DTN Early Word Opening Livestock

 
Cattle: Steady-$2 HR Futures: 25-50 HR Live Equiv $141.13 + $1.08*
Hogs: Steady Futures: 10-30 HR Lean Equiv $ 87.01 - 0.32**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Depending upon actual trade volume generated in Kansas and Texas on Wednesday (check Mandatory totals at midday), it's possible that cash cattle trading in the South is done for the week. On the other hand, the North needs to do much more business. Look for regional bids to open around $196 dressed and $125 live. Asking prices are around $202 dressed and $128 live. Live and feeder futures seem set to open moderately higher, supported by follow-through buying interest and positive fundamentals.

The cash hog trade is staged to open with basically steady bids. Processing margins seem to be improve as the cost of live inventory erodes at a slightly faster rate than the pork cut-out. Saturday slaughter is now expected to total close to 127,000 head. Lean futures are expected to begin slightly higher thanks to short covering and the still tall premium of the cash index.

	BULL SIDE		BEAR SIDE
1)	The weighted average of the FCE auction at midweek was $2 higher than last week. Furthermore, fully steady bids as early as midweek ($125/$196) suggests that are bigger checks ready to be cut in the wings if necessary (efforts made easier by improving carcass value and processing margins).	1)	The failure of April live future to hold a significant rally in its debut of the spot contract was quite disappointing, especially given its preexisting deep discount to feedlot cash.
2)	The wholesale beef market continued to be well supported at midweek with cut-outs up another $1.52 (select) to $1.95 (choice) with box demand as "moderate to fairly good".	2)	The willingness of many Southern feedlots to throw in the cash towel as early as Wednesday (i.e., $125) suggests a certain country nervousness about stubborn board discounts and the sustainability of cash market strength.
3)	The cash hog basis is very strong currently and it seems it will be hard for cash values to drop $6-$8 near-term. The seasonal trend is for April hogs to weaken near-term, but then tends to strengthen into contract expiration.	3)	Though the Lenten season is not as bearish for red meat consumption as it once was, the observation of the religious period probably hurts the movement of beef and pork through the late winter/early spring more than it helps.
4)	This week hog slaughter is expected to exceed last week only nominally with weekly kill levels relatively flat for the next three to four weeks.	4)	For the week ending February 25, U.S. hatcheries set 222 million eggs in incubators, up 2 percent from a year ago. At the same time, chicks placed totaled 178 million, up 1 percent from 2016.

OTHER MARKET SENSITIVE NEWS

CATTLE: (foodsafetynews.com) -- Mandatory country-of-origin-labeling bills for beef and ground beef made it out of committees in Pierre and Cheyenne, but got no further in the farm and ranch friendly South Dakota and Wyoming Legislatures.

Senate Bill 135 went down in the South Dakota Senate on Feb. 25. It would have required grocery stores in the Rushmore State to disclosure the country of origin of beef and ground beef.

House Bill 198 died in the Wyoming House on Feb. 3 when the Committee of the Whole opted not to consider the bill, which also would have required country-of-origin-labeling (COOL) for beef products in the Cowboy State.

State legislatures always have the ability to bring dead bills back to life, but there is not much time for that. The Wyoming Legislature plans to adjourn Friday. The South Dakota Legislature's adjournment comes later in March.

The South Dakota bill, SB 135, made it out of the Senate State Affairs Committee on a 5-3 vote on Feb. 15, only to be killed on the floor 10 days later. The committee did provide a classroom for lessons in cattle and beef prices.

Rep. Ryan Maher, R-Isabel, favored the bill because he's experienced prices for calves falling to $677 in 2016; down from $1,658 in 2014 and $1,207 in 2015. By contrast, he said, ribeye prices went to $9.89 per pound in 2016; up from $8.71 per pound in 2012. Sirloin sold for $3.81 per pound in 2012, and went for $4.49 per pound in 2016.

Repeal of mandatory federal COOL mestures contributed to the collapse of the U.S. cattle prices, according to some cattlemen. They point to a 34 percent increase in Brazilian beef imports since mandatory COOL ended.

SB 135, however, ended up being opposed by the South Dakota Cattlemen's Association, South Dakota Pork Producers, South Dakota Farm Bureau, South Dakota Retailers and South Dakota Chamber of Commerce. It was supported by the South Dakota Stockgrowers Association, South Dakota Farmers Union, and the Livestock Action Markets Association.

In Wyoming, HB 198 would have required every retailer and wholesaler selling beef in the state to comply with country-of-origin-labeling. Many retail outlets in South Dakota and Wyoming supply only 100 percent U.S. beef to their customers.

R-CALF USA, the national independent cattlemen's organization based in Billings, MT, has not been deterred by the labeling bills going down in the two farming and ranching states. Bill Bullard, R-CALF's CEO, is on a national tour to charge up members.

One of his goals is to get Congress to re-instate COOL for both beef and pork during the first 100 days of President Trump's service. Bullard has a hashtag for that: COOLin100. He says the U.S. cattle industry is in danger of being "chickenized" by beef packers taking over the live cattle supply chain.

The mandatory COOL regulations were repealed by Congress after the World Trade Organization ruled the United States was obtaining an unfair trade advantage by the manner in which labeling was being enforced in the U.S. Mexico and Canada sought the ruling from the WTO after failing to reach an agreement with U.S. officials. HOGS: (NPPC) -- The National Pork Producers Council (NPPC) applauds an executive order issued Tuesday President Trump that begins the process of rescinding or rewriting a controversial Clean Water Act regulation that would have given the government broad jurisdiction over land and water.

The order directs the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers to conduct a formal review of the Waters of the United States (WOTUS) rule, which took effect Aug. 28, 2015, and ostensibly was implemented to clarify the agency's authority over various waters. That jurisdiction -- based on several U.S. Supreme Court decisions -- had included "navigable" waters and waters with a significant hydrologic connection to navigable waters. But the regulation broadened that to include, among other water bodies, upstream waters and intermittent and ephemeral streams such as the kind farmers use for drainage and irrigation. It also covered lands adjacent to such waters.

"America's pork producers are very pleased that the president ordered EPA and the Corps of Engineers to repeal or rewrite this ill-conceived, overbroad regulation," said NPPC President John Weber, a pork producer from Dysart, Iowa. "The WOTUS rule was a dramatic government overreach and an unprecedented expansion of federal jurisdiction and control over private lands.

"It was the product of a flawed regulatory process that lacked transparency and no doubt would have been used by trial lawyers and environmental activists to attack farmers."

NPPC helped lead the agricultural community's opposition to the rule, including producing maps showing the extent of the lands affected by the regulation. (EPA's jurisdiction in Missouri, for example, would have increased by 77 percent under the WOTUS rule.) The organization also led the legal efforts against the rule, filing suit in a U.S. District Court and presenting a brief to a U.S. Court of Appeals. The latter halted implementation of the rule.

In arguing against the regulation to the appellate court, NPPC pointed out that EPA and the Corps of Engineers failed to reopen the public comment period after making fundamental changes to the rule before it took effect and withheld until after the comment period closed the scientific report on which the rule was based. The agencies also refused to conduct required economic and environmental analyses, engaged in a propaganda campaign to promote the rule and rebuke its critics and illegally lobbied against congressional efforts to stop implementation of the rule, said NPPC in its court brief.

"The WOTUS rule sought to hand control of land-use planning decisions to out-of-touch activists and government regulators in New York, San Francisco and Washington," Weber said. "We all want clean water, but this regulation was just a big government land grab that would have allowed activists to micromanage all kinds of farming and business activities. We applaud President Trump for taking this action."

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

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

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