DTN Early Word Opening Livestock

Hog Futures Staged to Open at Least Moderately Higher

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

Cattle: Steady-$1 LR Futures: 50-100 LR Live Equiv: $137.06 - .09*

Hogs: $1-2 LR Futures: 50-100 HR Lean Equiv: $ 76.50 + .48**

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

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

GENERAL COMMENTS:

The cash cattle trade in the North seems to be essentially done for the week with most live sales $2 to $3 lower than last week's weighted average basis Nebraska. Dressed business ranged from $175 to $179 with most deals marked around $177 to $178, steady to $1 lower than last week's weighted average in Nebraska. By contrast, cash activity in the South has not yet gotten off the ground. That will have to change sometime Friday. Look for opening bids around $110, roughly $5 below most asking prices in Kansas and Texas. Live and feeder futures should open moderately lower thanks to follow-through spending and weaker feedlot sales on Thursday.

The cash hog is expected to conclude Friday pretty much as it started on Monday (i.e., on the defensive). Look for packers to resume business Friday with bids $1 to $2 lower. Processing margins continue to slowly improve, partially justifying Saturday kill plans close to 135,000 head. Lean futures are set to open moderately higher, supported by follow-through buying and late-week short-covering.

BULL SIDE BEAR SIDE
1)

Beef producers in Kansas and Texas continue to stand tall with asking prices of $115 plus, suggesting that the perception of country leverage is alive and well.

1)

Fairly active trade volume surfaced in the Northern tier of cattle-feeding country Thursday when producers moved to accept lower packer bids (i.e., $110 to $111 live; $175 to 179 dressed).

2)

Boxed beef movement seems to be accelerating. Spot beef sales escalated into midweek, posting 117 total loads of cuts, the largest daily sale in two weeks. Active sales were spread well across the choice carcass, with modest activity noted on select cuts. The largest movers of the day were select 120 briskets, reported at 12.6 loads, the largest daily sale since May and the third largest of the year.

2)

The cheaper wholesale pork gets the more expensive wholesale beef looks.

3)

The pork carcass value closed moderately higher on Thursday, supported by better demand for fresh cuts.

3)

Actual pork exports last week totaled 13,600 metric tons, down 36% from the previous week and 29% from the prior four-week average.

4)

At long last, lean hog futures showed signs of life Thursday with all but spot August bouncing with triple-digit gains.

4)

Though obviously a sight for sore eyes, few believe that Thursday's sharp rally in lean hog futures represent anything more than overdue short-covering.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Oklahoma Farm Report) -- One topic of discussion that has seemed to suddenly arise on the beef industry scene is the issue of so called fake meat and which government agency has rightful jurisdiction for regulatory authority over the product. During the 2018 Cattle Industry Summer Business Meeting that took place in Denver last week, Radio Oklahoma Ag Network Farm Director Ron Hays sat down with Colin Woodall, lead lobbyist for the National Cattlemen's Beef Association in its DC office. According to him, this is an issue that needs to be addressed now sooner rather than later.

For beef producers and the industry as a whole, Woodall says the fact of the matter is, if the companies insist that their lab-grown products are from a cellular level the same as natural beef -- then their products are susceptible to the same pathogen risks as traditionally produced beef and therefore should be held to the same standards. It is also about creating a level playing field in the industry he says, and protecting that term "beef." Woodall says the industry does not want to end up in a situation like the dairy industry that has been embroiled in a legal fight over competing products qualifying and identifying them as "milk."

The issue at hand is that the Food & Drug Administration has taken action to claim jurisdiction over the product arguing that it is produced from science and innovation. However, the NCBA is challenging that claim, insisting that if the product manufacturers wish to compete in the meat market, they should be treated the same as traditional meat and be overseen by the USDA. Woodall says this would ensure the equitable treatment of both meat and fake meat products -- alluding to instances of FDA's relaxed enforcement of plant-based products already under FDA's oversight. While we are still a couple years from actually seeing these products hit the market, Woodall insists the industry must get out in front of the problem before it becomes more of an uphill battle.

"Bottom line for us, we have to ensure that the lab-grown product is regulated and right now it's not," he said. "So, it's a great opportunity for us to work with President Trump and the White House to make sure we get USDA in that loop, because we continue to hear from these lab-grown fake meat companies that they want to operate in the meat space and that their product is from a DNA standpoint exactly like meat. If that's the case then they need to be regulated like meat."

HOGS: (AP) -- The federal judge who's managing a series of North Carolina lawsuits accusing the world's largest pork company of creating nuisances for rural neighbors is being temporarily replaced.

The order replacing U.S. District Judge Earl Britt for a trial starting next month was finalized Monday. Court records don't indicate why Britt, who's in his mid-80s and semi-retired, was replaced or for how long.

Chief Judge Roger Gregory of the U.S. 4th Circuit Court of Appeals designated federal Judge David Faber of West Virginia to hear the upcoming trial. Gregory did not respond Thursday to an emailed request seeking clarification.

Gregory can appoint so-called senior judges like Britt and Faber to hear cases within the appellate district, which includes the Carolinas, Maryland, Virginia and West Virginia.

Documents show Faber's appointment was in progress before a jury last week slapped Smithfield Foods with a $473 million verdict. That decision made three straight multi-million-dollar losses for the Smithfield, Virginia, unit of Hong Kong-based parent WH Group. Jurors sided with neighbors who complained of intense animal waste smells, flies and truck traffic.

Industry advocates had complained Britt's decisions were biased and contributed to Smithfield Foods' losing streak.

A state legislator who represents the industry's core turf in the country's No. 2 pork-producing state has accused Britt of "unbridled bias" in managing the three trials so far. Britt is "an old has-been judge with an observable bias against the hog industry and he ran Lady Justice out of his courtroom," Republican Rep. Jimmy Dixon wrote in a newspaper column last month.

North Carolina Pork Council chief executive officer Andy Curliss has criticized Britt for decisions including refusing repeated requests by Smithfield lawyers to have jurors tour the industrial-scale hog operations being sued. Lawyers for the suing neighbors countered that smell intensity can vary widely hour by hour, and farm operators would spruce up ahead of a visit, giving jurors a false impression of the day-to-day reality.

"It is not clear what a change in the judge means for the future cases, but I can speak for hog farmers who will be hopeful that there's a fresh look at some of the rulings that have been made" that may have shaped the outcomes of previous trials, Curliss said.

But Michelle Nowlin, who supervises the Environmental Law and Policy Clinic at Duke University's law school, said criticisms of Britt are like "a lot of poor losers after a sporting event complaining about the referees who were biased against their team."

She added, "I've attended several days of the trials. The judge has issued rulings from the bench that favor both sides."

Britt's temporary replacement "doesn't tell us anything at all," Nowlin said.

Faber was assigned to be on the bench for the trial starting Sept. 4 in which neighbors are suing Smithfield over the smells, flies and pests caused by a 7,100-hog farm the company owns in Sampson County. It's not clear who will be the judge for the subsequent trial, but Faber is also due to run the sixth trial starting in late November.

More than two dozen lawsuits involving more than 500 neighbors of intensive animal operations have been pending for four years.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow him on Twitter @feelofthemarket

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John Harrington