DTN Early Word Opening Livestock
Meat Futures Are Set to Open Moderately Lower
GENERAL COMMENTS:
Cattle: Steady w/Wed Futures: 50-100 LR Live Equiv $138.86 - .94*
Hogs: Steady to $1 LR Futures: 50-100 LR Lean Equiv $105.51 - .64**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
Light trade volume is possible in feedlot country Friday with prices about steady with the lower money seen at midweek (i.e., $117 live; $188 dressed). Yet we won't be surprised if little business is added by the end of the day. Late-week asking prices should be around $118 to $120 in the South and $190 in the North. Live and feeder futures seem staged to open moderately lower, pressured by long liquidation and nervousness regarding late-summer fundamentals.
The cash hog trade is expected to open with bids ranging from steady to $1 lower. If Saturday's kill totals close to 65,000 head, the weekly slaughter should end up very close to 2.2 million head. Lean futures should start out moderately lower as well thanks to ideas of both larger hog supplies and softer pork demand ahead.
| BULL SIDE | BEAR SIDE | ||
| 1) | Actual beef exports last week totaled 15,476 metric tons, up 5% from the previous week, 10% from the prior four-week average, and a marketing-year high. | 1) | Beef cutouts closed significantly lower on Thursday with carcass values rolling lower from the early week advance. Box supplies were described as "heavy." |
| 2) | For the week ending July 15, cattle carcass weights dropped contrary to the seasonal trend, suggesting that intense summer heat is taking a toll (i.e., all cattle: 806 pounds, 5 lbs. lighter than the prior week and 14 lbs below 2016; steers: 865 lbs, 1 lb smaller and 15 lbs under last year. | 2) | Historically large March/April placement means the fed cattle numbers are clearly set to increase through the end of the summer. |
| 3) | Net pork export sales last week jumped to 19,100 MT, up 63% from the previous week and 26% from the prior four-week average. | 3) | The pork carcass value lost more ground Thursday, closing moderately lower thanks to softer demand for all primals except the loin and belly. |
| 4) | The fact that the dollar index has weakened to a 13-month low is good news for U.S. meat exports. With inflation remaining in low gear, the Fed seems unlikely to raise interest rates anytime soon. | 4) | Spot August lean hogs settled Thursday's session slightly higher at 82.25, a 715-point discount to Wednesday's CME two-day settlement index value. The seasonal trend is for the August contract to chop around sideways to lower from here into contract expiration in just over two weeks. It looks like the board remains confident in leading the cash market lower. |
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CATTLE: (Bloomberg News) -- McDonald's Corp. Chief Executive Officer Steve Easterbrook is keeping a close watch on food safety as he rolls out fresh beef at the fast-food chain, aiming to avoid problems that continue to roil Chipotle Mexican Grill Inc. almost two years after an E. coli crisis.
"The absolute No. 1 priority for us is food safety," Easterbrook said in an interview with Erik Schatzker on Bloomberg Television Wednesday. "We never take that for granted."
After a successful round of testing, McDonald's announced plans in March to roll out fresh beef in its quarter-pound burgers at the majority of U.S. restaurants by next year. The shift means swapping out frozen patties and dealing with something that's different to source, transport, store and cook, Easterbrook said.
Though the switch won't apply to all of McDonald's burgers, it represents a key new challenge for the six-decade-old restaurant chain. Fresh beef requires more careful handling than frozen patties, and Chipotle's woes have brought more intense attention to food safety.
Chipotle, which was backed by McDonald's before its initial public offering in 2006, suffered a norovirus outbreak at a restaurant in Virginia this month. More than 135 customers were sickened, and the incident battered the stock last week. It also brought back memories of Chipotle's multiple foodborne-illness outbreaks in 2015.
Fresh beef is one of several initiatives aimed at improving McDonald's culinary reputation. The company removed artificial preservatives from Chicken McNuggets last year and stopped using high-fructose corn syrup in its sandwich buns. It also plans to switch to cage-free eggs by 2025.
The shift away from frozen beef may put more pressure on sanitation. Easterbrook warned last year that contamination was a potential risk.
Wendy's Co. has spent decades offering fresh burgers, but not at the scale of McDonald's 14,000 U.S. restaurants.
"Our job is to solve the operational challenges, but deliver what the customer is asking for," Easterbrook said.
HOGS: (NPPC): -- Stating that "pork producers, not animal-right activists, lawmakers or regulators, should make the decisions about what production practices are best for their animals and for producing safe food," Neil Dierks, CEO of the National Pork Producers Council, On Tuesday in congressional testimony pledged the organization's support for legislation that would prohibit a state from imposing tax or regulatory burdens on businesses, including pork operations, that are not physically present in the state.
The ''No Regulation Without Representation Act of 2017,'' H.R. 2887, introduced by Rep. James Sensenbrenner, R-Wis., would stop states from adopting laws and regulations that ban the sale of out-of-state products that don't meet their criteria.
Massachusetts, for example, last year approved a ballot initiative that outlaws in the state the use of gestation stalls for housing sows, battery cages for egg-laying hens and crates for veal calves and prohibits the sale of out-of-state pork, eggs and veal from animals kept in the banned housing. The California Legislature in 2010 adopted a similar sales prohibition after voters in the state in 2008 approved a nearly identical ban on animal housing.
NPPC has fought such bans, which have been pushed by animal-rights groups. Nine states have banned, through legislation or ballot measures, gestation stalls, battery cages and veal crates, but only California and Massachusetts extended the bans to sales in their state of products produced anywhere in the country that don't comply with their housing standards.
"Changes in production practices should be driven by the marketplace, not government fiats or even ballot initiatives," Dierks told the House Committee on the Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law, during its hearing on the growing problem of states regulating beyond their borders.
He pointed out that, while states have the prerogative -- however ill-advised or uninformed -- to ban certain agriculture production practices for their farmers, they shouldn't be allowed to adopt laws or regulations that dictate the practices of farmers in the other 49 states.
That restraint of interstate commerce, Dierks told the panel, would appear to be a violation of the U.S. Constitution's Commerce Clause, which gives absolute power to Congress to regulate such trade.
The Sensenbrenner bill would prohibit state intrusions on the sovereignty of other states, limiting state taxation and regulation to persons and entities that have a "physical presence" in the state.
John Harrington can be reached at feelofthemarket@yahoo.com
Follow John Harrington on Twitter @feelofthemarket
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