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Morning Livestock Review by John Otte

Morning Livestock Review by John Otte

With cow herd expansion underway analysts ponder how March feedlot placements came in higher than expected, bird flu fears could boost pork demand

April 28, 2015

Avian influenza continues to march through the upper Midwest with USDA reporting confirmed cases in six more flocks in Iowa, North Dakota, Wisconsin and Minnesota.  In addition, a Bloomberg report quoted Iowa Secretary of Agriculture as saying Iowa had four more probable cases. The reported cited Bill Northey as saying HPAI has now infected 9.5 million laying hens in Iowa.

Steve Meyer, Paragon Economics, Adel, Iowa urges producers and consumers to keep in mind that H2N5 HPAI has not been indicated in any human infections. "We believe this is critical since any hint of human infection with this virus would damage poultry demand."

Cash fed cattle. On Monday USDA reported negotiated cash trade was mostly inactive on light demand in all major feeding regions.

On Wednesday in the Texas Panhandle trading was light with moderate demand. On Wednesday in Kansas trading and demand were moderate. For the week in the Texas Panhandle live sales sold $2 to $5 lower at $158. In Kanas live sales sold $2 to $4 lower at $158. In Nebraska on Thursday trading was light with moderate demand. On Friday trading and demand were moderate. For the week live sales sold $5 to $5.50 lower from $160 to $160.50. Dressed sales sold steady to $2 lower from $253 to $260. In Colorado on Thursday trading was light on moderate demand. For the week live sales sold steady to $2 lower at $160. In the Western Corn Belt on Friday trading and demand were moderate. For the week live sales sold steady to $3 lower from $158 to $161. Dressed sales sold very uneven. Early in the week dressed sales sold at $250 with late week sales selling at $260.

The previous week's cattle sold mostly $163 to $165 live and $260 to $263 dressed.

Nebraska feedlots responding to a Dow Jones survey report offering 7,000 more cattle than last week. Colorado show lists are unchanged from last week. Kansas offerings are down 7,000. Texas show lists are up 3,000 from last week. That nets out to 3,000 more cattle on this week's show lists in the four states.

Monday's morning choice boxed beef cutout was down 26 cents at $256.73 with select down 21 cents at $247.41. Monday afternoon boxed beef cutout values steady to firm on moderate demand and offerings. Choice closed 10 cents lower at $256.89 with select up 36 cents at $247.98.

USDA estimated Monday's cattle slaughter at 105,000, down 5,000 from last Monday and down 10,000 from a year ago.

The latest HedgersEdge packer-margin index was positive $21.45 on Monday, compared with positive $47.35 per head on Friday.

Cattle futures. Cattle settled lower on Monday, following Friday's USDA Cattle on Feed Report. It indicated more light-weight animals were placed into commercial feedlots than anticipated last month, a sign of potentially larger supplies looming ahead.

April live-cattle futures shed 70 cents to $160.47. Most-active June cattle declined 92 cents to $150.27.

Feeder-cattle futures for May fell $2.67 to $211.40.

Cattle have fallen under pressure from ideas that supplies of market-ready cattle and beef could grow more than expected in the months ahead. Friday's USDA report supported that notion. It showed around 1.809 million cattle entered U.S. lots through the end of March, compared with analyst expectations for a 4.4% decrease from 2014 levels. The data were above even the closest estimate for a 0.5% decline in year-over-year cattle placements.

However, market participants noted that, following years of drought and industry consolidation that encouraged ranchers to cull breeding cows and heifers, the cattle herd remains relatively small.

Although placements were above analyst's expectations, historically they're very low and supply of cattle in feedlots is squeaky tight.

Cow-calf producers holding heifers for cow herd expansion further shrinks animals available to place. That's one reason why analysts were surprised placements were as high as USDA reported.

Cash feeder cattle. Compared to last Monday, Oklahoma National Stockyards reported yesterday's feeder steers $2 to $4 higher.  Feeder heifers steady to $2 higher with 600-700 lbs up to $5 higher.  Steer and heifer calves $2 to $4 lower. 

Demand remains good for feeder cattle despite last Friday's bearish Cattle on Feed Report and Monday's lower cattle futures.  Numbers remain limited and along with that, more and more heifers are returning to the country as cow herd replacements. 

Demand for calves was moderate.  Cold, wet weather is limiting demand, especially for unweaned calves.  These are seeing discounts of up to $20 per cwt to their weaned mates. 

Heavy rains throughout the day prompted gaunt to average weigh-ups.  Rains continue to fall over much of Oklahoma.  Sunday and Monday those drought stricken areas are received much of this moisture.

Bottom line. Larger than expected March feedlot placements hint that feeder cattle supply outside of feed yards may be higher than most analysts have been calculating. That notion pressured feeder cattle futures.

Morning Livestock Review by John Otte

Cash hogs. Compared to Friday, on a plant by plant basis, Monday's weighted-average base prices were $2.25 lower to $2.50 higher, mostly $1.25 to $2 higher. The market was slow market with light to moderate demand. The base price range was $57 to $67.50.

USDA's afternoon reports showed Monday's weighted-average:

* National base price up 67 cents at $64.61.

* Iowa-Minnesota average was up $2.00 at $66.72.

* Western Corn Belt was up $1.95 at $66.52

* Eastern Corn Belt average was not reported due to confidentiality.

Price changes are compared to USDA's afternoon report for Friday.

USDA estimated Monday's hog slaughter at 429,000, down 1,000 from last Monday, but up from 344,000 last year.

USDA reported Monday's morning plant cutout up 27 cents at $69.94. Afternoon cutouts were:

* FOB plant up 92 cents at $70.86.

* FOB Omaha up 93 cents at $69.82.

* On 289 loads.

Friday's CME two-day lean hog index rose 44 cents to $65.83.

The Wall Street Journal estimated Monday's packer margin index at plus $1.72 per head vs. plus $3.87 on Friday.

Hog futures. Hogs trimmed early session gains to end little changed.

June hogs fell 5 cents to $79.40.

Hogs and pork face headwinds from rising pork supply due to recovery from the PEDV outbreak of the last two years. But a deadly outbreak of avian influenza that has affected U.S. turkey and egg-laying hen flocks could encourage consumers to shift to pork and beef items. Psychologically U.S. consumers may be more inclined to shy away from poultry at the grocery store.

Bottom line. Avian influenza could boost pork demand if consumers shy away from poultry. But faltering poultry exports could put a lot of relative cheap poultry on the U.S. market.

My sister has a short prayer:

We can't, you must show us the way.

It becomes even more powerful if you add a second comma:

We can't, you must, show us the way.

This is the last column you will see in this space that is written by me. Health of my bride of 35 years is slipping.  I'm transitioning from writer/editor to full-time care giver.

I hope you learned a few things from what you read in this space. I certainly have.

Someone said there are four types of people in this world:

Those who are care givers.

Those who have been care givers.

Those who will be care givers.

Those who need care.

Count your blessings if you're in the first three categories.

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