DTN Early Word Opening Livestock
Follow-Through Selling Expected to Pressure Meat Futures on Opening
GENERAL COMMENTS:
Cattle: Steady to $2 HR Futures: 50-100 LR Live Equiv $148.83 - 1.23*
Hogs: Steady to $1 LR Futures: 50-100 LR Lean Equiv $ 83.86 + .96**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Cattle traders are probably in for a typically slow Tuesday with neither side in a hurry to define bids or asking prices. Our guess is that some cattle will be priced around $132 to $133 in the South and $215 in the North. Live and feeder issues should open lower, pressed by residual selling interest and late-month beef demand.
Hog buyers seem likely to resume procurement chores Tuesday with bids ranging from steady to $1 lower. Negatively, plentiful supplies seem to be flowing curb-to-curb. Positively, packet margins are improving with the cost of live inventory slipping lower and carcass value firming. Lean futures seem staged to open lower, checked by spillover selling and pre-report long liquidation.
| BULL SIDE | BEAR SIDE | ||
| 1) | New showlists distributed in cattle feeding country Monday looked mostly smaller with only Colorado beef producers offering more ready steers and heifers. | 1) | Beef cutouts started the week with a crash, plunging sharply lower on Monday in the week of last week's big kill of 613,000 head. |
| 2) | Advanced boxed beef sales (i.e., negotiated with delivery 22 days plus) continue at a very aggressive pace. Last week such action totaled 1,135 loads, the third consecutive week over 1,000 loads and the largest round of business since mid-February. Packers will need to keep chain speed cracked up through April to fill these orders. | 2) | Cattle futures retreated sharply lower on Monday with long liquidation and technical selling tied to the sudden normalizing of Brazilian meat exports. |
| 3) | The pork carcass value closed moderately higher to start the week, supported by stronger demand for bellies, butts and ribs. | 3) | Lean hog futures were also hammered by triple-digit losses Monday with nearby contracts closing at new 2017 lows. |
| 4) | Bird flu, domestic and abroad, continues to bode well for U.S. pork prices. Additionally, this week is forecast to be seasonally lower than last week. | 4) | The USDA will issue the March 1 Hogs & Pigs inventory on Thursday and it will probably confirm record large numbers in virtually every category of the report. The total hog inventory could be up 5% or more and the winter pig crop will likely be 4% larger. |
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CATTLE: (North American Meat Institute) -- USDA's Grain Inspection, Packers and Stockyard Administration (GIPSA) should abandon its regulatory end-run around Congress and the Courts that was initiated via three separate livestock and poultry marketing rules in the final days of 2016, the North American Meat Institute told GIPSA in three strongly worded sets of comments submitted on Friday.
"Anything less than withdrawal of these stale and controversial rules will simply line the pockets of trial lawyers, while making our industry less competitive and our livestock producer-partners less profitable," Institute President and CEO Barry Carpenter said.
The Institute's comments responded to an interim final rule (IFR) that Congress blocked for six subsequent years after it was proposed in 2010, but failed to block in 2016, leaving an opening for GIPSA to move ahead in the final weeks of the Obama Administration. The so-called "scope" interim final rule would make it unnecessary for a disgruntled producer to show harm to competition generally when challenging a particular practice by a packer. This change would represent a major reversal of long settled case law.
"GIPSA, through the IFR, is conducting an administrative end run to accomplish what it has failed to do before the courts and before the Congress," the Institute said. "As the agency concedes, that action will set in motion a cascade of litigation brought under the Packers and Stockyards Act. The impact of that litigation, or the threat of it, will be to undermine and likely roll back the significant progress made by the livestock and meat and poultry industry in meeting consumer demands during the past quarter century."
The Institute pointed out that before and after the rule was originally proposed in 2010, courts have ruled and their decisions show that the rule is even more legally problematic than originally thought.
In addition, the Institute noted that the rulemaking violates the Presidential Executive Order on reducing regulations and controlling costs, which requires that two regulations must be identified for repeal before a new regulation may move forward; that requirements has not been met. Further, the rule's costs violate the spirit of the Executive Order: "By GIPSA's own analysis, the rule would impose almost $100 million [in costs], and in reality, based on the Research Triangle Institute analysis, the cost will be much higher. "
The Meat Institute also objected to a proposed rule, originally published in 2010 and blocked repeatedly by Congress, on unfair practices and undue preferences. The proposal would impose unwarranted burdens on meat companies and discourage the use of marketing agreements that GIPSA acknowledges in its Federal Register "have increased the economic efficiency of the livestock markets and yielded benefits to producers, packers and consumers alike." Marketing agreements are used when a packer needs particular livestock to match their brand, like livestock that were raised organically, that were only grass fed or that are a certain breed.
Finally, the Institute urged GIPSA to withdraw a proposal that it claims would "facilitate a level playing field and foster fair competition in poultry grower ranking systems," theorizing that more efficient growers are rewarded and less efficient growers are penalized. "Live poultry dealers already have powerful incentives to identify growers who raise poultry most efficiently—that is why dealers use a competitive ranking system," the Institute said. "This proposal will dismantle much, if not all, of the existing system and rather than reward excellent performance it will encourage mediocrity," the Institute said.
"These two proposals were misguided when proposed in 2010, which is why Congress objected to them, and they have not improved with age," Carpenter said. 'All three should be withdrawn and the marketplace should be allowed to continue operating in its dynamic and competitive manner."
HOGS: (Farm Journal)--Mexico's top pork producer, Granjas Carroll, said on Thursday it plans to double its sow count in the next four years as part of a $550 million expansion plan, as it eyes the risk of a crossborder trade spat with the United States.
The firm's sow tally will reach some 137,000 heads by 2021, while the company will also build a $94 million slaughterhouse that can process 600 pigs per hour, said Chief Executive Officer Victor Manuel Ochoa.
"We're not just thinking about growth, we're also going to enter the meat market," he said in an interview.
Once the expansion is complete, the company will annually produce some 2.8 million pigs, or about 140,000 tonnes of meat, and the slaughterhouse will be the largest ever built in Mexico.
Uncertainty over the future of the North American Free Trade Agreement (Nafta) is forcing Mexico to look to new markets for pork, both for imports and exports, said Ochoa.
John Harrington can be reached at feelofthemarket@yahoo.com
Follow John Harrington on Twitter @feelofthemarket
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