DTN Early Word Opening Livestock

Lean Hog Paper Set to Open Moderately Lower

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

Cattle: Steady-$2 HR Futures: Mixed Live Equiv $133.94 + .92*

Hogs: Steady-$1 LR Futures: 50-100 LR Lean Equiv $ 82.85 -1.71**

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

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

GENERAL COMMENTS:

We don't expect to see many signs of life in the cash cattle market Tuesday with bids and asking prices remaining poorly defined. While it sounds like the pre-holiday fed offering is generally smaller than last week, the same may be said about packer appetite. Our guess is that packer inquiry will start to improve on Wednesday, with significant trade volume delayed until at least Thursday. Live and feeder futures are likely to open on a mixed basis as traders position ahead of cash news and the Dec. 1 Cattle on Feed report set to be released Friday afternoon at 2 p.m. (CST).

The cash hog trade should open with bids steady to $1 lower. Packers are planning a large Saturday kill close to 300,000 or more, a function of workable margins and compensation for Christmas-related downtime. Lean futures seem staged to open moderately lower, pressured by struggling carcass value and further long liquidation prior to the quarterly snout count.

BULL SIDE BEAR SIDE
1) New showlists distributed in cattle-feeding country look generally smaller with only Nebraska offering more ready steers and heifers. 1) Given the way deferred live cattle futures failed to follow spot December higher Monday, it's clear that bulls are having more and more deferred board premiums.
2) Beef cutouts on Monday were quoted significantly higher with early-week box demand described as "moderate to good." 2) Furthermore, there are reasons to doubt the sustainable health of the recent rally in live futures (i.e., long on short-covering and short on new buying). A sharp decline in net-long positions among the noncommercials in the week of Dec. 12 was followed by further declines in open interest through last week, culminating in a decline of 9,000 contracts by Friday.
3) Spot February lean hogs may be seen as floating too high over cash, but it's not all that vulnerable in an historical context. The structure of the market remains positive as February is trading at a fairly "typical" premium to cash at the present time. 3) The pork cutout on Monday closed sharply lower with softer demand reported for all primals except the butt.
4) Most analysts are banking on an increase of 2% of total hog numbers as of Dec. 1. But the combination of better-than-expected finishing floor margins and stubbornly cheap feed could easily stoke greater expansion interest. Any bullishness in production above 1.5% increase in farrowings for the September to November timeframe would probably be considered bearish to hog price. 4) The lean hog cash index continues to drift, making the February premium more suspect with each downward step. Many believe cash sales could consistently bleed through the end of the year.

OTHER MARKET SENSITIVE NEWS
CATTLE:

(AgWeb) -- Farmers in Alabama and Nebraska joined with a Nebraska-based fair trade group Thursday to sue the U.S. Department of Agriculture over the agency's cancellation of an Obama-era plan that would have made it easier for farmers to demand better treatment when they contract with meatpacking companies.

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The lawsuit seeks to reverse the USDA's October decision to vacate the Farmer Fair Practices Rule — regulations that would have, among other things, reduced the burden of proof farmers face to sue over contracts and practices they believe are unfair, discriminatory or deceptive.

"We know from decades of evidence that massive agribusiness companies don't hesitate to use their power to abuse these farmers, and the Farmer Fair Practices Rule was a crucial step to restoring fairness in the market," said Anne Harkavy, executive director of nonprofit legal group Democracy Forward, which filed the lawsuit on behalf of Lincoln, Nebraska-based Organization for Competitive Markets; Nebraska farmer James Dinklage; and Alabama farm couple Jonathan and Connie Buttram. "It should be restored either by USDA, or by the court."

USDA spokesman Jake Wilkins declined to comment, saying the agency doesn't discuss pending litigation.

The rules were first proposed by the USDA in 2010 but were not released until last December in the final days of President Barack Obama's administration. They were scheduled to take effect on April 22, but President Donald Trump's administration delayed them for six months before the USDA announced in October that it would not implement them.

The suit, filed in the 8th U.S. Circuit Court of Appeals, alleges Agriculture Secretary Sonny Perdue ignored thousands of comments in public hearings and submitted in writing and unlawfully sidestepped directives in the 2008 Farm Bill mandating some of the rules be enacted.

Trade groups for the meatpacking industry, including the National Chicken Council and the National Pork Producers Council, had complained that the rules would lead to costly lawsuits and would reduce competition.

Some companies, such as Tyson Foods and Pilgrim's Pride, require chicken and pork producers to enter into contracts that farmers say set their compensation at unprofitably low levels and force them deeply into debt.

Several court rulings have interpreted federal law as saying a farmer must prove a company's actions harm competition in the entire industry before a lawsuit can move forward. The rules would have eased that high burden of proof.

The elimination of the rules has helped large multinational corporations get the upper hand on farmers, said Joe Maxwell, a Missouri hog farmer and executive director of the Organization for Competitive Markets, a nonprofit think tank focused on antitrust, trade policy and competitive markets.

"In doing so, Secretary of Agriculture Perdue and the administration have thrown America's farmers to the wolves, telling them that their family businesses don't matter," Maxwell said.

Named in the lawsuit are the USDA, Perdue and the U.S. government

HOGS: (Farm Journal) -- After several delays in the past year in setting an effective date for the final rule in organic livestock and poultry practices, Agriculture Secretary Sonny Perdue Tuesday announced his agency will withdraw the proposed rule.

Signed in the final hours of the Obama administration, the Organic Livestock and Poultry Practices (OLPP) rule would have added provisions for livestock handling and transport for slaughter and expand existing requirements of livestock care. In November, the rule was delayed until May 14, 2018.

In September, OTA responded to the string of delays by filing a lawsuit against USDA seeking judicial review.

The National Pork Producers Council (NPPC) released a statement in favor of USDA's dismissal, saying the "standards were not based on science and that were outside the scope of the Organic Food Production Act of 1990."

"We'd like to thank Sec. Perdue and the Trump administration for listening to our concerns with the rule and recognizing the serious challenges it would have presented our producers," says Ken Maschhoff, NPPC president and a pork producer from Carlyle, Ill.

Although larger organic interests such as the Organic Trade Association supported the rule, many commodity groups such as NPPC and the National Cattlemen's Beef Association voiced opposition, citing concerns about more barriers to the organic certification process and increasing costs without providing animal welfare benefits.

In withdrawing the rule, the USDA determined the regulation exceeded the agency's authority and that it would have had a greater economic impact on farmers than originally estimated.

The withdraw notice, which will be published in the Federal Register next week, is subject to a public comment period.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington

John Harrington
Connect with John: