DTN Early Word Opening Livestock

 
Cattle: Steady-$2 HR Futures: mixed Live Equiv $148.96 + 0.22*
Hogs: Steady-$1 HR Futures: mixed Lean Equiv $88.19 + 0.40**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

The focus of cattle buyers could start to sharpen at midweek. After all, they appear to be both well-margined and short bought. At the very least, we expected bids and asking prices to take on better definition. Regarding the latter, we believe asking prices will be posted around $128-plus in the South and $204-plus in the North.

Traders on both sides of the ball will be closely monitoring the FCE internet auction later this morning for possible clues of the greater cash trend. Live and feeder futures seem likely to open on a mixed basis tied to follow-through selling on one hand and short covering in the face of cash premiums on the other.

Yesterday cash hog market enjoyed a better tone, both in terms of moderately higher prices and decent negotiated dressed volume.

So we expected some level of carryover momentum this morning with bids steady to $1 higher. At this point, the Saturday hog kill is expected to total close to 145,000 head. Lean futures should also open with uneven price action tied to both follow-through buying and midweek profit taking.

	BULL SIDE		BEAR SIDE
1)	Tuesday marked the official end of the index roll in live cattle futures. Spec longs may now be less inhibited to buy spot April.	1)	Live cattle futures quickly gave back the moderate price progress won on Monday. In fact, triple digit losses in spot April and June worked to reinforce tough overhead chart resistance (e.g.,119 basis April).
2)	The early sentiment among cattle market analysts concerning the level of February placement activity is that in-movement last month probably totaled 5 to 10 percent below the prior year.	2)	While not exactly a train wreck, beef cut-outs closed no better than mixed on Tuesday. It was the second time since February 16 that the choice box was quoted lower. So fear that the red-hot wholesale beef trade is set to run out of steam.
3)	According to a senior industry official recently quoted by Reuters (i.e., Juhui Huang, Shanghai-based vice president of Brazilian food conglomerate BRF SA), China is likely to import about three million metric tons of pork in 2017, similar to last year's level despite rising domestic production.	3)	Though spot lean still remains a bit below the cash index (which still seems to be eroding), the much weaker basis may make it more difficult to recruit new spec buying.
4)	Lean hog futures and the pork cut-out continued to move higher on Tuesday. Indeed, spot April lean closed as high as 70.82, the most encouraging finish scored in a month.	4)	Even if hog slaughter eases a bit over the next 2-4 weeks, commercial tonnage should remain as great or greater given the seasonal tendency of carcass weights to gradually increase from now into mid April.

OTHER MARKET SENSITIVE NEWS

CATTLE: SOURCE: (Cargill) -- In response to last week's fast-moving wildfires that consumed more than 1,000 square miles (650,000 acres) of rural Kansas, Cargill's Wichita-based North America protein business is donating $50,000 in new fencing materials to ranchers in the Ashland area of Western Kansas.

Much of the impact was to grazing land on ranches in the western part of the state, with thousands of cattle perishing as wind-swept flames raced across pastures throughout the region. Estimates indicate that up to 100,000 miles of ranch fencing was destroyed in Kansas, with additional fencing destroyed in Texas, Colorado and Oklahoma wildfires.

"We know there are a lot of cattle producers that lost herds, buildings, fences and grazing land, and it's their hard work that helps us produce beef enjoyed by Americans and people around the world," stated Casey Mabry, strategic supply manager in Cargill's cattle procurement team. "When we contacted the Kansas Livestock Association, they told us what was needed more than anything is fencing materials to rebuild what was lost to fire. We knew time was of the essence and that we needed to help as much as we could, as quickly as possible."

Christina Taylor, associate brand manager in Cargill's beef marketing team, first proposed helping ranchers late last week after seeing heartbreaking news coverage of the losses. Cargill's protein leadership team quickly approved the donation. The Cargill Wichita team then purchased two semi-tractor-trailer loads of fencing materials from a supplier in Chanute, Kan., for delivery Tuesday, March 14, to relief efforts in the Ashland area. From Ashland, fencing materials will be distributed to local ranchers.

"In Dodge City, Kan., we have a large beef processing facility that employs 2,400 Kansans and harvests cattle from some of the ranchers impacted by last week's fires," stated Taylor. "Helping those who are part of our beef supply chain is the right thing to do -- it's part of

our DNA at Cargill and it's gratifying to know we could help those who lost so much rebuild their lives."

Additionally, Cargill's team in Dodge City is providing support to two beef processing plant employees who lost their homes and all of their belongings to nearby wildfires.

"Our mission to nourish people, animals and the planet in a safe, responsible and sustainable way sometimes means lending a hand to people in need, and that's exactly what we're doing in western Kansas," explained Taylor.

HOGS: (rt.com) -- Expansion of trade ties with both Russia and the European Union is on the agenda for Mexico, according to the country's Agriculture Ministry.

"We must diversify, we will return to Russia, they want to buy Mexican beef and pork, we will also intensify relations with the European Union which is interested in our honey, chickpeas, meat and tropical fruit," said Mexico's Agriculture Secretary Jose Calzada, as quoted by the ministry.

Mexican beef exports to Russia were restricted in December 2012 due to fears the meat could contain traces of the feed additive ractopamine. In 2011 Mexican meat exports to Russia were worth $251 million.

In February, Calzada said a preliminary agreement was reached with Russia on resuming supplies of Mexican meat. Calzada is expected to visit Moscow in late April, and on the table is a deal where Mexico will buy Russian grain in return for red meat exports.

"We buy wheat, and Russia produces it," he said.

According to Russian Agriculture Minister Alexander Tkachev, trade in agricultural products between Mexico and Russia is booming.

Mexico's statement on renewing trade relations with Russia and the EU comes amid impending North American Free Trade Agreement (NAFTA) renegotiations with the new US administration.

'We will not pay for any border wall' - Mexican president

The agreement was signed by the governments of US, Canada, and Mexico in January 1994. It covers trade between the three countries which together have almost half a billion people, and its fundamental principle is the elimination of tariffs across North America.

During his campaign, US President Trump condemned NAFTA, describing it as "the single worst trade deal ever approved," and a catastrophe for US workers and companies. In January he said he was ready to start renegotiating the agreement with Canada and Mexico.

The US Department of Commerce on Friday said it would begin talks in around two weeks.

According to Calzada, around 78 percent of Mexico's agricultural exports, worth $25 billion, currently go to the United States.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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