DTN Early Word Opening Livestock

Livestock Futures Set to Open With Mixed Prices

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

Cattle: Steady Futures: Mixed Live Equiv $149.63 - .03*

Hogs: Steady-$1 LR Futures: Mixed Lean Equiv $ 79.93 +1.45**

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

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


Generally speaking, we think of Tuesday as a do-nothing link in the weekly chain of cattle market. Tuesday will probably reinforce that general rule. Yet we've been surprised several times so far this year with its extraordinarily strong basis by the early development of cash trading. If the board continues to break and packers show near steady bids, we could indeed see trade volume develop as early as Tuesday. If the board stabilizes, significant trade volume could be delayed as late as Wednesday or Thursday. Opening bids will probably start out around $125 to $126/$203 to $204. Asking prices may begin around $128 to $127 live/$206 plus dressed. Live and feeder futures should open with uneven price action thanks to a combination of residual selling interest and short-covering tied to cash premiums.

The cash hog trade is expected to open with bids of steady to $1 lower. Carcass values seems to be bouncing higher for at least a moment following last week's wholesale train wreck. It will be interesting to see if this recovery can be extended through the balance of a month not known for good pork demand. This week's slaughter could total as much as 2.42 million head. Lean futures are staged to open on a mixed basis with deferreds probably better supported than nearbys.

1) Even though beef cutouts were no better on mixed, good demand continues to hold carcass value at a pretty high level, one that sponsors decent packer margins and, in turn, feedlot cash stability. 1)

Although showlists in the North look some smaller, the overall offering seems larger with more ready cattle seen in the South (especially Texas).


Not only have feedlot managers been holding fed sales steady/firm for the last seven weeks, they have also been pulling numbers forward. While it's obvious by board discounts that many expect a "wall" of cattle to appear sometime in the spring and early summer timeframe, one could argue that the aggressive marketing through the late winter period could push any major shift in supply further back on the calendar that many currently anticipate.


Live and feeder futures quickly reversed Friday's price pop on Monday, perhaps reminding would-be speculators and commercials alike that short-term rallies are for selling.


The pork carcass value is showing signs of a rebound with the carcass value jumping more than a buck higher on Monday. The big driver was the belly primal, recovering to the tune of $7.22.


Lower cash hog prices, along with concerns whether export and domestic pork demand will be strong enough given the large available hog supplies projected in the coming months, pressured the futures market Monday.


With the March 1 Hogs and Pigs Report due two weeks from this coming Thursday, bears may start calling off the dogs, both in the face of inventory uncertainties and the general consensus that the next seasonal price swing should be higher.


Hog/pork industry fear retaliatory tariffs from Trump's signature on steel and aluminum tariffs last week. Such fear is only exacerbated with the knowledge that the new version of TPP is set to go ahead without the U.S. (see article below).


CATTLE: (Bloomberg News) -- For the last seven years Porter Road has carved out a profitable niche selling small-batch meat to discerning shoppers in Nashville, Tennessee. Keen to start peddling its prime cuts of beef, pork and lamb to the rest of the country, the butcher opened an online store last month.

Porter Road and an expanding list of upstarts are tapping into growing demand for meat that's sustainably raised on family farms even as Americans open their minds and wallets to buying fresh food online. While a tiny part of the almost $55 billion U.S. meat industry, these companies are providing an alternative -- albeit a pricey one -- to the mass-produced steak, pork and chicken sold by giant agribusinesses like Perdue and Tyson.

"What we're trying to do is bring fresh meat delivery service into the 21st century," says Porter Road co-founder James Peisker.

Delivering meat to people's homes is not a new idea. Omaha Steaks, founded about a century ago in the namesake Nebraskan city, started a mail order business in 1953 -- shipping its meat in wax-lined boxes filled with dry ice. Tuesday the closely held, family-run company has an online store but emphasizes quality, price and free shipping -- not the provenance of its meat.

Upstarts like Porter Road, Greensbury Market, ButcherBox and Crowd Cow are all about where the food comes from, how it's raised and where it's slaughtered. Their philosophy echoes an ethos long espoused by Whole Foods and now creeping into mainstream grocers. It started in the produce aisle with organic fruits and vegetables and has spread to meat and fish. Consumers are particularly enamored of grass-fed beef, annual sales of which have exploded more than 2,000 percent in the last five years to almost $360 million, according to Nielsen.

"Technology allows these companies to go after that leading-edge consumer, it's a perfect marriage," says Carl Jorgensen, director of wellness strategy at Daymon Worldwide, a retail marketing firm. "There's a group of people who don't think organic is enough; they're getting fussier about what they're eating."

Porter Road is like many of the specialty butcher shops that have opened in recent years -- with a key difference: it processes the animals in-house, rather than outsourcing the job. Workers at a slaughterhouse in Kentucky employ traditional methods and use the entire animal, selling the bits consumers don't typically want to wholesale operations and other companies. Porter Road also does its own packaging and fulfillment, so it's the only entity touching the meat between the farm and the customer. The packaging insulation is corn-based and dissolves in water.

