DTN Early Word Opening Livestock

 
Cattle: Steady Futures: 50-100 LR Live Equiv $139.63 - 0.52*
Hogs: Steady-0.50 LR Futures: mixed Lean Equiv $109.48 - 0.20**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle buying interest could start to take shape today, but we may not see significant trade volume develop until Thursday or Friday. Look for asking prices to start out around $122 in the South and $192 plus in the North.s Both sides will be monitoring FCE results later this morning for clues regarding the big cash picture. Live and feeder futures are likely to open under pressure this morning thanks to further follow-through selling and long liquidation.

While there may some talk about the atypical case of BSE found in Alabama (see article below), we don't expect it to have any market impact. The atypical nature of the case (i.e., an extremely rare and random occurrence) as well as the assurance that the old cow did not move into the food chain should make this a non-story.

The cash hog trade should resume this morning with bids steady to .50 lower. At this point, packer seem to be planning a Saturday kill around 50,000 head. Furthermore, the weekly slaughter should track very close to last week, totaling right at 2.2 million. Lean futures seem staged to open on a mixed basis with deferred probably geared to outperform nearby once again.

	BULL SIDE		BEAR SIDE
1)	The combination of extreme summer temps and fairly aggressive feedlot marketing should at least minimize beef tonnage moving into late summer.	1)	Live and feeder futures crashed hard on Thursday with triple-digit losses once again reinforcing over chart resistance.
2)	Given the board's significant discounts to cash, waves of short covering could develop over the next several days as specs and commercial position ahead of the July 1 on feed report to be released Friday afternoon.	2)	Beef cut-outs rolled further downhill yesterday with box supplies still described as "moderate to heavy".
3)	Tuesday's impressive rally in 2018 lean hog contracts suggests that some are beginning to reassess the real expansion plans actually on the ground (or even on the drawing board) at this time.	3)	So far this week, hog buyers have been fairly successful in using softer cash bids to generate decent country movement. For example, the national dressed carcass base slipped by 0.21 but negotiated receipts still numbered 11,827 head.
4)	The bellies were higher again on Tuesday, up .85 on the 9-13# derind, now $255.04. There is still higher price risk on the bellies for several more weeks.	4)	Despite its $12 discount to the cash index, the debut of spot April lean hog contract did not exactly ring with bullish promise. The short-term and long-term market trends have turned negative and the market structure is negative as well with the August contract continuing to trade at a significantly discount to the cash hog market.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Bloomberg.com) -- An "atypical" variety of the animal illness known as mad cow disease was found in an 11-year-old Alabama animal, the U.S. Department of Agriculture said on Tuesday.

The case of bovine spongiform encephalopathy was detected during routine surveillance at a livestock market, the USDA said Tuesday in a statement. The cow was kept from slaughter channels and "at no time" posed a risk to the food supply, the agency said.

The atypical variety differs from "classical" BSE linked to Creutzfeldt-Jakob disease in people, according to the USDA. In the four previous findings of BSE in the U.S., one case in Washington state in December 2003 was classical, involving a cow brought in from Canada. That roiled global cattle markets and spurred several countries to ban U.S. beef. Earlier this year, China reopened access to U.S. beef imports for the first time since that notorious episode.

Colin Woodall, vice president for government affairs at the National Cattlemen's Beef Association in Washington, said the USDA announcement probably won't hurt trade with exports unaffected by previous findings of the atypical variety.

"We would not expect any restrictions by our trading partners, but it's a situation we will watch carefully," Joe Schuele, a spokesman for the Denver-based U.S. Meat Export Federation, said in a telephone interview. "USMEF would concur with the USDA's conclusion that an atypical case will not impact the negligible risk status of the U.S. designated by the World Organization for Animal Health."

While the case of classical BSE in 2003 "shocked the world and shut down a big chunk of exports," the industry has since made changes to ensure that an infected cow would never enter the human food chain, Brett Stuart, a founding parter at Denver-based market researcher Global AgriTrends, said in a telephone interview.

