DTN Early Word Opening Livestock

Cattle: Steady/Firm w/Thurs Futures: Mixed Live Equiv: $139.67 -.13*
Hogs: $1-2 HR Futures: 50-100 HR Lean Equiv: $ 73.30 - .04**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Significantly higher packer bids in Kansas and Texas early Thursday sparked decent volume and regional trade volume is probably done for the week. Yet Northern business still needs to find wheels. Look for opening bids around $190 in the face of asking prices around $192 to $194. The April 1 Cattle on Feed report will be released Friday afternoon at 2 a.m. CDT. Average guesses look like this: on feed, up 7% to 8%; placed in March, off 10%; marketed in March, off 4%. Live and feeder futures should open on a mixed basis thanks to a combination of follow-through selling and pre-cash/Cattle on Feed report short-covering.

The cash hog market this week has been a very impressive display of packer spending with increasingly higher bids around every corner. We can only assume that the cash chase based on tightening country supplies will continue Friday. Clearly, pork processing margins have softened through the week thanks to the inability of carcass value to keep up the red hot cash trade. Lean futures seem set to open solidly higher, supported by cash strength and technical buying.

	BULL SIDE		BEAR SIDE
1)	Southern feedlot managers in Kansas and Texas demonstrated superior leverage in the cash market on Thursday by selling significant numbers as much as $4 higher than last week (i.e., $121 to $122).	1)	Cattle futures reversed sharply lower, ignoring clear evidence of higher cash business. Such negative action underscores how much specs and commercials fear the building burden of second quarter beef tonnage.
2)	Carcass weights continue to decline. For the week ending April 7, all cattle averaged 816 pounds, 1 pound smaller than the prior week and 14 pounds heavier than the year before; steers averaged 872 pounds, unchanged from the week before and were 20 pounds greater than last year; heifers averaged 809 pounds, 5 pounds lighter than the previous week and 17 pounds greater than 2017.	2)	Even if March placement is confirmed to be 10% or more below last year's record, total feedlot in-movement last month may still be the largest since 2004.
3)	The national lean hog base exploded Thursday, closing more than $3 higher on a dressed basis. Clearly, ready numbers have started to tighten, a trend that could easily continue for another 30 to 60 days.	3)	Net pork export sales last week totaled 17,900 metric tons (MT), down 18% from the previous week and 12% from the prior four-week average. At the same time, actual pork exports totaled 16,100 MT, down 30% from the previous week and 29% from the prior four-week average.
4)	While much trade war talk has been focused on damaged China demand for U.S. pork, China is not the game-changing play it was years ago for our market. China has been unwinding dependence upon U.S. product over the years. Exports to China may not even trend lower this year than previously expected.	4)	Some market analysts believe summer lean hog futures are already fully reflecting the bullish cash potential of the next two to three months. Many specifically argue that summer belly demand is not apt to be as strong as it was in 2017, a fact further compounded by larger summer production.

OTHER MARKET SENSITIVE NEWS

CATTLE: (weeklytimesnow.com.au) -- Rabobank's Australian 2018 Beef Cattle Seasonal Outlook report says that increased supply, reduced producer demand and weaker global markets will see cattle prices ease from the record levels seen in 2017.

However, prices are expected to stabilize just above the five-year average -- still a profitable level for most producers.

In Tasmania, recent store- cattle sales have seen lower prices compared to last year but this has not come as a surprise to many farmers.

Tasmanian Farmers and Graziers Association meat council chairman Chris Gunn said most producers would have expected prices to drop.

"What I've heard is prices will be between $5.60 to $5.80 a kilogram over winter, which is lower than the prices over $6 we were seeing last year," Mr Gunn said.

"Most people would have known those prices wouldn't last and it's probably better to stabilize and stay where it is. Everyone in the chain has to be able to make some money."

Even with lower prices, Mr Gunns said most store-cattle producers were likely to be happy with returns this season.

Because of the record-high store prices last year, Mr Gunn said some producers had been holding on to cattle longer to put more weight on them.

"A lot depends on what's happening on the mainland.