The butcher, which sells a $100 starter pack containing dry aged steaks, pork chops, ground beef, bacon, country sausage and chorizo, says it generates average margins of about 40 percent on each box of meat -- including the cost of the animal, packaging, labor and shipping. Porter Road says its farmers earn more because there are no middlemen. The company raised $1.5 million in July from venture capital investors.

Looming over Porter Road and other online butchers is Amazon.com Inc. The e-commerce giant sent a shudder through the entire grocery industry when it acquired Whole Foods last year, accelerating its own push into fresh food delivery. Greensbury Market, a New York purveyor of premium meats that opened its online store about 10 years ago, was trying to raise money from investors when the deal hit.

"We had some investors who very directly said that if Amazon goes into your market, they'll put you out of business," says Ted Hopper, Greensbury Market's chief executive officer. "I think that's a lazy perspective. There are people who don't want to buy everything on Amazon." Hopper says sales surged more than 50 percent in 2017, in part because customers are losing trust in Whole Foods' ballyhooed quality standards in the aftermath of the Amazon takeover.

Greensbury sources organic meat and wild seafood from animals harvested in the U.S. The hand-trimmed steak comes from small family farms that feed cows a strict diet of flax, hay and alfalfa. A few years ago, the company got a helping hand from Rastelli Brothers, a large New Jersey-based meat wholesaler, which bought a stake to capitalize on the growing demand for premium cuts online.

Crowd Cow, backed by National Football League Hall of Famer Joe Montana, sells customers shares of a cow from small, family-run farms. Founders Ethan Lowry and Joe Heitzeberg got the idea after growing tired of listening to a friend rave about the beef he bought from a farm in Washington state. On a whim, the pair decided to crowd source a cow. They sold 550 pounds of meat in the first 24 hours and soon launched the company. Revenue surged five-fold in 2017 and is approaching $10 million, Lowry says.

A new customer favorite: Japanese A5 Wagyu beef, which sells out in hours.

"The demand for Wagyu is a further sign that beef is not a commodity, and that the American consumer is interested in the incredible variety of craft beef that's available both domestically and internationally," he says.

Timothy Haws, a farmer in New York's Finger Lakes region, began working with three-year-old Crowd Cow last year when the Seattle-based company expanded distribution to the East Coast. He says letting Crowd Cow handle marketing and sales gives him more time to focus on what's important: raising his 300 head of cattle. "This lets me stay on the farm," he says.

Back in Nashville, Porter Road co-founder Peisker says the company is in the process of closing another round to help fund its expansion. "If we accomplish what we want to accomplish," he says, "the end result would be four facilities in different places, so product is more localized, shipping costs go down, the farmers are well taken care of and we can actually supply the whole country."

HOGS:(National Hog Farmer) -- Canadian Pork producers welcome the signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Canada's Minister of Trade, François-Philippe Champagne and trade representatives from the other 10 CPTPP countries signed the deal in an official ceremony March 8 in Santiago, Chile.

"Canada is a globally competitive producer and exporter of pork and pork products. We have worked hard to develop our reputation as a reliable supplier of safe, wholesome, high-quality pork. The key to building on our success, however, is the ability to access a wide variety of markets," says Canadian Pork Council Chair Rick Bergmann.

Even without the participation of the United States, the CPTPP will span a market of nearly 500 million people, making it one of the globe's three largest trade agreements. The deal will be setting the global trade rules for at least the next decade and Canada's involvement is crucial to protecting the country's agricultural interests. The expanded trade opportunities flowing from the CPTPP mean Manitoba farmers may increase their investment in new and existing farm infrastructure, which will certainly create new jobs both on and off the farm.

"This deal will provide our industry stability in vital markets like Japan and opportunities in emerging markets like Vietnam. Canadian pork producers can rest easy knowing that their livelihood and that of thousand other Canadians in rural and urban communities who work in the pork industry is supported by this newest trade deal," Bergmann adds.

This agreement will secure preferential market access to the free trade agreement partner countries through tariff elimination and reduction with the most noticeable gain for Canadian pork being Japan. According to Global Affairs Canada's Office of the Chief Economist, Canadian pork exports to Japan are projected to increase by $639 million or 36.2% under the CPTPP.

With eyes on improving the Japanese market, Bergmann and Lawrence MacAulay, minister of Agriculture and Agri-Food Canada, along with representatives from the Canadian pork sector, were on a trade advocacy mission in Japan recently. The goal of the mission was to build on trade relationships that have been decades in the making. It was also an opportunity for the delegation to witness firsthand how Japan markets Canadian pork.

Japan is currently Canada's second largest market for our pork. In 2017, 252,147 tons of Canadian pork and pork products were exported to Japan, a value of $1.2 billion.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket


John Harrington