DTN Early Word Opening Livestock

 
Cattle: Steady/firm w/Wed Futures: 50-100 HR Live Equiv $133.49 + 1.28* 
Hogs: Steady-$1 LR Futures: 25-50 LR Lean Equiv $ 85.62 - 4.30**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

All of a sudden, cash bulls jumped out of the cattle woodwork at midweek. Almost before you could say "tight supplies" live sales were marked $5 higher (i.e., $125 live part of the North and South). Dressed deals surged as well with most Northern deals traded at $196, $6 higher than last week's weighted average basis Nebraska. Trade volume seemed quite large in most areas, and it's possible that business could actually be done for the week. Cattle still left on showlists will probably be priced around $127 to $128 in the South and $200 in the North. Live and feeder futures should open solidly higher, boosted by follow-through buying and the surprising surge in packer spending.

Just as the cash cattle market is finding new life, the country hog business seems to be showing some age. Look for opening bids to be steady to $1 lower. The Saturday slaughter is currently estimated at 105,000 head. Lean futures should open moderately lower, pressured by residual selling and sharply lower carcass value.

	BULL SIDE		BEAR SIDE
1)	The cash cattle trade actually exploded on Wednesday with short-bought packers writing the biggest check seen since early last summer. Fed supplies through the balance of the first quarter must be perceived as very light.	1)	The February/April live cattle spread has widened further, to more than a $5 discount in the April contract. In most years, April would trade at a premium to February. The even wider discounts in the summer and fall contracts continue to show a bearish structure, with expectations of imminent highs, and then sharply declining prices into the second half of the year.
2)	Beef cutouts also closed sharply higher at midweek, reflecting better demand from retailers and food managers.	2)	For the week ending Feb. 18, U.S. hatcheries set 223 million broiler eggs; up 3% from a year ago. At the same time, chicks placed totaled 179 million, up 1% from 2016.
3)	The wider than normal premium in the June lean hog futures to the April contract reflects a positive market structure.	3)	The pork carcass value imploded at midweek, hammered by a $20 drop in the belly primal.
4)	If the cash cattle market is set to make new highs moving into the early spring, such bullishness could easily spillover in to hog trade.	4)	For the week ending Feb. 18, Iowa barrows and gilts average 281.3 pounds, .7 lbs. bigger than last week, but 3.3 lbs. lighter than 2016.

OTHER MARKET SENSITIVE NEWS

CATTLE: (ABC) -- Online sales of branded beef could be improved in Australia with better marketing and value adding less popular cuts according to a Queensland producer.

Selling online is tipped as the low cost, high participation way to sell various products including beef but Central Queensland producer Josie Angus says overseas customers buy more via the web than Australians.

She has exported branded beef with her husband for 17 years, and said online marketing and selling is essential to their business.

However, she said international buyers have a greater appetite for internet sales than their Australian counterparts and were more willing to snap up less popular cuts of meat.

"Australia is a market that has a real preference for either loins or mince, whereas a lot of clients around the world have maintained a broader appreciation of cuts across the carcass and utilisation of those cuts," she said.

"I guess one of the other challenges we have also faced has been our own in-house ability to value-add to a level.

"We have some projects... on the table that will hopefully assist in terms of really being able to put forward some of those other products that are consumer ready and present great value points on the carcass."

Mr Angus added that the diversity of the carcass was possibly the beef industry's greatest advantage.

"Now we have the opportunity to utilise the whole carcass because people are becoming more aware of health benefits."

One of those projects includes plans to build a boutique abattoir focused on value-adding to boxed beef.

It is also value adding which Mrs Angus believed would help Australian consumers shift from more traditional cuts of meat to slow cooking something like a brisket.

"In my mind it is about actually presenting products in a way that they are easy to use," she said.

"I think we have seen university students for the last 20 years universally cook chicken breast because they felt it was easy.

Mrs Angus added that branded beef producers gave more time and attention to their steak or prime rib fillet, than perhaps a secondary cut like a brisket.

"As you eat down that carcass the integrity, the eating quality of that animal, has a larger bearing on the outcome of those other cuts and how to present them," she said.

The Angus family have spent a number of years experimenting with different cuts and finding ways to utilise as much of the carcass as possible.

Mrs Angus said the humble brisket can taste just as good as any roast or prime piece of steak.

"Blair does a brisket in the style of a pork belly that is truly amazing."

The Angus's, however, admit they too have more work to do in the domestic online space.

"Look we have not done a lot domestically in this space [but] I think in Australia we have seen the smaller level where we have individual, small producers looking at the farmers' market and an extension of that online," Mrs Angus said.

"There are some really key challenges in terms of what is a critical level of throughput and being able to promise customers what they want and deliver each time.

"Where we have had success it has been around having a large number of people in central area, good, cold logistics and about balancing markets and - for us- being in the export space."

HOGS: (National Pork Board) -- At year-end 2016, U.S. pork exports showed impressive progress following a challenging 2015. In 2016, 5.1 billion pounds of pork and pork variety meats valued at $5.94 billion dollars were exported, up 8 percent and 7 percent respectively from 2015, according to the USDA.

"We saw a strong 2016 for U.S. pork exports, but we still face challenges with increased global competition and a stronger U.S. dollar," said Becca Nepple, vice president of international marketing for the Pork Checkoff. "The Checkoff is committed to bolstering its partnership with international customers through additional funding of in-country promotions of U.S. pork with the U.S. Meat Export Federation."

On average, U.S. pork and pork variety meat exports accounted for 25.8 percent of total pork production in 2016. Export value returned an average $50.20 per head back to producers. During 2016, more than 100 countries around the world imported U.S. pork.

•The top five markets by volume were Mexico (1.61 billion pounds), China/Hong Kong (1.21 billion pounds), Japan (854.8 million pounds), Canada (452.2 million pounds) and Central and South America (299.7 million pounds).

•The top five markets by value were Japan ($1.56 billion), Mexico ($1.355 billion), China and Hong Kong ($1.075 billion), Canada ($798.5 million) and Korea ($365.1 million).

With more pork available in the U.S., the National Pork Board recently approved an increase of 12.7 percent in funding for 2017 export market activities. This financial commitment translates into tangible marketing activities that increase U.S. pork exports to emerging and developing markets.

According to Nepple, promotions and marketing activities will focus on displacing other proteins and global competitors and on promoting larger pork cuts.

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

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

(BAS)

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