DTN Early Word Opening Livestock

Hog Paper Set to Open Moderately Higher

(DTN file photo)

Cattle: Steady Futures: mixed Live Equiv $130.28 - 0.02*

Hogs: Steady-$1 HR Futures: 25-50 HR Lean Equiv $ 90.83 + 0.10**

* 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 buying interest could slowly begin to surface this morning with opening bids probably around $116 in the South and $185-187 in the North. If feedlot managers dig in their heels regarding asking prices close to $122 in the South and $192-plus in the North, significant trade volume could easily be delayed until Friday. Live and feeder futures are likely to open on a mixed basis thanks to residual selling and pre-cash short covering.

Look for the cash hog trade this morning to retain a firm undertone. Buyers should resume work with bids ranging from steady to $1 higher. Although WTD chain speed is running behind last week, a larger Saturday kill could result in a larger weekly total when everything is said and done. Mechanical problems at a major plant has checked chain speed over the last several days. But such lost time could be quickly made up for in terms of a larger Saturday kill. At this time, the Saturday slaughter should be close to 190,000 head. Lean futures should open moderately higher, boosted by short covering and cash premiums.

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BULL SIDE BEAR SIDE
1) The average retail price of all beef in January was $5.396, 6.2 percent below 2016 and the lowest in nearly three years. Consumer friendly pricing to be sure. 1) Yesterday sell-off in live cattle essentially confirmed that Tuesday's rally was nothing but a dead cat bounce. Furthermore, the persistently basis strength will make it tough for feedlots to hold cash sales steady (let alone ask for higher money).
2) Cattle buyers remain short bought and running out of time to negotiate. Additionally, feedlot managers have displayed remarkable leverage since the first of the year. Such clot is not likely to suddenly evaporated. 2) According to new meat spread data released yesterday, beef's farm-to-retail spread narrowed to $3.07 in January, its tightest (i.e., poor for meat counter featuring) since February 2016.
3) It would appear that retailers are pushing to price pork on a attractive basis as well. The average retail price of pork last month was $3.57, 6 percent below last year and the lowest since before February 2015. 3) For the week ending February 11, U.S. hatcheries set 221 million broiler eggs in incubators, up 2 percent from a year ago. At the same time, chicks placed totaled 179 million chicks, up 1 percent from 2016.
4) For the week ending February 11, Iowa barrows and gilts averaged 280.6 pounds, 0.8 pounds lighter than last week and 2.8 pounds smaller than 2016. 4) The fact that new spot April lean hog futures appears to be in no hurry to move toward the premium of the cash indicated suggests that traders are worried about fundamentals around the next corner.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Eater) -- Two fast-food superpowers could be on the brink of becoming one: The company that owns Burger King is reportedly in talks to buy beloved fried chicken chain Popeyes, according to Reuters.

BK parent company Restaurant Brands International also owns Tim Hortons, the coffee shop chain that's wildly popular in Canada and the Northeastern U.S. (and occasionally serves drive-thru customers on dog sleds). If RBI and Popeyes were indeed to merge, it could potentially mean major expansion for the latter. While Burger King has more than 15,000 locations worldwide, Popeyes has less than 3,000. Neither company has commented on the merger talks, leaving us with no choice but to speculate wildly.

As Buzzfeed News points out, such a merger "would create a diverse, international fast-food company, similar to Yum Brands, which owns Pizza Hut, KFC, and Taco Bell." That particular greasy triumvirate has given the world the strange beast colloquially known as a "Kentacohut" — stores that serve menu items from all three chains. Could combined Burger King/Popeyes outlets be on the horizon?

But more importantly for fast-food aficionados, given BK's penchant for weird menu items like the Whopper burrito and Cheetos chicken fries, not to mention Burger King wine and Whopper-scented cologne, such a marriage could lead to some truly terrifying-slash-beautiful fast-food novelties.

HOGS: (thepigsite.com) -- Recently released 2016 Canadian pork export statistics show the Canadian pork industry can fill global demand when favourable terms of access to foreign markets exist.

The Canadian Pork Council (CPC) takes a proactive position in support of international market access. It is a strong advocate for pursuing new or expanding existing trade agreements to increase market access or prevent deterioration in Canada's competitive position in a market.

"Pork producers understand that market access is of paramount importance to the sustainability of the country and the hog industry," stated CPC Chair Rick Bergmann. "The development of international market opportunities like Japan and China creates Canadian jobs across the country, attracts investment and contributes to growing the economy."

In 2016, the pork industry exported 1.246 million tons of pork value at $3.8 billion to over 100 counties. The United States, China and Japan remain Canada's top three pork export markets in both volume and value. Japan continued as a high valued market worth $1.07 billion for Canadian pork.

Demand for Canadian pork in the Chinese market increased by 144 per cent in 2016. Canada shipped approximately 12,500 forty-foot shipping containers filled with 312,000 tonnes of Canadian pork across the pacific to China. The $580 million in sales of Canadian pork to China is an increase of 157 per cent.

"Canadian hog producers, pork processors and meat traders and the many other companies in Canada that provide inputs and services to our industry have a very strong interest in Canada aggressively pursuing further progress toward reducing agri-food trade barriers and trade-distorting subsidies, and achieving additional market access," added Mr Bergmann.

The globally competitive Canadian hog and pork industry generates $13.1 billion in economic activity and 31,000 on-farm jobs. Another 69,000 Canadians rely on the pork sector for their livelihoods. Well over 70 per cent of the industry's output is now exported, with pork and pork products shipped to almost 100 countries.

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

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

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