a healthy diet. Forty-two percent ofAmerican millennials don't trust that their pork is raised on ahealthy diet, significantly more than Baby Boomers (32 percent). InSpain, the number jumps to 67 percent of millennials who don't trustdiets fed to pigs are healthy.
"The U.S. pork industry works hard to conduct research and improvethe nutritional balance of swine diets," said Dr. Chris Hostetler,director of animal science at the National Pork Board. "It isincumbent upon us to raise pigs in a healthy, safe and responsiblemanner. And that begins with diet and nutrition."
Pig diets largely consist of corn, soybean meal, vitamins andminerals. Beyond those base ingredients, Cargill has developed precisefeed formulations with probiotics, antioxidants, and essential oils topromote better gut health, digestion and metabolism. Just like inhumans, gut health in pigs is an important factor in proper nutrition.
"Worldwide, swine nutrition continues to advance, and Cargill'sresearch on optimal nutrients is at the forefront of feedimprovement," said Brooke Humphrey, global swine technology directorfor Cargill. "Cargill Animal Nutrition has worked closely with itscustomers to develop a range of nutrients and feed options, all gearedto delivering proper nutrition to help farmers raise healthy pigs."
As part of its research, Cargill researchers, scientists andnutrition experts conduct hundreds of feed trials each year at itsinnovation and technical application centers around the world. Thetrials examine ingredients and feed formulations to determine the bestnutritional solutions for pig diets. Through a worldwide database,Cargill is able to leverage research and information across the globe,and formulate diets best suited for raising pigs based on theirgeography, economics, and nutritional needs.
"Our precision nutrition approach ultimately is more sustainableand lowers the amount of feed and resources needed to raise pigs,"Duerksen said. "Our researchers, scientists and animal nutritionexperts continue to dedicate their careers to providing optimalnutrition options. This is important work that we know can have animpact on meeting consumer demand, but also help us feed a growingglobal population."
Additional results of the survey include:
Ninety-four percent of American consumers eat pork, and 52 percentof them say bacon is their favorite pork product.
Ninety-eight percent of Spanish consumers eat pork, and 74 percentof them say ham is their favorite pork product.
Only 10 percent of both U.S. and Spanish consumers have an accurateidea of how much feed it takes to raise a pig to market weight.
Thirty-seven percent of U.S. millennials think it takes more landand water to raise pigs today than it did 50 years ago. (In fact, a2012 study by the National Pork Board found that farmers actually use78 percent less land and 41 percent less water to raise pigs).Thirty-nine percent of Spanish millennials think it takes more landand water to raise pigs than it did 50 years ago.
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John A. Harrington
John A. Harrington can be reached at john.harrington@dtn.com
Follow John Harrington on Twitter @feelofthemarket
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