DTN Early Word Opening Livestock

Hog Paper Likely to Open Moderately Higher

John Harrington
By  John Harrington , DTN Livestock Analyst
(DTN file photo)

Cattle: Steady-$2 LR Futures: Mixed Live Equiv $140.03 - .54*

Hogs: Steady-$1 LR Futures: 25-50 HR Lean Equiv $ 87.12 + .60**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue


Our guess is that Monday will represent a slow start to a slow cattle trading week. Of course, the activity Monday will be limited to the distribution of new showlists. The mid-month offering is likely to be about steady with last week, possibly a bit larger. Yet action could remain sluggish throughout the entire week, with most retailers indifferent toward beef business right before Thanksgiving, and packers gearing down before next week's reduction in chain speed. Live and feeder futures are staged to open on a mixed basis thanks to a combination of residual selling interest and early-week short-covering.

Look for the cash hog trade to kick off the new week with bids of steady to $1 lower. On one hand, packer margins are very attractive, justifying aggressive chain speed to be sure. On the other hand, market hog numbers are ample enough where buyers just don't have to try very hard in terms of procurement. Indeed, ready numbers should steadily build for another 30 days or so. Lean futures should open moderately higher, supported by the premium status of the cash index and firming carcass value.

1) Between sharply higher cutouts last week (i.e., from Friday to Friday, the choice and select box advances by $5.11 and $1.43, respectively) and some savings in the cost of live inventory, beef packers are starting the week with much improved margins. 1) The gap in the December live cattle chart between $121.62 and $122.32 was filled in Friday's bearish action. The lead month now looks vulnerable to testing support at the 40-day moving average (118.41) and the 100-day moving average (115.16).
2) Since the USDA has recently raised the standard for electronic quality grading (i.e., making it tougher for carcasses to receive a choice or better score), some processors may have to scramble (e.g., increase chain speed in order to fill large standing orders tied to late-year holiday parties/featuring). 2) The Nov. 1 Cattle on Feed report to be released Friday afternoon is set to come in on the bearish side with October placement probably exceeding 2016 by 7% to10%.
3) The pork carcass value closed with solid progress on Friday, supported primarily by processing items and butt cuts. The wholesale pork trade has been rolling generally higher for the last five weeks. Processing margins are excellent. 3) Last week's surprising jump in corn yield and ending stocks would seem to further underscore the longer-term implications of cheap feed for meat production: more animal placed on feed, heavier carcass weights and greater overall tonnage.
4) Given the fact that spot December lean hogs is now trading $5 under the cash index, it's possible that the worst case scenario is already on the table. In addition, the seasonal tendency suggests a sideways trading pattern for futures in the near term followed by a strong rally in the December contract into contract expiration. 4) The last full retail week prior to Thanksgiving is typically a slow and sluggish period for red meat prices on all levels.


CATTLE: (USMEF) -- Monday [Friday], the World Trade Organization (WTO) ruled in favor of the United States in a dispute with Indonesia over its complex and opaque import requirements for beef and beef products. The WTO report found that all 18 of Indonesia's import measures challenged by the United States were inconsistent with WTO rules and obligations. Monday's ruling marks the end of the WTO dispute settlement process and is expected to open up significant new export opportunities for the U.S. beef industry in the Indonesian market.

U.S. Meat Export Federation (USMEF) CEO Philip Seng said, "We are extremely pleased with the outcome of this case and wish to thank the Office of the U.S. Trade Representative (USTR) for its effective presentation of the legal arguments against Indonesia's import controls. The WTO ruling is confirmation of USTR's decision to bring the case and supports the need for a strong and transparent dispute settlement system in the WTO."

Seng said USMEF sees Indonesia as a very promising market for the future. It is the fourth most populous country in the world, but with per capita beef consumption of only 3.4 kg Indonesia has almost unlimited potential to become one of the world's largest beef importing countries. "Monday's WTO report sets the stage for expansion of Indonesia's beef market. We are excited about the opportunity to play a big part in its development by introducing U.S. beef to a much wider group of Indonesian customers."

