DTN Early Word Opening Livestock

Live and Feeder Futures Are Likely to Open Moderately Lower

(DTN file photo)

Cattle: Steady-$2 LR Futures: 50-100 LR Live Equiv: $141.22 -1.04*

Hogs: Stdy-$1 HR Futures: Mixed Lean Equiv $ 71.48 - .05**

* 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 may start to show more interest Wednesday morning, although they may not surface with higher bids. On one hand, packers are relatively short bought. On the other hand, processors are nervous about sluggish product demand. Asking prices are around $120 in the South and $190 in the North. Significant trade volume could be delayed until Thursdayor Friday. Live and feeder should open moderately lower, checked by lower cutouts and cash uncertainty.

Hog buyers should resume work Wednesday with bids steady to $1 higher. Saturday slaughter is currently estimated to be no more than 92,000 head. Lean futures seem set to open on a mixed basis, linked to residual selling and short-covering.

BULL SIDE BEAR SIDE
1) The beef production forecast is reduced from the previous month on lower first-half slaughter and lighter weights. 1)

The inability of live cattle futures to rally toward the cash market does not bode well for feedlot leverage. Basis strength continues to work against cash strength.

2) Chinese President Xi Jinping discussed plans Tuesday to further open up the country's economy with measures that includes lowering import tariffs on autos. 2) Beef cutouts closed sharply lower on Tuesday with box supplies described as "moderate to heavy."
3) Slowly firming cash hog prices seem to be suggesting we are moving toward seasonally tightening numbers. 3) If pork bellies continue to show weakness during April, likely cold storage rotations are at intended levels. Average weekly gains are not forecast for another month.
4)

Hog buyers know they have to step in soon for the seasonal demand increase. There is little time left for buyers to hold off purchasing decisions, and those are expected to begin soon.

4) The spread between spot April and June lean contracts is currently $21. But last year, the summer premium was proven by record pork demand. Many believe that will be tough to repeat this year.

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OTHER MARKET SENSITIVE NEWS

CATTLE: (NCBA) -- On Tuesday the National Cattlemen's Beef Association submitted official comments to the United States Department of Agriculture (USDA) outlining key principles for the regulation of fake meat products. The comments, filed in response to Food Safety Inspection Service (FSIS) Petition Number 18-01, encourage USDA to look beyond modifying "standards of identity" in order to provide adequate protection for beef producers and consumers.

"It is critical that the federal government step up to the plate and enforce fair and accurate labeling for fake meat," said Kevin Kester, President of NCBA. "As long as we have a level playing field, our product will continue to be a leading protein choice for families in the United States and around the world."

NCBA's regulatory principles are designed to effectively address both plant-based and lab-grown imitation beef products. Specifically, NCBA:

1) Requests that USDA work with the Food and Drug Administration (FDA) to "take appropriate, immediate enforcement action against improperly-labeled imitation products."

NCBA firmly believes the term beef should only be applicable to products derived from actual livestock raised by farmers and ranchers. For misbranded and mislabeled plant-based protein products, existing legislation gives FDA the authority to take enforcement actions. However, the agency has a history of failing to enforce labeling laws. Rather than expending time and resources to develop a standard of identity the FDA will blatantly ignore, NCBA requests USDA engage with FDA to facilitate immediate, appropriate enforcement actions against imitation meat product labels that clearly violate existing laws.

2) Urges USDA to "assert jurisdiction over foods consisting of, isolated from or produced from cell culture or tissue culture derived from livestock and poultry animals or their parts."

NCBA believes that USDA-FSIS is the agency best placed to regulate emerging lab-grown meat products. First, USDA-FSIS possesses the technical expertise and regulatory infrastructure to ensure perishable meat food products are safe for U.S. consumers. Lab-grown meat must comply with the same stringent food safety inspection standards as all other meat products.

Second, USDA-FSIS labeling standards provided greater protection against false and misleading marketing claims. Unlike the FDA, USDA-FSIS requires pre-approval of all labels before products hit the marketplace. This will ensure consistent labeling practices across all products, and prevent misleading marketing labels such as "clean meat."

HOGS: (Pig Progress) -- In recent years, the European Union has grown has grown out to be the largest supplier of pork to China taking care of 60% of pork imports. Especially Germany and Spain sell a lot of pork in China.

These figures were shared by market researchers of the well-known French Pork and Pig Institute (IFIP) at the most recent edition of the Swine Research Days (JRP), held in Paris, France in February.

Painting the background, the researchers stated that the Chinese government seems ready to accept a 5% deficit in the coming years. This is because there is an increasing lack of space for new farms, constraints due to environmental issues, and an increasing absence of skilled labour. That is the opportunity in the market many countries see.

Accumulated figures over 2016 showed that Germany and Spain, the 2 leading swine nations in the European Union, recorded exceptional growth in terms of pork exports.

In the presentation, German pork exporters could be characterised by sending large volumes, homogeneous products and a having relatively small number of customers. The Spanish in turn were said to be better at adapting products to Chinese industrial chains, with a better value for quality.

North America accounted for 21% of Chinese imports in 2016. Only companies that have established pathways prohibiting the use of ractopamine in feed are allowed to sell directly in China.

Interestingly, frozen pig meat represented in 2016 almost half of the total import flows.

Historically, the situation has been different, the researchers explained, as pig production and pork consumption in China used to be at similar levels, leading to similar growth levels. Since the mid-2000s, however, imports gradually started to happen more often, the researchers said.

China used to be known for its high demand for offal and co-products, but its gradually imports have been moving towards more valuable products. Given the importance of China in world trade and economy as the leading pig producer and pork consumer, this small deficit has a huge impact on global pork exporters, especially the European Union and North America.

The speakers stated that China has been controlling its imports through the management of meat stocks and the distribution of direct access approvals to export companies. In many countries, slaughterhouses obtained approvals, which allowed them to sell directly on the Chinese market.

Casting a look ahead into the future, the researchers noted that pork consumption is expected to increase in the future. To try to keep up with the growing demand, the Chinese government is strongly supporting pig production, especially through subsidies for farm investments and fixing of domestic pork prices.

One fair question that was asked was therefore whether the production would follow the growth of consumption of pork.

John A. Harrington can be reached at john.harrington@dtn.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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