On the Chicago Mercantile Exchange, cattle futures for October delivery fell 1.5 percent to close at $1.16875 a pound. The market settled before the USDA announcement.

In the month of December 2003, the most-active contract plunged 21 percent after the classical case was reported.

(South China Morning Post) -- The United States will not resume imports of beef from Brazil until food safety issues have been addressed, US Agriculture Secretary Sonny Perdue said on Monday.

Purdue met with his Brazilian counterpart, Blairo Maggi, to discuss the issue after Washington late last month halted all beef imports from the country following a rash of bad shipments discovered in US ports.

"Though Brazil pressed for a timeline for restoration of beef imports, any timeline would have to depend upon progress being made by Brazil," Purdue told the Brazilian official, the USDA said in a statement following the meeting.

The agency's Food Safety and Inspection Service (FSIS) began inspecting all Brazil beef imports in March after a series of bad meat shipments were discovered, and through late June had stopped 11 per cent of the beef meant for the US market, about 1.9 million pounds (862,000 kilogrammes).

The normal rejection rate is one per cent, USDA said.

At the time the ban was imposed, Purdue said: "Ensuring the safety of our nation's food supply is one of our critical missions, and my first priority is to protect American consumers."

Maggi detailed the corrective actions Brazil has taken and continues to take to address the food safety concerns, the USDA said, without providing specifics.

Brazil is the world's leading beef and poultry exporter. The US ban comes after a scandal in March when 21 meat processors in the South American country were accused by Brazilian police of adulterating bad quality meat and bribing inspectors.

That prompted some 20 countries, including Brazil's top beef markets China and Hong Kong, to suspend all Brazilian meat imports.

The bans caused havoc in the US$13 billion a year industry, which employs some six million people, before being finally lifted.

HOGS: (porknetwork.com) -- USDA expects 2018 pork production to reach record high levels for the fourth consecutive year. Despite a 3.1% increase in pork production, hog prices are averaging a fraction higher than last year. Through mid-June, Iowa-Minnesota negotiated market hog prices averaged $65.80/cwt, up 50 cents from the same period last year, while during this period, year-over-year hog slaughter was up 3.5%. USDA is pegging 2017 pork production at 3.8% above last year's record with hog prices even-to-$2 higher than last year.

Production of beef, chicken and turkey are also expected to increase faster than the population. Per capita meat consumption in 2017 is forecast to be the highest since 2008. The seasonal pattern is for hog prices to peak in midyear.

Hog prices are almost certain to decline as we move through the second half of 2017, but they are expected to stay above last year's fall lows because slaughter capacity is increasing more than hog slaughter.

Hog slaughter during March-May was slightly lower than expected. The March Hogs and Pigs report implied March-May barrow and gilt slaughter would be up 5.26% but actual weekly slaughter of U.S.-raised market hogs was up 4.88% and pork production was up 4.4%. June-July-August market hog slaughter should be up 3.8% according to the March Hogs and Pigs report. Hog slaughter during the fourth quarter of 2016 was more than a million head greater than any previous quarter. USDA is predicting that fourth quarter 2017 pork production will be up 5% compared to last year. Last fall the challenge for hog packers was to process a record number of hogs on a timely basis. With two big new plants opening later this year, the challenge for packers in the fall of 2017 will be to move a record amount of pork at something close to a profitable price.

Thus far in 2017 slaughter weights are down 1.7 lb compared to the same weeks in 2016. The long term trend is for market hog slaughter weight to increase by about 1 lb per year. Pigs eat more and grow faster in cool weather, so seasonally, weights are heaviest during the winter and lightest in late summer. Slaughter weights are also influenced by profitability. Red ink can cause producers to market hogs sooner and at lighter weights. That happened in the fourth quarter of 2016 when producers lost $27 per head marketed and weights dropped back to the five-year average.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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