DTN Early Word Opening Livestock

 
Cattle: Steady-$2 HR Futures: 50-100 HR Live Equiv $135.28 + .43 *
Hogs:   Steady-$1 HR Futures: 50-100 HR Lean Equiv $83.31 + $1.01**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Even though cattle buyers probably came into the final week of the year with a smaller shopping list, they still had some basic slaughter needs to cover. Obviously, they're running out of time to complete these limited chores. Look for light to moderate trading to surface sometime Friday late morning. Recent board strength and the softening basis have made feedlot managers tough to deal with, pricing showlists with firmer and firmer hands. Look for asking prices to be restated this morning around $124 to $125 in the South and $195 to $198 in the North. Live and feeder futures should open at least moderately higher thanks to follow-through buying and cash optimism.

Hog buyers are expected to wrap up the year's businessFriday with cash bids steady to $1 higher than Thursday. Receipts have been relatively light this week, but it is difficult to say if smaller runs are tied to cold weather, a real tightening of seasonal numbers, or just late-year apathy. At any rate, some plants stilll need to fill space in the large Saturday kill schedule. Look for lean futures to open moderately higher as well, supported by residual buying and firming carcss value.

	BULL SIDE		BEAR SIDE
1)	For the week ended Dec. 16, fed cattle carcass weights declined: all steers averaged 902 pounds, 2 pounds lighter than the week before and 6pounds smaller than 2016; all heifers averaged 842 pounds, 2 pounds below the prior week and just 1pound heavier than the year before.	1)	Between the evaporation of premiums and further evidence of long liquidation in open interest this week, February and April live cattle futures seem to be signaling both supply and demand caution for the first third of 2018.
2)	Boxed beef firmed furtherThursday with cutouts quoted moderately higher. At least a few accounts seem to be anticipating better demand after the first of the year.	2)	More specifically, February through June live futures remain corralled by tough oversold chart resistance. Indeed, it would take a strong rally Friday to even challenge 40-day moving averages basis February and April (i.e., 123.50 and 124.10, respectively).
3)	The pork cutout jumped more than a dollar higher on Thursday, powered by better demand for bellies and loins.	3)	For the week ended Dec. 23, U.S. hatcheries set 228 million broiler eggs in incubators, up 4% from a year ago. At the same time, chicks placed totaled 186 million, also up 4% from 2016.
4)	Ambitious Saturday kill plans are now privately estimated to total 385,000 hogs or better, surely reflecting positive and encouraging pork processing margins.	4)	For what it's worth, the seasonal tendency for lean hog futures is for lower prices the nextfour to sixweeks.

OTHER MARKET SENSITIVE NEWS

CATTLE:

HOGS: (Hoosier Ag Today) -- Efforts by the U.S. and South Korea are moving ahead to modernize the 2011 Korea-U.S. Free Trade Agreement, KORUS, a key trade agreement for the U.S. pork and beef industries. The South Korean government sent its parliament a plan to renegotiate KORUS and announced it's ready to start talks. The White House must tell Congress it plans to launch the talks, hold two public hearings, and disclose its negotiating goals 30-days before talks begin.

The U.S. pork and beef industries are watching KORUS developments closely, concerned as with NAFTA, that producers could lose existing tariff gains if U.S. negotiators bargain ag for manufacturing wins, or even abandon KORUS.

"We have seen our exports to South Korea go up," says National Pork Producer's spokesman Dave Warner. "Las year we sold $365 million worth of pork to South Korea, making it the number 5 foreign destination for U.S. pork."

That provides a big market for high-value internal organ cuts not eaten much in the U.S. American beef sales in number-two buyer Korea were up more than 80-percent to around one billion dollars, as tariffs move to zero over 10-years. Warner says the US needs more, not fewer trade agreements…tape

"The US pork industry is kind of the poster child for that. We sell more pork to the twenty countries with which the United States has free trade agreements, than we do to the rest of the world combined. So, obviously free trade agreements work."

Agriculture is a U.S. economic sector that, unlike most others, has a foreign trade surplus. The challenge, of course, is convincing the White House to protect tariff gains, at a time when actual or possible losses in NAFTA or the U.S. TPP pull-out are foremost on producers' minds.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

(SK/BAS)

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