DTN Early Word Opening Livestock

 
Cattle: Steady/Weak w/Tues Futures: 25-50 HR Live Equiv $141.59 + .20* 
Hogs: $1-2 HR Futures: Mixed Lean Equiv $ 84.72 + 1.11**
* 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 buyers and sellers have reached midweek and cash business seemed to be pretty much wrapped up. Frankly, we can't remember ever saying that before. Clean-up business is certainly possible. The balance of showlists are probably priced around $122 in the South and $194 plus in the North. Live and feeder futures should open moderately higher, supported by short- covering and cash premiums.

Look for bullish momentum to persist in the cash hog trade Wednesday. Opening bids are likely to present $1 to $2 higher than Tuesday. Between aggressive spending and ambitious chain speed, it quite clear that packers like their work. The same can be inferred about Saturday kill plans as large as 150,000 head. Lean futures should open on a mixed basis linked to a combination of follow-through buying and profit-taking.

	BULL SIDE		BEAR SIDE
1)	Though the pace of appreciation slowed Tuesday, beef cutouts rose, further padding packer margins and encouraging chain speed necessary to safeguard feedlot currentness.	1)	Although live and feeder futures closed moderately higher Tuesday, the rather modest rally in the wake of the price avalanche seemed like a pretty sorry dead cat bounce.
2)	Another extreme blast of winter seems set to hit parts of the Northern Plains over the next several days, checking livestock safety and performance.	2)	Cash cattle traders continued to throw in the towel on Tuesday with a significant number of dressed steers and heifers marked at $192, $2 lower than Monday and $3 below last week
3)	The pork carcass value closed with impressive strength on Tuesday thanks to better demand for bellies, hams and picnics.	3)	This week's hog kill is off to a very aggressive start with 467,000 bell rang on Tuesday. Some believe the weekly slaughter could end up dangerously close to 2.5 million head.
4)	Once again the cash hog trade surged higher Tuesday with the national lean base closing $1.72 while moving just moderate numbers.	4)	From this point forward, the seasonal trend is for the February lean hog contract to work erratically lower into expiration. As strong as the cash market seems in early January, lean futures may be overextended at the present time until there is more solid evidence that the cash market can continue to work higher.

OTHER MARKET SENSITIVE NEWS

CATTLE:(Dow Jones) -- Leucadia National Corp. is exploring a sale of part or all of its stake in its National Beef Packing Co. unit, one of the biggest U.S. meat-processing companies, people familiar with the matter said.

Leucadia owns a 79% stake in the Kansas City, Mo.-based beef giant, a 26-year-old supplier of steaks, hamburger and other beef products. A sale would see Leucadia exit a big bet on beef at a time when the industry is rebounding from a rough patch, thanks to rising consumer demand and cheap grain prices.

Leucadia purchased the National Beef stake in 2011 for $868 million and is working with advisers to explore options for that stake, people familiar with the matter said. It is unclear how much the business might fetch from a suitor.

The process is at an early stage and Leucadia may opt not to move forward, one person said.

National Beef ranks among Leucadia's largest businesses. The New York conglomerate's biggest is the financial firm Jefferies Group. It has also invested in industries ranging from lumber production to gold mining to a foreign-exchange brokerage.

Leucadia is weighing the sale as profits fatten for processors such as National Beef, which slaughters about 12.5% of U.S. beef cattle. Beef exports in 2017 climbed nearly 13%, according to estimates from the U.S. Department of Agriculture, led by growing sales to Japan, Hong Kong and Korea. Foreign sales of U.S. beef are projected to climb another 4.5% in 2018.

In the U.S., beef consumption is estimated at 58 pounds per capita in 2017, the highest level since 2010.

Demand for beef is climbing as the cost of raising cattle has declined. Feed -- the biggest cost involved in raising livestock -- remains cheap. U.S. farmers last fall harvested what is expected to be another record corn and soybean crop, the latest in a string of bumper harvests that has driven down crop prices. Ranchers have responded by raising more cattle, helping boost the size of the U.S. beef cattle supply by 12% since early 2014 when a drought had forced many ranchers to reduce the size of their herds.

"We can now say with much greater confidence that the beef cycle has indeed turned in our favor," company executives wrote in their annual letter to shareholders, which was issued in late February 2017.

Leucadia bought its stake in National Beef as part of a long-term bet that a growing and more-affluent global population would put more beef on dinner tables. Executives then acknowledged the meat business's exposure to price swings, and as the beef industry struggled against drought and other challenges, National Beef lost money in 2013, 2014 and 2015.

