DTN Early Word Opening Livestock

Livestock Futures Set for Mixed Late-Week Opening

John Harrington
By  John Harrington , DTN Livestock Analyst
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Cattle: Stdy/Frm w/Thurs Futures: Mixed Live Equiv $134.40 -1.14*

Hogs: Steady-$1 HR Futures: Mixed Lean Equiv $ 88.75 - .05**

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

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

GENERAL COMMENTS:

Light to moderate fed cattle volume was generated in most areas on Thursday with the best market test evident in the South where most live deals were marked at $121 ($3 higher than last week). Business in the North seemed more hit-or-miss (some $190 dressed/$120 to $121) with a good number of feedlot managers passing packer bids. Packers should need to own more cattle before calling it a week, especially in the North. The balance of showlists are priced around $122 to $123 in the South and $195 in the North. Live and feeder futures should open on a mixed basis as traders position ahead of late-week packer spending.

Look for the cash hog market to open steady to $1 higher Friday. With the rising cost of live inventory, processing margins have narrowed somewhat through the week. Yet profit opportunity remains decent enough to plan a Saturday kill close to 240,000 head or better. Lean futures are geared to open with uneven price action thanks to follow-through selling and late-year short-covering.

BULL SIDE BEAR SIDE
1) Short-bought cattle buyers in the South really came with it Thursday, spending as much as $3 more than last week for ready steers and heifers (i.e., $121). 1) Thursday's cattle board took back much of the midweek rally thanks to long liquidation, technical selling and cash uncertainty.
2) Net beef export sales last week totaled 13,800 metric tons, up 49% from the previous week and 7% from the prior four-week average. 2) Post-Thanksgiving beef demand continued to disappoint Thursday with cutouts quoted significantly lower and box offerings still described as "moderate to heavy."
3) The cash hog market has consistently marched higher this week, throwing water on bearish ideas that late-year numbers will be more than ample relative to demand. 3) Net pork export sales last week drooped to 15,400 MT, down 6% from the previous week and 3% from the prior four-week average. At the same time, actual pork exports of 21,700 MT were down 12% from the previous week and 9% from the prior four-week average.
4) Despite this week's fairly consistent retreat in lean hog futures, the short-term trend remains positive as does the long-term trend. 4) Although the summer 2018 contracts posted new life-of-contract highs during the session, contracts ended the session well off those highs. This week's more defensive board behavior probably suggests more commercial selling interest and caution.

OTHER MARKET SENSITIVE NEWS

CATTLE: (National Hog Farmer) -- The U.S. Government Accountability Office delivers five recommendations for checkoff programs after a comprehensive review. At the request of House Minority Leader Nancy Pelosi (D-Calif.), the GAO examined the USDA's Agriculture Marketing Service process overseeing checkoff programs.

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In 2016, checkoff funds totaled over $885 million for 22 commodity programs that conduct research and promotion activities to strengthen a commodity's position in the market.

"Got milk?", "The Incredible, Edible Egg" and "Pork: The Other White Meat" are examples of advertising campaigns undertaken by two of the 22 federal agricultural research and promotion programs. These programs, funded by a fraction of the sale of each unit of a commodity, are led by boards consisting of industry members appointed by the Secretary of Agriculture.

The GAO evaluated the extent to which AMS has addressed previously identified weaknesses in its oversight along with how the effectiveness of the programs has been evaluated and what the results have indicated. Eight programs, based on total funds collected, were selected and review laws, regulations and agency guidance. Interviews of agency officials, checkoff board executives and economists were also conducted.

In the report publicly released last week, the GAO advises the following changes to USDA AMS oversight of 22 checkoff programs to enhance transparency.

1. Subcontracts: The GAO says AMS has made a noticeable stride in improving its oversight of checkoff programs based on the USDA's Office of Inspector General's recommendations in 2012. However, GAO found that AMS does not consistently review subcontracts or ensure that certain documents are shared with stakeholders on program websites.

2. Increase follow-up: AMS should establish a mechanism for documenting and tracking follow-up with checkoff boards on the implementation of management review recommendations

3. Audit rules: AMS should ensure that annual independent audits include the five statements of assurance as outlined in the standard operating procedures.

4. SOPs: AMS should include in the guidelines and standard operating procedures that key checkoff board documents, such as bylaws and policy statements, annual reports and independent evaluations of economic effectiveness are posted on the checkoff programs' websites.

5. Independent evaluations: Independent economic evaluations of the effectiveness of checkoff programs, required by law to be conducted every five years, have generally shown positive financial benefits. For the eight evaluations GAO reviewed, benefits ranged from an average of $2.14 to $17.40 for every dollar invested in the programs. However, the evaluations varied in the methods used and had certain methodological limitations. Without developing criteria to assess the methodology and results of evaluations, the agency's assessments of independent economic evaluations may be inconsistent across checkoff programs and misleading to stakeholders. Therefore, GAO recommends AMS to develop criteria by which to assess the methodology and results of independent evaluations and document those reviews to ensure that the standard operating procedures are met.

As stated in the report, AMS officials also identified ongoing challenges in oversight across the 22 commodity checkoff programs. Specifically, AMS marketing specialists and senior agency officials identified three challenges: (1) the increase in some checkoff boards' use of social media, (2) the absence of an information system to track approvals, and (3) complex and time-consuming Freedom of Information Act requests for some programs. Because of competing priorities, some oversight duties may be delayed as a result.

HOGS: (Farm Journal) -- Raymond "Bob" Rowland, is doing his part to eradicate porcine reproductive and respiratory syndrome (PRRS) at Kansas State University. It is estimated that the virus costs the U.S. pork industry more than $600 million in losses every year.

"In his latest study, Rowland, professor of diagnostic medicine and pathobiology in the College of Veterinary Medicine, has created a way to protect offspring from the PRRS virus during pregnancy," a news release from KSU said. "He has found that mothers without the CD163 protein are resistant to the PRRS virus and give birth to healthy, normal piglets. The work appears in Nature's Scientific Reports."

"We have created a protective shell against the PRRS virus during the reproductive phase of production," Rowland said in the release. Offspring don't become infected during pregnancy, hence healthy piglets are born, which means during this particular phase of production, the disease can't exist.

The PRRS virus causes disease in two forms: a respiratory form that weakens young pigs' ability to breathe and a more severe reproductive form that causes mass deaths in pigs during late pregnancy.

"The reproductive form not only has a tremendous economic impact, but also a psychological impact on people who work with pigs," Rowland said in the news report. He has spent more than 20 years studying the PRRS virus, and said, "When we look at ways to control this disease, it really begins with reproduction. We want to keep this disease out of the reproductive process and we have found a way to do that."

Rowland collaborated with Randall Prather, a professor at the University of Missouri, and a team to develop PRRS-resistant pigs. PORKBusiness.com reported on this breakthrough in Dec., 2015. Using CRISPR/Cas9 technology, the researchers found that pigs without the CD163 protein showed no signs or evidence of being infected with the PRRS virus. CD163 is the receptor for the virus.

The research has the potential to save pig farmers millions of dollars, Rowland said.

However, it's not a silver bullet. Even though offspring can be born without the virus, they may still be susceptible to the disease later in life.

"This is one tool that we can use," Rowland explains. "It doesn't mean that we can give up on vaccines or diagnostics, but it does create more opportunities for other tools to become more effective. Because this pig is born healthy, it will respond better to a vaccine or a diagnostic test. We are enhancing other aspects of disease control as well.

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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