DTN Early Word Opening Livestock

Cattle Staged to Open Significantly Higher

John Harrington
By  John Harrington , DTN Livestock Analyst
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Cattle: Steady-$2 HR Futures: 100-200 HR Live Equiv $133.02 + .15*

Hogs: Steady-$1 LR Futures: 25-50 HR Lean Equiv $ 82.85 + .27**

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

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

GENERAL COMMENTS:

Activity in cattle country Monday will be typically limited to the distribution of new showlists. We believe that the pre-Christmas offering will probably be steady to somewhat larger than last week. The trade is starting out with a strong basis, which could make it tough for feedlot managers to hold for higher asking prices, unless the board keeps running higher. Given the long holiday weekend ahead, buyers and sellers would like to have cash business completed by Thursday. We'll see. Live and feeder futures should open significantly higher, supported by the recent bullish cash news.

The cash hog trade seems set to open with bids steady to $1 lower. Last week's hog slaughter set a new record at 2.578 million head. This will put a lot of pork on the street this week at a time when pre-holiday is typically soft. Many believe last week's kill represented a seasonal top. Whatever, pork tonnage will remain ample through the end of the year. Lean futures are set to open moderately higher thanks to short-covering and spillover buying from the cattle complex.

BULL SIDE BEAR SIDE
1) Mid-December is not typically known for feedlot leverage and higher fed sales. Yet live steers and heifers sold $1 to $3 higher on Friday, an impressive sign of both feedlot currentness and packer demand. 1) Between the rising cost of live inventory and falling cutouts, beef processors are starting the week with narrower margins and possibly more defensive attitudes relative to procurement.
2) Triple-digit gains in live cattle futures late last week secured impressive technical progress with nearly all contracts closing well above 100-day moving averages. Furthermore, soon-to-be-spot February settled above its 10-day moving high. 2) The last fortnight of the calendar year typically sees slow and sluggish wholesale meat markets as the holiday needs for most retailers and food managers is already covered.
3) February lean hogs confidently assumed spot contract status last week as the December contract expired and the long-term trend remains positive. 3) For the week ending Dec. 12, noncommercial traders reduced their net-long position in lean hog futures by 4,900 contracts, now totaling right at 50,000.
4) Total pork exports are forecast to exceed fourth quarter 2016 by more than 6%. Export markets continue to help keep domestic markets tight on available supply, despite the record large fresh supplies of hogs. 4) The standard uncertainty leading up to quarterly Hogs & Pigs report often triggered a spate of long liquidation, especially in the face of substantial board premiums.

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OTHER MARKET SENSITIVE NEWS
CATTLE:

(beefmagazine.com) -- Slaughter cows prices started a seasonal decline and cattle movement slowed as prices declined.

Feeder cattle movement dropped quite a bit as a reaction to the declining prices with 36,900 head at the Southern Plains test auctions compared to 51,000 head the prior week and 46,000 head last year. Yearling prices were $3-9 lower with some locations even more than that and calf prices fluctuated more and were a couple dollars higher or lower depending on locations. Thinner, grazing type held up better as stocker operators are starting to put together calves for normal spring grazing.

Slaughter cow numbers starting the seasonal decline and price firmed up as packers start to build inventories prior to the big holiday shutdowns coming soon. Cow meat prices improved some. Also a discussion as to why there is a bigger spread between beef and dairy cow prices right now.

HOGS: (nationalhogfarmer.com) -- The U.S. General Accountability Office is calling on USDA's Agricultural Marketing Service to improve the oversight of commodity checkoff programs. GAO reviewed eight of the 22 federal checkoff programs.

GAO found that AMS needs a more consistent and better review of subcontracts to ensure the proper use of funds. Checkoff programs need greater transparency by posting all key documents, including budget summaries and evaluations of effectiveness with stakeholders on program websites.

The report says the independent economic evaluations looking at the effectiveness of the programs have shown positive financial benefits. However, the methodology used to evaluate the effectiveness of the checkoff programs differs across the programs and makes it difficult to compare. Of the eight checkoff programs reviewed, "benefits ranged from an average of $2.14 (for fluid milk) to $17.40 (for pork) for every dollar invested."

Of the 22 checkoffs, the range in assessment revenue in 2016 went from $332.1 million for dairy to popcorn at $600,000. Pork had an assessment revenue of $70.3 million.

Delay implementation of electronic logging devices for livestock haulers A group of 20 bipartisan Senators sent a letter to the Senate leadership calling for a delay in the implementation of electronic logging devices for commercial motor vehicles transporting livestock. The letter organized by Sens. Jerry Moran (R-KS) and Heidi Heitkamp (D-ND) asks the Senate leadership to support including in the final Fiscal Year 2018 Transportation, Housing and Urban Development appropriations bill the House provision that would delay implementation of ELDs and provide the Federal Motor Carrier Safety Association more time to review the needs of agriculture. This would give the FMSCA time to make the necessary adjustments to hours of service rules to address animal welfare concerns. A similar letter in the House of Representatives was signed by 67 Congressmen.

The Senators say, "These animals must be transported hundreds and even thousands of miles to their final destinations in a safe and humane manner. Long distance transportation is often the most stressful event in a livestock animal's life and it is impractical and inhumane to stop, offload multiples times, or significantly delay delivery of these animals."

The National Pork Producers Council has argued the requirement could have a negative effect on "animal well-being and that it is incompatible with DOT's Hours of Service rules." The DOT rules limit truckers to 11 hours of driving daily, after 10 consecutive hours off duty, and restrict their on-duty time to 14 consecutive hours, which includes non-driving time.

In November, the FMCSA allowed a 90-day waiver to exempt truck drivers hauling agriculture commodities from the Dec. 18 ELD implementation deadline.

As 2017 draws to an end there are still a number of key positions that are not filled at the USDA. Besides Secretary of Agriculture Sonny Perdue, there are only three key positions confirmed and in place-- Steve Censky, deputy secretary; Ted McKinney, undersecretary for Trade and Foreign Agricultural Services; and Greg Ibach, undersecretary for Marketing and Regulatory Programs.

The Senate Agriculture Committee has approved the nomination of Steve Varden as general counsel, but he still needs Senate confirmation. The White House has yet to announce the nominees for undersecretary of Food Safety, Natural Resources, Nutrition and Consumer Services, and Research, Economics and Education. Bill Northey's nomination as undersecretary of Farm Production and Conservation has been approved by the Senate Agriculture Committee, but Sen. Ted Cruz (R-TX) has placed a hold on the nomination because of the administration's position on the Renewable Fuels Standard.

The Republican House and Senate leadership announced they have reached an agreement on the tax bill but were still working on various details last night. They plan to vote on it next week so it can be on the president's desk prior to Christmas.

Details are slowly being released but what is known as of now is the estate tax will not be eliminated but the exemption will be doubled; the corporate tax bill be at 21% effective Jan. 1; top individual rate of 37%; and allow deduction of state and local taxes, including income and property taxes, up to $10,000.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington

John Harrington
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