Last year U.S. beef and beef variety meats exports to Indonesia were 10,783 mt valued at $39.4 million, making it our 9th largest export market by volume and 15th largest by value. Through September of this year, exports to Indonesia were 9,934 mt valued at $36.6 million. This marked a 96 percent increase from the first nine months of 2016 in volume and a 78 percent increase in value.

Indonesia is currently the third-largest export market for U.S. beef hearts llowing Mexico and Hong Kong.

(Beef Magazine) -- After a bitter and contentious pre-vote battle, the Oklahoma Department of Agricutlure, Food and Forestry announced on Wednesday, Nov. 9 that the Oklahoma beef checkoff referendum was voted down, with 2,506 beef producers voting no and 1,998 voting yes.

Officials with the Oklahoma Cattlemen's Association (OCA), which supported the effort to establish a state-run beef checkoff in addition to the national $1-per-head checkoff, were disappointed. "As a rancher, I face challenges every day," said Weston Givens, rancher and OCA president. "Unfortunately, those daily challenges are nothing compared to the growing challenges that our industry faces, such as: aggressive anti-meat activist groups trying to remove beef from the menu and misleading claims about food safety and animal care.

"It is disheartening that the Oklahoma beef checkoff was defeated, but I'm still proud of the strong collaborative effort of the Vote Yes Coalition and our grassroots campaign."

"This is an unfortunate loss for the beef industry here in Oklahoma," said Michael Kelsey, OCA executive vice president. "Investing in a state-level beef checkoff would have greatly increased the opportunities to market, promote and educate consumers about beef and beef producers. We ran a good campaign that worked hard to reach out and educate beef producers, but ultimately we were defeated Monday by the same out-of-state activists that defeated State Question 777 last fall."

Opponents of the Oklahoma referendum, however, were pleased with the outcome. "We were proud to stand with our Oklahoma members to ensure justice was carried out during this election," said Bill Bullard, CEO for R-CALF USA, "It is good to know that in America, if you stand up for what is right you can still win."

Oklahoma farmer and Organization for Competitive Markets (OCM) board member Paul Muegge added, "With my years of experience fighting corporate agriculture, I knew we had to stand up to OCA. They are nothing more than the modern day cattle barons trying to ride rough shod over family farmers and ranchers and using our government to do so."

HOGS: (meatfyi.com) -- With a Nov. 15 deadline looming, the National Pork Producers Council and the U.S. Poultry and Egg Association Monday filed a brief in support of the U.S. Environmental Protection Agency's motion to delay a mandate that farmers report certain air emissions from manure on their farms.

In April, a federal court, ruling on a lawsuit brought by environmental activist groups against EPA, rejected an exemption for farms from reporting "hazardous" emissions under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and the Emergency Planning Community Right to Know Act (EPCRA). CERCLA mainly is used to clean hazardous waste sites but has a federal reporting component, while EPCRA requires entities to report on the storage, use and release of hazardous substances to state and local governments, including first responders.

EPA had exempted farms from CERCLA reporting, reasoning that while emissions might exceed thresholds that would trigger responses under the law such responses would be "unnecessary, impractical and unlikely." The agency limited EPCRA reporting to large, confined animal feeding operations (CAFOs), requiring them to make one-time reports. Under the decision from the U.S. Court of Appeals for the District of Columbia Circuit, all livestock farms, not just CAFOs, are required to report.

Between 60,000 and 100,000 livestock and poultry farmers will need to file air emissions reports with the U.S. Coast Guard National Response Center (NRC), beginning Nov. 15, as well as written reports with their regional EPA office within 30 days of reporting to the NRC.

Some farmers already have tried filing reports, but the NRC system has been overwhelmed. NRC operators are refusing to accept reports for more than a single farm per call because of concern that the phone systems will be tied up for non-emergency purposes. In one instance, an NRC operator sent notices out to more than 20 state and federal response authorities, including the Department of Homeland Security, the Centers for Disease Control and Prevention and a state policy agency, after receiving a phone call.

In seeking a second delay in implementing the CERCLA reporting mandate -- the original filing deadline technically was the day the federal court threw out the exemption -- EPA, NPPC and the poultry and egg association are asking the court to give the agency more time to "provide farmers more specific and final guidance before they must estimate and report emissions."

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket


John Harrington