DTN Early Word Opening Livestock

Cattle Paper to Open With Firm Undertone

(DTN file photo)
   

Cattle : Higher Futures: 25-50 HR Live Equiv $139.37 + $1.18*
Hogs : Steady to $1 HR Futures: 10-30 HR Lean Equiv $93.79 + 0.89 **

* 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 the cash cattle trade to remain at a standstill with both preliminary bids and asking prices poorly defined. We may not get a decent sense of even the neighborhood of price possibility until Thursday or Friday. Understandably, feedlot managers don't want to price cattle too cheaply, hoping that another big jump in price like that seen last week is waiting in the wings. CME officials announced 26 delivery intentions, all retendered for $1 at Norfolk (25 were demand). Live and feeder futures should open moderately higher, supported by bull-spreading and improving fundamentals.

The cash hog trade seems ready to open with bids steady to $1 higher. While market hog supplies should build over the next several months, this week's kill could be very close to last week. Specifically, we expect total slaughter to be around 2.26 million head, 5-6% greater than 2014. Look for lean futures to begin with a generally firm undertone.

BULL SIDE BEAR SIDE
1) At long last, beef cutouts closed significantly higher on Monday (the biggest single day jump for choice since August 12) with early-week box movement described as "fairly good." 1) While cattle futures firmed further on Monday, most technicians see the recent action more in terms of "correction" than a change in trend. Indeed, the market still suffers from a lack of spec interest (e.g., total open interest remains 55,000-plus below the peak commitment of early June.
2) The new offering of fed cattle is generally smaller than last week with only Colorado showing more ready steers and heifers. 2) Premiums in Dec and Feb live cattle remain relatively large, a reality that may hinder the ability to reduce the still-ample front-end supply of heavy cattle.
3) The pork carcass value got off to a firm start yesterday, advancing nearly a buck higher with all primals kicking in except the loin. 3) Given the time of year, it is likely that the cash hog market will begin to decline in the next few weeks capping off the board.
4) Lean hog futures began the week modestly higher, supported in part by expectations that domestic and export demand for pork will be good through the end of the year. 4) As we move past the peak in belly and ham prices, a break in the cutout into the low $80 range is probable during November

OTHER MARKET SENSITIVE NEWS

CATTLE: (care2.com) -- Could McDonald's start selling 100 percent organic burgers? With demand growing across the globe for more wholesome, natural foods, McDonald's is debuting a new, 100 percent organic burger this fall. Before you run out the door to check it out, know this offer is unfortunately limited to McD's in Germany.

Germany is one of McDonald's top markets in Europe — and the second largest market for organic food after the U.S. The burger will debut for a very limited time — from October 1st through November 18th. These "McB" burgers will be made of 100 percent organic beef sourced from organic farms in Germany and Austria. While they surely won't be on the "Dollar Menu," they're likely to be a popular choice among people looking for healthier-yet-affordable fast food options.

It is unclear as to whether McDonald's plans to release this organic burger in its other markets, European or otherwise. Is this something that could eventually take hold in the U.S.? Perhaps. It certainly would put McD's in more direct competition with Chipotle, whose smart sourcing practices recently led to a huge boost in sales. However, with the huge market, it will take some time to ensure McD's has a large enough supply to meet the demand. The U.S. branch of McDonald's already has a plan to stop buying chickens raised with antibiotics (specifically those that impact human health, so they will not necessarily be 100 percent antibiotic-free) over the course of the next two years. And McDonald's recently stated that it will start serving only cage-free eggs in its 16,000 North American restaurants by 2025. So, we can assume it will take significantly longer than that for McDonald's to make the necessary adjustments to serve organic beef in its U.S. chains — which is certain to be a huge transition.

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HOGS: (The Washington Post) -- The nation's pork producers are in an uproar after the federal government abruptly removed bacon, pork chops, pork links, ham and all other pig products from the national menu for 206,000 federal inmates.

The ban started with the new fiscal year last week.

The Bureau of Prisons, which is responsible for running 122 federal penitentiaries and feeding their inmates three meals a day, said the decision was based on a survey of prisoners' food preferences:

They just don't like the taste of pork.

"Why keep pushing food that people don't want to eat?" asked Edmond Ross, a spokesman for the prison bureau. "Pork has been the lowest-rated food by inmates for several years," It also apparently got more expensive for the government to buy, although he did not provide specifics.

The National Pork Producers Council isn't buying it. "I find it hard to believe that a survey would have found a majority of any population saying, 'No thanks, I don't want any bacon,'" said Dave Warner, a spokesman for the Washington-based trade association, which represents the nation's hog farmers.

"We're going to find out how this came about and go from there," Warner said. "We wouldn't rule out any options to resolve this." He said the association "is still formulating our strategy" to reverse the prison decision, which the industry first learned about Monday when the Fort Worth Star-Telegram called for comment.

The pork industry produces 24 billion pounds a year of pork products, from tenderloin to bacon, its most popular product. About a quarter of that is exported.

Warner said pork is healthy and economical, especially for a big buyer like the federal government. "Not to throw beef under the bus, but we cost a lot less than beef."

"We're nutritious," he said. "A boneless pork chop or loin is a very healthy alternative to lots of other foods. If you compare a pork tenderloin to a rib eye steak and a boneless chicken breast, we come out pretty well."

But Ross said that based on annual surveys of inmates' food preferences, pork lost its luster years ago. To wit: In the last two years, the federal prison menu dropped to just two pork products, he said.

"And we were paying more than what we'd like to pay," Ross said.

"People are more health conscious these days," he said. "Some people choose to be vegetarian or vegan. That's their preference." As of last week, the prison menu had added an "economically viable" turkey bacon substitute.

Incarcerated pork lovers still have an option: The prison commissary, a convenience store that sells packaged pork rinds and precooked bacon. But they have to pay.

Observant Muslims and Jews are forbidden to eat pork, and the prison system has long made accommodations for them by providing alternatives to pork and halal and kosher foods. Ross declined to say whether there has been an increase in Muslim or Jewish inmates in recent years and whether that may have factored into the survey responses.

"In general we welcome the change because it's facilitating the accommodation of Muslim inmates," said Ibrahim Hooper, a spokesman for the Council on American-Islamic Relations, the country's largest Muslim civil rights advocacy group. "We hope it's not an indication of an increasing number of Muslims in the prison system."

Hooper predicted that anti-Islam groups would spin the decision into a case of the federal government acting under pressure from Muslims.

"This is just the kind of thing that drives them crazy," he said. "It will stoke the fires of Islamophobia based on the usual conspiracy theories."

John Harrington can be reached at feelofthemarket@yahoo.com
Follow John Harrington on Twitter @feelofthemarket

(CZ)

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