DTN Early Word Opening Livestock

Hog Paper Staged to Open With Firm Undertone

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

Cattle: Steady Futures: 25-50 HR Live Equiv $136.70 - .37*

Hogs: Steady-$1 HR Futures: 50-150 HR Lean Equiv $ 87.58 - .35**

* 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 begin to show life Tuesday. Perhaps action on the FCE will spark greater thoughts of business in the country. Feedlot managers will also be watching the board before getting too excited about pricing ready steers and heifers. Our guess is that asking prices will start out around $121 to $122 in the South and $192 to $195 in the North. Significant trade volume may not surface until Thursday or Friday. Look for live and feeder futures to open some higher, girded by residual short-covering and ideas of cash market stability.

Hog buyers should resume work at midday with firm bids, building on the more aggressive spending pattern displayed on Tuesday. It sounds like packers are planning another large Saturday kill, perhaps as large as 245,000 head. Bullish action on the board Wednesday was quite impressive without 2018 issues setting new contract highs. Lean futures should open solidly higher Tuesday, supported by follow-through buying and surprisingly friendly late-year fundamentals.

BULL SIDE BEAR SIDE
1) Live and feeder contracts successfully shook off heavy selling late day, closing no worse than mixed, thanks to aggressive short-covering and ideas of cash stability/firmness. 1) Wednesday's closing box report served up more disappointing evidence of post-Thanksgiving beef demand. Cutouts settled lower with the choice box losing nearly a buck. Furthermore, box supplies were described as "moderate to heavy."
2) February and April are carrying larger than average premiums to December, which is positive to producer attitudes for late in the year and heading into the new year. A continuation of these large premiums could start encouraging producers to slow marketing rates in the coming weeks, in an effort to boost cash cattle prices and capture some of the premiums implied by the current market. 2) The chief executive of Brazilian meatpacker Minerva said on Tuesday that the company, based on consultations with the country's agriculture ministry, expects Brazil to resume fresh beef exports to the U.S. in the first quarter of 2018.
3) In a shocking display of late-fall strength, the national lean hog base surged $1.30 higher on Tuesday with apparently short-bought packers gathering as many as 21,565 head on a dressed basis. 3) Successful Farmer's recent "Pork Powerhouses 2017" confirmed very aggressive expansion plans. When all 40 companies surveyed are summarized, there are almost a-quarter-million more sows Tuesday than there were one-year ago, the most expansion this annual survey has seen in 10 years.
4) The late-year rally in lean hog futures really gathered steam on Tuesday with December through April surging by triple digits. There seems to be growing confidence in some circles that the worst of the fourth quarter supply fundamentals are behind us. 4) Notwithstanding Wednesday's isolated cash jump, evidence of hog availability suggests packers can be patient in pulling hogs, as even more hogs are available right around the corner.

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OTHER MARKET SENSITIVE NEWS

CATTLE: (moultrieobserver.com) -- Local and corporate dignitaries celebrated an expansion of National Beef Monday with a groundbreaking for a 40,000-square-foot addition to the meat processor's Moultrie plant.

"This expansion we're about to undertake will transform this facility into one of the premium consumer-ready facilities in the country," National Beef CEO and President Tim Klein said during the ceremony.

The expansion is expected to add 100 jobs to the 300 people already employed there, company officials said. The work force numbered 450 at its peak in 2013.

Klein mentioned "lean times" that started that year, when Wal-Mart did not renew its contract for meat from the company. "But you stayed with us," he gratefully told representatives of plant employees as well as leaders of the community.

Hiring is expected to begin in the third quarter of 2018, with the new part of the plant to come on-line in the fourth quarter.

This expansion will involve an investment of more than $30 million to include a physical plant expansion as well as new processing and packaging equipment, David Davidson, vice president of case ready operations, told The Observer when the expansion was announced two weeks ago.

Darrell Moore, president of the Moultrie-Colquitt County Development Authority, recounted the history of meat packing in Colquitt County. Moultrie Packing Company-- opened in 1914 and was bought by Swift and Co. in 1917-- is responsible for the mascot of the high school football team, the Colquitt County Packers, he said. Swift and Co. employed more than 700 people at its peak in the 1950s.

Swift and Co. was bought out by Premium Pork, which eventually closed the plant in 1996, and Moore said economic development officials immediately started trying to market the facility with little success.

He said they were trying to get a hamburger plant to expand there from out of town in 1999, but the company kept putting them off. When he asked them why, they told him they were watching a competitor that was considering a move to Middle Florida. They didn't want to act until they saw what the competitor was going to do. He asked who the competitor was, and they said, "Farmland-National Beef."

"Thirty minutes later I was on the phone with Farmland-National Beef," Moore said.

The facility opened in 2001, the first beneficiary of the state's One Georgia EDGE Grant, which continues to use proceeds from the tobacco settlement of the late 1990s to help create jobs throughout the state.

"Moultrie and Colquitt County definitely got the right company," Moore said. "… I know National Beef is committed to Moultrie. I know we're committed to National Beef. I only hope they're here for 82 years like the first one (Swift and Co.)."

HOGS: (wnax.com) -- The Trump administration's focus for trade has been achieving bilateral agreements. One potentially good deal and market for U.S. pork would be India. National Pork Producers Council Vice President and Counsel for Global Government Affairs Nick Giordano says while India may not be as big a market as Japan, it has promise for American pork exports just due to its large population base.

He says another advantage to doing business with India is there aren't any sensitive trade issues for negotiators to overcome.

Giordano says USDA Undersecretary for Trade and Foreign Affairs Ted McKinney was in India recently and that bodes well for future pork business.

McKinney says India could begin allowing U.S. pork into their country as early as next year.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington

John Harrington
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