DTN Early Word Opening Livestock

 
Cattle: Steady Futures: 100-200 LR Live Equiv $138.89 - .41* 
Hogs: $1 LR Futures: 50-100 LR Lean Equiv $108.35 -1.16**
* 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-feeding country will be typically quiet Monday as buyers and sellers focus exclusively on the distribution of new showlists. We expect the last month's offering to be somewhat larger than last week. Live and feeder futures should open significantly lower, primarily pressured by the larger than expected June placement confirmed by Friday's on feed report.

Hog buyers should start the week by leaning into the case market by as much as a buck. Country sales drifted slow lower last week as receipts gradually increased. That pattern could be extended this week, especially if the pork carcass runs out of gas as the break in cutouts suggested on Friday. Lean contracts are staged to open moderately lower thanks to signs of developing defensiveness in fundamentals.

	BULL SIDE		BEAR SIDE
1)	Despite the extension of extreme summer heat, sluggish beef demand, and rangebound futures, cash feeders largely managed to hold steady prices late Friday (i.e., the South was fully steady at $120 live, and the North was steady to $2 lower at $188 to $190 dressed).	1)	The July 1 on feed report unveiled Friday turned out to be more negative than expected with June placement 16% larger than 2016 (i.e., exceeding the average expected increase by 6 points).
2)	Though beef processing margins have narrowed a great deal from the vaulted levels of June, middle profit potential remains attractive enough to encourage chain speed and feedlot cash stability.	2)	Between confirmation on Friday that heifers on feed surpassed July 1, 2017, by 11% and beef replacement heifers totaled 2% below last year, herd expansion appears to be slowing. More specifically, DTN estimates the July 1 pool of feeder cattle outside of feedlots at 37 million head, 4% larger than the prior year.
3)	The belly primal gained another $5.20 last week. Given the fact that we're just beginning to move into BLT season, belly prices could be generally supportive of carcass value for another two to three weeks.	3)	The pork carcass value on Friday broke sharply lower with all major primals losing ground in the face of softening demand (especially the butt, rib and picnic).
4)	Some analysts believe that the year-over-year increase in pork production in the third quarter could be significantly smaller than that seen in the first half of the year, perhaps not very price negative at all if export demand stays strong.	4)	Last week's hog slaughter increased once again to 2.213 million head, up 18,000 from the previous week and standing as further proof thatslaughter has turned the corner on the smallest production of the summer. It looks like slaughter will now gradually increase over the next four months.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Intellasia East Asia News) -- Taiwan's Food and Drug Administration (FDA) said Wednesday that it will not ban beef imports from the United States, where a fifth case of mad cow disease was confirmed the previous day.

The infected cow was 11 years old and posed no immediate threat to human health since Taiwan's beef imports from the US are limited to boneless and bone-in beef and specified meat products from cattle under 30 months, said FDA section chief Wu Tsung-hsi.

According to the US Department of Agriculture, the cow in Alabama tested positive for the atypical type of bovine spongiform encephalopathy (BSE), also known as mad cow disease.

"This animal never entered slaughter channels and at no time presented a risk to the food supply, or to human health in the United States," the USDA said.

It was the US' fifth case of mad cow disease this year, the USDA said, adding that of the four previous cases, the first was a case of classical BSE that was imported from Canada, while the others were atypical (H- or L-type) BSE.

HOGS: (pig-world.co.uk) -- Between 2016 and 2026, global pig meat production is forecast to increase by 10% to 127.5 million tonnes (cwe). The main driver behind the overall rise is China, with production projected to rebound from the 2016 dip, and increase by 12% over the decade to 59.3 million tonnes in 2026. On the other hand, EU production is expected to post a slight decline (-1%) from the 2016 level, as the domestic market saturates.

Global pig meat trade spiked in 2016, driven by strong Chinese demand as domestic production fell. However, following the anticipated recovery in production, Chinese import demand is expected to fall back 43% between 2016 and 2026. While this is expected to drive an overall decline in global pig meat exports up to 2020, volumes are anticipated to recover in the latter half of the decade. Import demand from some developing nations, in particular Vietnam, South Korea and Mexico, is expected to drive this.

According to the latest outlook, pig meat consumption is set to be overtaken by poultry meat in 2017. Furthermore, the popularity of poultry meat is expected to rise further over the next decade, driven by its relative affordability compared to other red meats. Global consumption of poultry meat is set to climb by 13% between 2016 and 2026, with per capita consumption expected to grow by 2.5% over the same time frame. On the other hand, while total pig meat consumption is expected to grow 9% over the decade, per capita consumption is actually set to decline by 1% between 2016 and 2026.

Overall, the latest outlook only projects a marginal increase in pig meat prices over the next decade, but once inflation is taken into account, prices will actually record a slight decline. However, as feed prices are forecast to remain low, the outlook for global producers remains reasonably positive.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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