DTN Early Word Opening Livestock

 
Cattle: Steady-$2 LR Futures: Mixed Live Equiv $148.38 - .18* 
Hogs: Steady Futures: Mixed Lean Equiv $ 83.14 + .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:

Look for a typically slow Monday in cattle country with the distribution of showlists about the only order of business. We expect the early-month offering to be steady with last week. Feedlot managers will be slow to price cattle, carefully monitoring the board for clues in that regard. Live and feeder futures seem ready to open mixed thanks to a combination of residual selling interest and short-covering/profit-taking.

Hog buyers will probably return to work Monday. The product trade caught a little bounce late last week, but many doubt that carcass value can steadily improve as long as weekly slaughter remains so large. Indeed, don't be surprised if weekly kills hang right at 2.4 million head pretty much through the entire month of March. Lean futures should open the week on a mixed basis thanks to uninspiring fundamentals on one hand and oversold charts on the other.

	BULL SIDE		BEAR SIDE
1)	First-of-the-month paychecks should have helped better meat counter clearance over the weekend.	1)	The substantial discount of April live futures to the last test of feedlot cash will make it difficult for cattle feeders to hold for steady/firm prices. The combination of impressive basis strength and negative board psychology could easily encourage selling sooner rather than later.
2)	The stubborn discounted structure of the board and falling carcass weights suggests the feedlot managers are aggressively pulling cattle futures. Such currentness could pay bullish dividends in early spring when packers typically run short of finished yearlings and cannot reach out for fed calves.	2)	For the week of Feb. 27, the net-long position in live cattle futures held by noncommercials declined by 3,300 to a total of 104,700 contracts.
3)	The pork carcass finally seemed to dig in Friday, bouncing moderately higher with the help of better demand for fresh cuts (especially loins).	3)	Generally speaking, the hog industry has entered a bit of a dark tunnel since pork demand is nearly at its weakest seasonal basisthrough the month of March.
4)	For the week ending Feb. 27, noncommercial traders increased their net-long position in lean hog futures by 1,100 contracts, pushing it to 17,800.	4)	With Easter early this year, hams will be weakening sooner rather than later, which will probably put softness in the cutouts as early as midmonth.

OTHER MARKET SENSITIVE NEWS

CATTLE:(beefmagazine.com) -- If 2017 will be remembered in cattle country for anything, it will go down as a year of surprises. That's what Glynn Tonsor, professor of agricultural economics at Kansas State University, told cattle feeders at a presentation hosted by Performance Livestock Analytics last week in Sioux Falls, S.D.

"We no longer have tight supplies, 2017's calf crop was nearly a 4% increase following 2016's 6% higher beef production numbers and 2018 projections show another 5% increase in beef volume," Tonsor said. "What is certain is a larger calf crop, but what's not certain is projected slaughter weights for 2018. Last year, producers kept weights in check, marketings stayed current, and we had a better year as a result."

"Surprising market prices wrapped up 2017." That rarity occurred when average calf prices for the fourth quarter were higher than the average in all other quarters of the year. The industry witnessed a price rally at a time of the year typically associated with lowering prices due to numbers of cattle marketed in the fourth quarter.

Tonsor emphasized the impact of trade, reminding producers many products exported by the U.S. would never be consumed in the typical American diet, yet garner a premium in overseas markets. "At the end of the day, cash fed beef price is at least $10 per cwt higher because of export demand."

Tonsor reports demand strength offset the increase in beef production enough that 2017's fourth-quarter fed cattle prices were up 9% and feeder calf prices up 23%. "Export growth and domestic beef demand continues to put dollars back in producers' pockets."

2017 provided much needed equity back to the feedlot industry and 2018 looks to be better than Tonsor anticipated, but the outcome will continue to be closely tied to demand. "Anything which hurts demand or exports can cause a big hit on fed cattle prices."

Cattle feeders in attendance were excited to hear Tonsor confirm the shift in cow numbers moving more north and west over the past 10 years. Since 2008, South Dakota tallied a 9.5% increase in beef cow population, North Dakota numbers are up 6.5%, with Missouri's growth at 4.6%. Although still ranking number one in cow numbers, Texas's inventory has fallen 11%. "As northern cattle feeders, this provides an opportunity of increased availably for cattle accessible to enter your feedyard."

