DTN Early Word Opening Livestock

 
Cattle: Steady-$2 HR Futures mixed. Live Equiv: $139.79 - 0.23*
Hogs:   Steady    Futures: mixed Lean Equiv $77.98 +0.73**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle traders have arrived back on a Friday with cash business undecided. Look for that question to be answered by late this afternoon. If recent history provides a reliable clue, the fed market will print. closer to asking prices ($121-122/$190) than bids ($115/$185-187). But time wiill tell. Live and feeder futures should open on a mixed basis thanks to a combo of short covering and slow long liquidation as traders position ahead of actual cash news.

Look for the cash hog market to resume this morning with basically steady bids. Keep in mind that spot December expires near the noon hour, opening the door for February to take the point at a tall, tall, premium to spot cash. Of course, the question now becomes how cash and Feb will move together over the next several months. How much can cashb rally? How much will the board fade? Lean futures are also expected to open mixed in slow trade volume.

	BULL SIDE		BEAR SIDE
1)	Cash cattle bulls have held hot hands on the majority of "Fridays" through the fourth quarter. There's may be little doub† that will change tomorrow.	1)	We're still looking for a confirmation of a bottom in cattle carcass weights. Weight data for the week ending December 1 was no better than mixed. although steer carcass averaged 2 pounds lighter than the prior week (899 pounds), heifer carcasses averaged 2 pounds heavier (838 pounds).
2)	Net beef export sales last week totaled 10,300 MT reported for 2018 were up noticeably from the previous week and up 19 percent from the prior four-week average. Actual beef exports totoaled 18,200 MT, down 1 percent from the previous week, but up 9 percent from the prior four-week average.	2)	Feedlot managers may find it more difficult to defend the cash market today if they are worried about packer appetitie probably chopped up to some extent as the schedule around late-year holidays.
3)	Net pork export sales last week jumped to 22,300 MT, up 12 percent from the previous week and 18 percent from the prior four-week average. Actua; pork sxports at the sae time totaled 27,800 MT, unchanged from the previous week, but up 3 percent from the prior four-week average.	3)	The European Union and Japan will launch the world's largest free trade zone early next year after their economic partnership cleared a final hurdle on Wednesday. Japan had been part of the 12-nation Trans-Pacific Partnership that Trump rejected on his first day in office, turning Tokyo's focus to other potential partners.
4)	The 2018 pork export forecast is unchanged from the previous month, but the export forecast for 2019 is raised on continued strong global demand for U.S. pork. The broiler export forecast is raised for 2018 on recent trade data. For 2019, the broiler export forecast is raised as competitively priced U.S. broiler meat is expected to support global demand.	4)	Market uncertainties continue to flourish regarding available hog supplies in the months ahead and whether U.S. domestic and export pork demand will be sufficient to clear the available supply of pork.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Drovers) — The second half of December marks the end of the holiday run on middle meats, along with seasonally wider price spreads between quality grades and the premium brands. We can classify demand spikes for the more richly marbled carcasses relatively easily by the four quarters of the year as those demand periods happen to fall nicely within the quarterly calendar segments. As quickly as the Christmas holiday wraps up, we see beef demand shift to a more balanced pricing approach across the carcass. Middle meats fall back in price and end meats step up their contribution to total carcass value.

On the production side, fed cattle harvested numbers tend to fall off a bit in the first quarter while the marbling trend tends to increase to near annual highs in February, creating the largest proportions of Choice, Certified Angus Beef (CAB) and Prime product in a normal calendar year. These combined supply-and-demand factors have a negative effect on the quality price spreads packers pay on their grids moving from the 4th quarter to the first quarter, as seen in the chart. With the exception of the 2015-2016 transition, each of the past 5 years has featured a Choice/Select price spread decline larger than 50% moving into the 1st quarter of the year. The CAB/Choice premium reduction is much smaller for this transition, averaging just 12% in the past five years, but it has always moved up and down in a much smaller range on top of Choice.

High-quality cattle are generally a smart hedge as they tend to have better health and nutritional management behind them, not to mention that it's difficult to lose money on a grid when they're properly sold. But is the added investment to purchase the front-end type of cattle best targeted to finishing dates in the first quarter of the year? Certainly not. This rings true especially for larger feedyards marketing cattle each month of the year. The big yards are also most likely to access different classes and breeds of feeder cattle based on regional differences in calving seasons and environment. These feedlots can time their buying power toward the more costly, high-marbling-potential Angus calves with harvest dates specifically in the 2nd and 4th quarters of the year when the largest carcass premiums are historically most likely to occur. The reality is that quality-focused feeders pursue the good ones constantly.

HOGS: (Farmscape) — The Veterinary Counsel with the Canadian Pork Council says keeping African Swine Fever out of North America requires a coordinated industry-wide effort among stakeholders in both Canada and the United States.

African Swine Fever was the focus of a telephone town hall last week hosted by Swine Health Ontario, the Ontario Pork Industry Council and Ontario Pork.

Dr. Egan Brockhoff, the Veterinary Counsel with the Canadian Pork Council, told participants we've seen significant movement of the virus throughout Europe and now significant movement throughout China.

"The CPC, as soon as the virus was discovered in China, we immediately ramped up industry advocacy with the government in getting information out about this virus.

"We've been speaking at producer meetings all across the country and on town hall meetings like this, really spending a lot of time reaching out to our U.S. colleagues because this is a North American challenge.

"We need to build a wall around not just Canada but all of North America so we've been working closely with the U.S. pork sector, with universities and other veterinary groups in the United States to ensure that we're in alignment and moving forward in similar directions and targeting those gaps that we've identified.

"We've really also tried to focus our efforts on producer communication and industry communication.

"You've all seen that we have an ASF section up on the CPC web site.

"We've been spending a lot of time on ASF awareness of course.

"You've seen the emails and trying to get as much out on social media as we possibly can."

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JohnA. Harrington can be reached at john.harrington@dtn.com

(BAS)

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