DTN Early Word Opening Livestock
Late-Week Short-Covering Opening Likely in Complex Futures
GENERAL COMMENTS:.
Cattle: Steady w/Thurs Futures: 50-100 HR Live Equiv $142.02 + 0.89*
Hogs: Steady Futures: 25-50 HR Lean Equiv $85.55 - $1.46**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Thanks to yesterday active round in the North (i.e., when steers and heifers sold $200 dressed and $126 live), cash business is probably done for the week. We could see a new scattered clean-up deals here and there, but late week prices are not likely to change. Any unsold cattle still up for grabs are prices around $126 in the South and $202 in the North. As we get ready to wrap things up, it's been another amazing week of great cash strength and sorry board weakness. Live and feeder futures could open higher tied to late week short covering and tall cash premiums. Of course, as we've been repeatedly reminded this week, opening and closing can be two very different things.
Look for hog buyers to open their last round of bidding for the week with basically steady bids. While market hog numbers have been declining, the same can be said of processing margins. No wonder packers have become more defensive. Saturday's hog slaughter is not estimated to total right at 130,000 head. Lean futures seem likely to open moderately higher thanks in part to late week profit taking.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
| BULL SIDE | BEAR SIDE | ||
| 1) | Short packers in the North were forced to scramble for cattle on Thursday, generating fairly active trade volume with dressed bids of mostly $200, the most money seen since early June 2016. Tight fed numbers remain a bullish country force, to be sure. | 1) | Once again, live and feeder futures chose to ignore bullish fundamentals (i.e., higher feedlot sales and further strength in wholesale beef) and close sharply lower. The board's stubborn bias to sell into rallies supports skeptical theories that once cash cattle definitely notches an early year top, it will be all downhill from there. |
| 2) | Beef cut-outs (i.e., both choice and select boxes) jumped higher yesterday for the seventh-consecutive session. | 2) | Though the deep April live discount should be appealing for would-be bullish specs, buyers are nervous about one approaching speed bump. The "official" index fund roll begins next Tuesday and goes through the following Monday. There is expected to be a good amount of action, given the size of index fund net long positions in the live cattle futures market. |
| 3) | Actual pork exports last week totaled 23,900 MT, up 7 percent from the previous week and from the prior 4-week average. The destinations were primarily Mexico (8,700 MT), Japan (4,400 MT), South Korea (3,000 MT), China (1,600 MT), and Canada (1,400 MT). | 3) | Thursday's pork cut-out dropped like a sack of wet sand, falling as much as $1.46 thanks in large part to the sharply breaking belly primal (i.e., off $9.41). |
| 4) | At this point of time, there are more bullish certainties regarding the second half of 2017 (e.g., significantly expanded pork processing chain speed) than bearish certainties (e.g., expanded market hog numbers). | 4) | Though pork processing margins may still be slightly profitable, the spread between carcass value and the cash index is now a shadow of it former self (and still shrinking). Look for packers to be increasingly nervous as we move into the early spring. |
CATTLE: (wisconsinagconnection.com) -- McDonald's is looking to set the industry standard for serving sustainably raised beef and become a major player at the intersection of consumer digital dining experiences. The golden arches chain is set to take part in two pilot programs to fund sustainably-raised beef, reports Fortune.
Last year, McDonald's began experimenting with purchasing sustainable beef in Canada, and in Rio de Janeiro, Brazil, during the 2016 Olympics. The company's sustainable beef effort initially started in 2012, when they co-founded the Global Roundtable for Sustainable Beef
McDonald's push to source sustainable beef marks its latest efforts toward environmental responsibility. Since taking over as CEO in 2015, McDonald's CEO Steve Easterbrook has announced plans to increase pay for workers, remove antibiotics from its chicken supply, and serve only cage-free eggs, the latter of which was commended by Paul Shapiro, the vice president of farm animal protection for the Humane Society of the United States.
In addition to its sustainability efforts, McDonald's also announced Wednesday it's beefing up its mobile app capabilities to compete with other chains that have eaten into its marketshare. Among the enhanced app features, will be the option for customers to order and pay for their meals curbside. HOGS: (Pork.Org) -- In 2016, the U.S. pork industry saw record-breaking pork production and strong ongoing consumer demand. Additionally, consumer interest in how food is produced is also at an all-time high, leading the National Pork Board today to reaffirm its commitment to antibiotic stewardship during a live online broadcast event. Real Change: A Live Discussion of On-Farm Antibiotic Use, hosted by The Supermarket Guru® Phil Lempert, brought together experts in pork production, retail and animal care and welfare for a live, web-based broadcast. During the 30-minute program, experts discussed the pork industry's leadership in responsible antibiotic use and how it has implemented new strict guidelines set by the U.S. Food and Drug Administration (FDA). Those guidelines went into effect Jan. 1.
"There is very real change happening on the farm, and we want those who care about these issues to understand the commitment that pig farmers have with regard to antibiotic stewardship and continuous improvement in animal welfare," said John Johnson, chief operating officer of the National Pork Board. "For nearly two years, we have been educating farmers on antibiotic stewardship, investing in research and helping prepare for these changes. Hands down, it has been our largest pig farmer education campaign ever."
FDA guidance 209 and 213 ends the use of medically important antibiotics for growth promotion and increases veterinarian oversight for on-farm antibiotic use through the Veterinary Feed Directive and prescriptions. All human medically important antibiotics administered to pigs in feed and water must have direct veterinarian oversight. This creates a strong veterinary-client-patient relationship between pig farmers and their veterinarians. These same pig farmers and veterinarians also are taking pig management and biosecurity steps that increase the health of pigs and reduce the need for antibiotics.
"We've always been committed to a process of continuous improvement in a number of areas, especially regarding responsible antibiotic use," said Brad Greenway, a pig farmer from South Dakota and America's Pig Farmer of the Year. "We have a great relationship with our veterinarian, with regular check-ins to make sure we're operating safely and effectively. It's only when it is medically necessary for the well-being of the animal that we are prescribed antibiotics."
Another important topic addressed during the broadcast relates to antibiotic resistance -- a complex issue that affects both veterinary and human medicine. The U.S. Centers for Disease Control and Prevention (CDC) estimates that 47 million human prescriptions are not medically necessary, at least 30% of all prescriptions written.
"The CDC has warned us that antibiotic resistance is one of the world's most pressing health problems, and that's why we're committed to doing our part in antibiotic stewardship," said Johnson.
"In the end, we're committed to defining the ideal balance of the right medicine, in the right dose, at the right time for our pigs," said Dr. Michelle Sprague, veterinarian and director of sow health at AMVC Management Services.
Shifting to the consumer landscape, the broadcast also focused on consumer concerns about food safety and animal welfare. The use of antibiotics on the farm has drawn increased questions from consumers, and the pork industry is dedicated to encouraging an open dialogue, working with its partners and building confidence in today's pork supply.
"It's a shared responsibility, and we all have to do our part to navigate this evolving discussion about antibiotics and providing safe food to our consumers," said Rick Stein, vice president of fresh foods at Food Marketing Institute. "Organizations like the National Pork Board are getting out there and being stewards of this complicated and evolving issue. The pork industry invites collaboration and constructive criticism among the leaders in food production and
distribution." A replay of the broadcast can be viewed online at: RealChangeOnFarms.org. For more information on the National Pork Board's efforts to assist farmers and others who want to learn more about responsible on-farm antibiotic use, visit pork.org/antibiotics.
John Harrington can be contacted at john.harrington@dtn.com
For more from John Harrington, see www.feelofthemarket.com
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