One of Tonsor's greatest concerns in 2018 is not only the increase in cattle supply, which will push demand to hold its own, but the projection of heavier end weights adding more total tonnage to an already big production number. The Livestock Marketing Information Center (LMIC) projects 2018 could record a 4.7% increase in commercial beef production, both due to increased supply and weight.

He cautions with low commodity prices, feeders and producers may choose to run their own grain through their cattle without placing full value on the feedstuffs. This action historically produces heavier animals, which has market consequences.

"A lot of things work when you are the only person doing it, but they sometimes don't work as well when done collectively." In this case, Tonsor is concerned about the risk factor-- more pounds hitting the market, putting pressure on price.

Tonsor highlighted three areas for cattle feeders to consider as ways to increase margins and improve management.

"Risk management shrinks the highs and the lows," he says. "It's hard to get the benefit of the upside of the market and protect yourself from the bottom lows. "Research has found not only opportunities if you lock into the market, but opportunities can vary by month. You need a data tracking system or to be diligent when monitoring the futures."

Second, focusing on a 1% improvement in any aspect of your operation can result in better returns. He suggests a good place to start is focusing management efforts on making efficiency improvements on cost of gain, as many producers are output price takers, reducing comparative opportunity for fed cattle price gains.

Furthermore, Tonsor reminds feeders not to become complacent when monitoring cash markets. For example, he referenced the Five Area market average, pointing out past variances in the representation by region. "Understand your market, figure out how you are different from the averages and how you can make improvements that will impact your profitability."

HOGS: (Farm Journal) -- The pork industry needs to "move at the speed of business," says Bill Even, CEO of the National Pork Board. During the Pork Industry Forum in Kansas City, Mo. this week, Even addressed producer-delegates during the annual meeting and spoke to media in a press conference following the meeting.

Farmers who raise pigs are businesspeople, and the industry needs to be ahead of the curve to enhance and positively impact its outlook At a press conference on Thursday, Even discussed six key areas that will receive emphasis in 2018.

1. Emphasis on domestic marketing: The domestic marketing team will engage in research, outreach and especially the WeCare 2.0 program to help make members of the food chain more aware of production practices. He announced during the meeting earlier on Thursday that American consumers buy fresh pork loin cuts, on average, 6.2 times per year based on Nielsen research that tracks point-of-purchase sales at retail. That's a number that needs to change, Even says.

"If half of fresh pork buyers (those already buying fresh pork) bought one more time per year, it would be worth over $400 million in revenue," Even says.

2. State collaboration: "Together we'll be stronger," Even says. State organizations have experienced, creative staff members. The national organization is involving state staff in strategic planning and Even says "it's gone over really well."

3. Communications: More needs to be done to drive the power to tell pork's story, Even notes. He says the communications staff at the National Pork Board is focused on a "digital-first mindset. "We want to make sure our information is current, crisp, timely and actionable," Even says. "We need to understand what everyone else is talking about in society." He adds that the industry needs to meet consumers on their own terms instead of trying to drive them to what the industry wants to talk about.

4. Marketing: Key players in the meat chain need to know what U.S. pork has to offer, Even stresses. The 2018 World Meat Congress will be held in Dallas, Tex., this year, and it will be a great opportunity to showcase U.S. pork. About 1,000 people from all over the world will be in attendance and NPB is a sponsor. "This meeting is "critically important especially with high trade tensions. We want to make sure we don't lose pork's pole position," Even says.

5. Sustainability and We Care: The organization is committed to learning what other groups think about the industry in terms of sustainability. While knowledge about We Care is very high by producers, the rest of the supply chain has limited knowledge of the program. Even says they're "asking a lot of questions and doing a lot of listening to non-governmental organizations, the supply chain and consumers. "I'm excited that the boards of both organizations (National Pork Board and the National Pork Producers Council) see this as a priority.

6. Technology: "The speed at which technology comes at us is scary, but we're on the cusp of being able to do some fantastic things," Even says. He says the industry will maintain its competitive edge by keeping up on technology and embracing what it can offer, particularly in the areas of trade, transparency and traceability.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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