In 2016, National Beef swung to a $329 million profit, and over the first three quarters of 2017 National Beef's profit jumped 61% to $310 million from the same period in the prior year. In a regulatory filing, Leucadia listed the net book value of its National Beef investment at $629.8 million as of Dec. 31, 2016.

National Beef ranks as the fourth-largest U.S. beef processor behind Tyson Foods Inc., JBS SA and Cargill Inc. Besides beef, the company also sells cattle hides to leather makers for clothing, furniture and car seat covers.

HOGS: (National Pork Board) -- U.S. pork producers receive a positive return on their Checkoff investment, according to a 2017 study conducted and released by Harry Kaiser, the Gellert Family Professor in the Dyson School of Applied Economics and Management, Cornell University.

Additionally, 91 percent of pig farmers who took part in the annual producer survey in November acknowledge their overwhelming support of the Pork Checkoff, with a record-low opposition of just 3 percent.

An economic analysis of Pork Checkoff programs is commissioned every five years by the National Pork Board. The study quantifies the returns generated by Pork Checkoff investments in research, pork promotion and producer education programs. The latest results, published in 2017, cover 2011 to 2016 programs.

"It's important to producers -- those who directly fund the Pork Checkoff -- to understand and quantify the value of their investments," said Terry O'Neel, National Pork Board president and a pig farmer from Friend, Nebraska. "The results indicate a positive impact of all aspects of the Pork Checkoff, from conducting production-focused research to growing consumer and export demand for pork."

Specifically, the study documented a growing return on investment through defined benefit-cost ratios across several key program areas from 2011 to 2016:

•Production Research: Each dollar invested in production research to benefit on-farm practices yielded $83.30 in producer value.

•Foreign Market Development: Each dollar invested in developing foreign markets yielded $24.70 in producer benefits.

•Advertising and Non-advertising Promotion: Other pork promotion resulted in benefits of $14.20 for advertising and $12.40 for non-advertising promotion.

•Research to Grow Demand: Research on market drivers returned $8.30 for each $1 invested.

•Net Result: Collectively, the overall return of Checkoff program activities is $25.50 for each dollar invested.

The U.S. Department of Agriculture requires a return on investment analysis every five years. The 2001 to 2006 study showed an overall return of $13.80 to $1 invested, and the most previous study, released in 2012 for the time period of 2006 to 2011, found a return of $17.40 to $1 invested.

"This analysis provides a comprehensive review of program development, and more importantly, efficiency of our Checkoff program administration," O'Neel said. "The net return of 25 to 1 on Checkoff investments demonstrates that we are meeting producer needs in the areas that drive sustainable production and grow consumer demand."

The Pork Checkoff also reports findings from a study that gauges producer support of the Pork Checkoff. Since 2002, the National Pork Board surveys producers annually to gain insight about the condition of the industry, general attitudes on pig farming and their support of the Checkoff. The most recent survey of 550 pork producers, conducted Nov. 6-16, 2017, showed that for the eighth consecutive year, pig farmer support for the Checkoff has improved.

Support for the Checkoff remained at 91 percent, while opposition declined to a record low of 3 percent, which is down from 4 percent in 2016.

Other Highlights:

•Right direction/wrong track: Producers grew in their industry optimism despite market supply pressure and other issues they face. In 2017, 78 percent of producers said that the industry was heading "in the right direction," up from 76 percent in 2016. Only 12 percent said that the industry was "on the wrong track," an improvement from a 2016 score of 19 percent.

•Support for the Pork Checkoff and general optimism of the industry was strongest among larger producers, or those that marketed more than 80,000 pigs in 2017. Support from this group was 95 percent.

•The No. 1 challenge facing producers was "managing hog health and disease," which was a change from 2016's No. 1 concern of "too many rules/regulations."

Regarding awareness and support of the strategic plan, the primary Pork Checkoff goals resonated with the random sample of producers surveyed. On a 10-point scale:

•Build Consumer Trust rated a mean score of 8.95, up from 8.91 in 2016.

•Grow Export Demand rated a mean score of 8.69. This was a new category this year since "Grow Consumer Demand" was broken into two elements -- export and domestic demand.

•Grow Domestic Demand rated a mean score of 8.64, down from 8.70 in 2016.

•Drive Sustainable Production rated a mean score of 8.28, up from 8.18 in 2016.

"These are the most positive results we have seen since we began the producer survey 15 years ago," O'Neel said. "The findings underscore the value that the Pork Checkoff team delivers day-in, day-out to the pig farmers who fund the Checkoff. The results demonstrate that the board's strategic goals are aligned with producers' interest.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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