DTN Early Word Opening Livestock

 
Cattle: Steady to $2 HR Futures: Mixed Live Equiv $148.55 - .28* 
Hogs: Steady to $1 LR Futures: 25-50 LR Lean Equiv $ 82.99 -1.51**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Besides a few scattered sales with extended terms of delivery reported in parts of the South (i.e., $125 to $126), the cash cattle trade remained at a standstill on Tuesday. Cattle buying interest could start to improve Wednesday, but if feedlot managers dig in with higher asking prices (e.g., $132 to $133 in the South and $215 in the North), significant trade volume will probably be delayed until Thursday or Friday. Live and feeder seem staged to open Wednesday on a mixed basis in light trade volume.

The cash hog trade shouldresume at midweek with bids steady to $1 lower. For the moment, ready market hog numbers continue to trump early spring product demand. Lean futures are expected to open on a mixed basis thanks to both follow-through selling and eroding pork carcass value.

	BULL SIDE		BEAR SIDE
1)	Live cattle futures still remain above last week's technical breakout and could easily move back into the passing lane, especially if this week's cash trade holds relatively firm.	1)	Hong Kong announced on Tuesday it has lifted a ban on the import of Brazilian meat, removing one of the last blanket bans by a major importer less than two weeks into the scandal.
2)	Brazil ordered three more food processing plants to suspend production on Monday amid an investigation into alleged corruption in its meat industry as the world's biggest beef exporter. The European Union has maintained a partial ban on products from the 21 meatpacking plants under investigation. This story still remains in play.	2)	Most analysts are looking for another substantial cattle kill this week, possibly as big as 610,000 head, somewhat smaller than last week and 12% or more above 2016. Slaughter levels will grow into the spring.
3)	Given the persistence of decent pork packing margins, there is still plenty of incentive to run large slaughter schedules as long as hogs remain available.	3)	The pork carcass value was hit hard on Tuesday, especially pressured by struggling demand for bellies and hams.
4)	The oversold character of lean hog charts prior to the release of the March 1 Hogs & Pigs report suggests that the board may be more vulnerable to a bullish surprise than a bearish one.	4)	Lean futures continued to slide lower and lower Tuesday with spot April closing at its lowest price level since early December. The cash index has now fallen below $70 and the board clearly believe country bleeding will continue over the next several week.

OTHER MARKET SENSITIVE NEWS

CATTLE: (The Weekly Times) -- The Australian red meat industry cannot directly oppose US, Japanese and Dutch bids to export chilled and frozen beef to our shores.

That was the message from Red Meat Advisory Council chairman Don Mackay in ­response to the Federal Government's draft review that gives conditional approval to the import bids.

Mr Mackay said the Australian beef industry could not afford to simply reject the bids, given the US and Japan are Australia's biggest beef export markets.

"Trade is a two-way street," he said. "We go overseas and expect to be allowed into these countries, so to stand in total opposition (to imports) is not something we can do."

But RMAC was all too aware of the risks to Australia's beef industry if things went wrong, he said, citing the collapse of the Australian prawn industry in the wake of the recent outbreak of white spot disease linked to imports.

"We've seen the devastation of white spot in prawns where there's been a failure in control of produce after arrival," Mr Mackay said.

A similar failure in the livestock industry wouldn't fade away within a couple of weeks. "It would affect thousands of jobs and billions in export earnings," he said.

Industry groups had until March 15 to lodge submissions on the Department of Agriculture and Water Resources review of the US-Japanese import bid.

The review, which analysed proposals from Japan, the US, the Netherlands, New Zealand and Vanuatu, outlined the risk management measures the US and other countries must meet, including:

NO imports of brain, pulmonary and reproductive organs, and udders (and associated lymph nodes).

CERTIFICATES of freedom may be required for diseases such as foot and mouth disease and rift valley fever.

THEY must prevent import of Salmonella enterica (serotype typhimurium DT104), which is a serious disease of humans and has been found with multiple antibiotic resistance.

While the risk was "very low", it must still be addressed through pre-export testing and abattoir surveillance and reduction schemes.