"It's still very dry in large parts of NSW, Queensland and even Victoria, so that's having an impact," Mr Gunn said. The report says slaughter numbers are to rise marginally.

Australian production looks set to lift 3 per cent this year, thanks to high numbers on feed, a lower cow kill and heavier grass-fed cattle weights in better seasonal conditions.

Report author, Rabobank senior animal proteins analyst Angus Gidley-Baird, said while the price decline would more than offset the production boost, the outlook was still for an overall profitable 2018.

However, the report names four factors that could hit the market: a potential big, early Queensland wet season, fierce competition in Asian export markets, growing Chinese demand for live exports and increased US cow slaughter.

"After falling by 1.7 per cent to 7.16 million head in 2017, we expect cattle slaughter to rise slightly in 2018, with herd rebuilding over the previous two years in southern states now expected to start generating increased turn-off," he said.

While Australia's key export markets are expected to remain strong, more competition could limit price upsides.

Mr Gidley-Baird said with production up and static domestic consumption, exports would rise slightly in 2018.

"Japan, the US, South Korea and China will remain key markets," he said.

The report tips 2018 domestic cattle prices to be at 15 per cent below the year before.

This could see the Eastern Young Cattle Indicator average 513c/kg this year, just above the five-year average.

Mr Gunn said local producers were reasonably confident. "The season hasn't been too bad, although all across the state could do with some more rain. There's definitely more optimism than gloom."

HOGS: (Business Times) -- Some Chinese pig farmers are adjusting expansion plans or putting planned projects on hold because of a glut in the market that led to hog prices hitting an eight-year low last month.

Two medium-sized companies have told Reuters they have either reduced expansion plans or are holding off on future expansion of breeding pigs, while an industry analyst said some small farmers have already begun slaughtering sows.

The moves are the latest sign that years of frenzied investment to boost hog production has been overdone, with output well beyond stagnating domestic demand at a time when global pork supplies are already at record levels.

"Demand is not keeping up with the pace of production growth," said Pan Chenjun, senior analyst at Rabobank.

China is the world's biggest producer and consumer of pork, and the domestic glut is already having repercussions on the global market. A surge in China's supply of pigs pushed hog prices to eight-year lows in mid-March.

That reduces demand from exporters like the United States, where hog numbers recently hit record levels, driven by expanding processing capacity. Slower expansion in China may not necessarily help US farmers, after Beijing recently slapped tariffs on imports of US pork.

"The market right now is pretty pitiful," said Thomas Titus, a hog farmer in Elkhart, Illinois.

In China, hog prices are hovering around 10 yuan (S$2.09) per kg in major production provinces of Henan, Hebei and Shandong, as well as the north-east, where expansion has been fastest.

At the same time, feed prices have been high for much of the past year amid tighter supplies of Chinese corn and strong soyameal prices. Feed can account for as much as 80 per cent of production costs in Chinese pig farms.

With farmers now losing as much as 190 yuan per pig by the time it is slaughtered, Beijing this month called for more "rational" production as the situation hit a "warning zone".

Yin Pingan, chairman of Chongqing Riquan Animal Husbandry Co Ltd, said he plans to finish five new breeding farms already under construction.

But he will wait to see how the market develops before adding another 60,000 sows to his herd next year, as originally planned. "Those (farms) we haven't started, we'll slow down. We'll watch the situation before deciding whether to build or not," he told Reuters by phone.

An executive at another company that has recently moved into pig farming said it now planned to add only another 10,000 sows to the current 60,000 head. Previous plans were targeting around 40,000 more sows this year.

"The price will not improve before the end of the year," the executive said, declining to be identified because of the sensitivity of the matter.

For now, Chinese hog prices are set to remain at a low level, an official warned on Tuesday, although some farmers have already begun slaughtering sows, which could help support the market in coming quarters.

But an escalating trade war between China and the United States may trigger a faster recovery. If Beijing implements high tariffs on soybeans imported from the United States as threatened, feed costs will soar and drive more farmers out of the business, said Pan, the analyst at Rabobank.

On Tuesday, China imposed an effective 178.6 per cent duty on imports of US sorghum, another grain that is used in feed.

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

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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