DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv $131.04 -1.20* 
Hogs:  Steady-$1 HR Futures: 25-50 HR Lean Equiv $ 90.68 + .25**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle buyers could start fishing a little Wednesday with a few more willing to throw out some preliminary bait (bids of $116 in the South and $187 to $188 in the North). Yet the timing of significant trade volume may turn on what the board decides to do over the next several days. If futures can manage to build on Tuesday's rally, feedlot managers will be more inclined to stick with higher asking prices around $122 in the South and $192 to $194 in the North. Our guess is that meaningful cash business will be delayed until Thursday or Friday. Live and feeder futures are expected to open on a mixed basis linked to a combination of residual buying and midweek profit-taking.

The cash hog trade seems likely to open with bids ranging from steady to $1 higher. The national dress negotiated average was some lower on Tuesday, but packers were not very successful in moving significant numbers. Our guess is that packers will need to sweeten the pot Wednesday in order to cover slaughter plans. At this time, it looks like the weekly kill should total just a bit over 2.3 million head. Lean futures should open moderately higher, supported by follow-through buying constructive fundamentals.

	BULL SIDE		BEAR SIDE
1)	Cattle futures staged a decent recovery on Tuesday with April live pretty much filling the bearish gap of late January and closing back above its 40-day moving average. If the board can stay on the mend, a weaker basis should help asking prices.	1)	Beef cutouts fell sharply lower on Tuesday with the choice box tripping under $190 for the first time since Jan. 12. Again, February can be a tough month to find reliable meat buying interest.
2)	New showlists are generally smaller than last week, especially in Nebraska. Only Texas yards are offering more ready steers and heifers.	2)	Tuesday's flurry in live and feeder futures could easily prove to be short-lived. The fact remains that the well-established uptrend drawn across late-fall and early-winter lows was breached in late January with a decisive breakaway gap, potentially signaling a trend change with support at last week's lows near $113 and resistance at the January highs near $120.
3)	Lean hog futures keep rolling higher. Soon-to-expire spot February closed Tuesday 103 points higher at $73.38, another life-of-contract high and nearly a 100-point premium to the cash index.	3)	Although market hog numbers seem snugger than anticipated now, if the fall pig crop proves to be as large as estimated (i.e., 32.2 million head, 5% above 2015), a significant market correction could be looming 30 to 45 days down the road.
4)	During the week ending Jan. 31, noncommercial traders saw their net-long position in lean hog futures increase by 7,000 contracts to the 42,000-contract level. Since then, open interest has expanded by nearly 5,000 loads. The bullish fire here continues to build and roar.	4)	After such an enormous price explosion over the last several weeks, the belly market is beginning to show signs of cooling off. If the cure for low prices is low prices, the cure for high prices is high prices (at least momentarily, in this case.

OTHER MARKET SENSITIVE NEWS

CATTLE:(NCBA) -- Ahead of Japanese Prime Minister Shinzo Abe's state visit here, the National Cattlemen's Beef Association and the National Pork Producers Council urged President Trump to begin negotiations on a free and fair trade agreement with Japan.

In a joint letter transmitted on Tuesday to the White House, NCBA and NPPC asked the president "to initiate free trade agreement negotiations with nations in the Asia-Pacific region beginning with Japan. … As you continue to lead America forward, we want to be a resource for your administration for possible strategies in improving existing and future trade agreements for the benefit of our producers."

Abe will be in Washington Friday to meet with Trump on a number of matters, including security challenges and bilateral trade.

"A successful, comprehensive agreement with Japan would result in one of the greatest trade agreements for the U.S. pork and beef industries and for many other sectors," said NCBA President Craig Uden, a cattle rancher from Elwood, Neb.

Said NPPC President John Weber, a pork producer from Dysart, Iowa, "Securing strong market access to Japan and other Asian markets is a priority for the U.S. beef and pork industries, and we appreciate the president's leadership and dedication to making our products the most competitive around the world."

For U.S. beef and pork exports, Japan is the highest value international market. In fiscal 2016, Japanese consumers purchased $1.4 billion of U.S. beef products and $1.5 billion of U.S. pork products. Demand in the Asian nation for U.S. beef and pork is very strong despite Japanese tariffs and other import measures that limit market access for both products.

Under terms of the Trans-Pacific Partnership (TPP) agreement, Japan's 38.5 percent tariff on fresh and frozen beef would have been cut to 9 percent over the agreement's phase-in period and would have given the U.S. beef industry parity with Australia in the Japanese market. Japan's tariffs on pork, which are determined through a so-called gate price system, would have been substantially reduced as part of the TPP agreement.

An analysis by the U.S. International Trade Commission found that beef exports to TPP countries, which included the United States, Japan and 10 other Asia-Pacific nations, would grow by $876 million a year by the end of the phase-in period and that most of the growth would be in trade to Japan. Likewise, it found that pork exports to TPP countries would grow by $387 million, with most of the exports going to Japan. Nearly 9,000 U.S. jobs would be generated by increased exports of livestock products, according to the U.S. Department of Agriculture's export multiplier.

HOGS: (National Pork Board) -- Eating healthier just got easier with the addition of one more pork cut to the list of Heart-Check Certified products by the American Heart Association. The Pork Checkoff is working with the American Heart Association to highlight the heart-healthy benefits of the pork sirloin roast.

As a Heart-Check Certified cut of meat, pork sirloin adheres to the American Heart Association's requirements allowing its label as a "heart-healthy food." The pork sirloin roast joins the pork tenderloin with this designation as an extra lean cut of meat certified by the Heart-Check Food Certification Program.

"The prominent Heart-Check mark on packages of meat offers consumers an easy way to cut through the clutter of often conflicting nutrition information," said Adria Huseth, RDN, LD, CPT, and manager of nutrition communications and research for the Pork Checkoff. "The Heart-Check mark is valuable and serves as a trusted resource for consumers. By cutting through the noise at the meat counter, shoppers can quickly identify heart-healthy foods."

Sound science and proven research serves as the basis for the Heart-Check Food Certification Program nutrition requirements. Introduced in 1995, the Heart-Check Food Certification Program helps consumers identify foods that can be building blocks of a heart-healthy diet. To become certified, a product must meet specific nutrition requirements. For more information, visit heartcheck.org.

"Wednesday's consumers are busy and they seek both convenience and real-time information before purchasing foods in their local grocery store," said Huseth. "Having the Heart-Check mark on pork sirloin roast and tenderloin products helps consumers make wise choices. This prominent, recognizable mark allows the shopper to buy with confidence."

In 2013, the U.S. Department of Agriculture approved a pork cooking temperature of 145 degrees Fahrenheit, followed by a three-minute rest. By following this cooking guidance on pork products like the sirloin roast or tenderloin, consumers can enjoy a healthy, tasty and tender product.

John Harrington can be contacted at john.harrington@dtn.com

For more from John Harrington, see www.feelofthemarket.com

(BAS)

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