One major issue was the ability of the US beef industry to trace livestock.

As for Australian demand for US and Japanese beef, Mr Mackay said Japan was seeking export markets for Wagyu and US exporters had access to cheap cattle and grain.

HOGS: (National Hog Farmer) -- Iowa is becoming more globally dependent, especially as it welcomes new business like Prestage Foods pork processing plant to the northern part of the state. That's a strategic move that Creighton University economics professor Ernie Goss says is smart for Iowa's future.

For economists, "it is always exciting to see actual production -- something that people eat, wear or use," notes Goss.

The Prestage plant is a net gain of $13 million in annual state and local tax collections for the surrounding ten counties and the state overall, according to a comprehensive report conducted by Goss. He presented the results of economic analysis for the plant being built south of Eagle Grove, Iowa, at several forums last week. The ten counties considered in the report are Calhoun, Franklin, Hamilton, Hardin, Humboldt, Kossuth, Palo Alto, Pocahontas, Webster and Wright.

Goss explains the region's shrinking population and dense livestock population are clear economic signals that greater development is needed for the area. These counties have seen a significant decrease in population and employment compared to the rest of Iowa and the entire United States. While the number of farms has grown in the area, the non-agriculture and manufacturer enterprises have not. Regarding livestock production, this region almost 30 times the concentration of the United States and even higher than the rest of Iowa without the presence of a processing facility.

Examining the regional economic impact from construction through one year of operation, overall sales in the region would increase by $1.7 billion in the first 36 months. Between construction of the plant and the first year of operation, a total of approximately $46 million will be collected in state and local taxes alone.

A true boost for the area is the substantial increase in new jobs. "Direct jobs, you're talking about at least on the first shift, 900 to 1,000 jobs at the facility itself. When you take into account the spillover jobs in the 10-county area, you're in the neighborhood of 3,072 total jobs, so that's quite significant. (That does not even include the plant construction jobs)," states Goss.

Still, new business development does translate to an increase in $32.7 million annual costs for the local communities. New jobs bring new families to the region which increases the number of children in schools, requiring more teachers. The cost was calculated at $21 million for the period.

Moreover, an increase in government dollars will be necessary for the additional police and fire protection. According to the study, the cost is penciled at $1.3 million for the first 36 months. More trucks on the highway will mean an additional $8 billion spent on roads and other infrastructure.

The largest surprise to Goss in completing the all-inclusive study was the lack of processing plants in the region. In terms of pork production, the region produces 25 times more than the rest of the United States with one-fifth the processing capacity. Basically, the pigs are being shipped many miles and across state lines to be processed.

For the 811 hog farms in the 10-county area, local access to new global market opportunities may compute to increased revenue streams. According to the Prestage family, in the first year of production 40% of the hogs will be purchased from independent hog farmers with the goal to market the pork products worldwide.

According to the report, hog prices are estimated to grow by 3.5% with $724 per farm boost annually for the operations in the region. The true cost saver is the reduction in transportation costs, projected at $16,000 per farm.

Nationwide, packing capacity is extremely tight as America's pig farmers send a record number of hogs to market. Last year's commercial hog slaughter reached 118.2 million head, surpassing the old record set in 2008. Market analysts forecast this year's hog slaughter total will easily exceed 121 million hogs and may exceed 123 million head. As a result, there will be more hogs than shackle space.

The Iowa Prestage plant is one of five new processing facilities coming on line by 2018, increasing the U.S. packing capacity by 8%.

Construction is set to begin this spring and will take 18 to 21 months to complete. Once the plant is open for business, it will process 50,000 pigs a week. At first, Prestage Farms will supply 30,000 of the pigs to the plant, and the remainder will be purchased from independent producers. If the plant goes to a second shift, then the additional pigs will also be purchased from independent producers in the Upper Midwest.

Value-added agriculture fuels economic growth locally and statewide. That is a real value of the Prestage pork plant to Iowa. "The future looks very bright. Although farm income is down for the fourth year in a row, looking long-term value-added agriculture and agriculture is the place to be," concludes Goss.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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