DTN Early Word Opening Livestock

Cattle Futures Geared for Mixed Opening

John Harrington
By  John Harrington , DTN Livestock Analyst
(DTN file photo)

Cattle: Steady Futures: mixed Live Equiv $131.03 - 0.12*

Hogs: $1-2 LR Futures: 50-100 LR Lean Equiv $ 87.40 - 0.87**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue


You had to stay late, but light to moderate trade volume finally developed in feedlot country on Friday. Live sales were marked at $105 in the South and the North, generally steady with the previous week. When business is so delayed, it's often tough to get an accurate handle on actual volume. We'll post official Mandatory totals asap later this morning. But at this time we assume that feedlot managers were forced to carry-over a good number of unsold cattle. For that reason, it seems likely that new showlists distributed this morning will be generally larger than last week. At any rate, not much will happen today beyond that distribution and the initial assessment of ready supplies. Live and feeder futures should open on a mixed basis thanks to residual buying on one hand and cash uncertainty on the other.

Cash hog buyers are expected to resume work this morning with bids $1-2 lower. Packers continue to enjoy decent processing margins. In other words, they have incentive to kill as many hogs this week as is practically possible. New plants will continue to slowly crank-up and it wlll be interesting to see how quickly chain speed accelerates through the balance of the month. On the other, production potential is likely to checked to some extent this week depending upon the severity of Hurricane Irma as it tracks northward along the Atlantic Coast. Lean futures should open moderately lower, pressured by sagging carcass value and fears of further cash weakness.

1) Triple-digit gains scored by cattle futures on Friday represented another vote of confidence that the board has established a reliable market bottom. More specifically, December and February live cattle will start out this morning above 40-day and 100-day moving averages. 1) Given light trade volume totals generated in cattle feeding country last week, new showlists distributed today are likely to be some larger. Additionally, beef cut-outs closed lower on Friday with box supplies described as "heavy."
2) For the week ending September 5, noncommercials further liquidated their net long position in live cattle futures by 3,200 to 83,200 contracts. However, significant increases in open interest on Thursday and Friday, couple with sharply higher prices, may signal renewed bullish confidence. 2) The combination of negative cattle feeding margins and the $5.50 premium December live futures hold over spot October could take away some of the incentive for producers to maintain their relatively aggressive marketing rates that had held through spring and much of the summer.
3) Net pork export sales for the week ending August 31 totaled 25,700 MT, down 1 percent from the previous week but up 24 percent from the prior 4-week average. At the same time, actual exports totaled 19,300 MT, up 3 percent from the previous week and 8 percent from the prior 4-week average. 3) Irma, like Harvey, has the potential to impact the restaurant industry, by forcing locations to close for days and driving people from their homes in mass evacuations, not to mention the potential damage such storms can cause to the restaurants themselves.
4) From now through expiration of the spot October lean contract, the seasonal tendency is for the board to trade higher to sharply higher. 4) The pork carcass value eroded further on Friday, especially pressured by softer demand for the rib (off $4.94) and belly (off $3.65) primals. From Friday to Friday, the cut-out lost $2.35, notching its eighth consecutive week of retreat.


CATTLE: (foxnews.com) -- Texas agricultural officials fear thousands of cattle may have died in the aftermath of Harvey, resulting in losses to ranchers of tens of millions of dollars.

The counties that sustained damage when Harvey first came ashore Aug. 25 were home to 1.2 million head of cattle, representing 1-in-4 of all beef cows in Texas, the nation's largest producer.

Sales of beef cattle and calves in the state averaged $10.7 billion annually between 2011 and 2014, according to the Texas A&M Agri-Life Extension Service and Agri-Life Research.

Most ranchers don't insure their herds because of the cost, so a rancher could be out hundreds of thousands of dollars if an entire herd drowned, the Houston Chronicle reported . The Oklahoma National Stockyards, branded as one of the world's largest stocker and feeder cattle markets, sold beef cows for an average of $1,500 in May.

Officials are still in the process of tallying the damages.

"We're finding cattle in waist-deep water," said Sid Miller, Texas Agriculture commissioner. "But when we try to drive them to dry ground, many of them just collapse they're so exhausted."

Cattle standing in water will have weakened skin and hooves that are susceptible to infection, said Dr. Dan Posey, a veterinarian and clinical professor at Texas A&M. Prolonged standing, lack of food and lack of drinkable water could make the cattle susceptible to respiratory disease, he said.

"Not all of them will recover even though they were rescued," Posey said.

Texas A&M economists estimated that Hurricane Ike in 2008 caused about $13.3 million in cattle losses, with an additional $23.3 million in damages to fences, hay and other farm equipment.

Harvey may be more costly because it affected a larger area, said David Anderson, an A&M professor and agriculture economist.

However, Anderson said he doesn't expect the losses to affect meat prices, because the number of cattle lost in Harvey won't be enough to impact the national beef market, which is expected to yield a record amount next year.

The beef cows in the coastal regions are mostly raised for breeding, so their loss won't be immediately felt by meat packers. Coastal region calves are sent to Texas Panhandle feedlots where they grow to full size before going to slaughterhouses.

HOGS: (hoosieragtoday.com) -- White House officials have temporarily halted discussions on the possibility of terminating a free trade agreement with South Korea. On Wednesday night, a senior White House official said that the deal could still be terminated, but there were no immediate plans to do so. President Trump had been talking with his senior advisers about the possibility of withdrawing from the free trade agreement because of concerns that it is tilted in favor of South Korea. However, Trump also needs help from South Korea as he tries to end a crisis regarding North Korea's nuclear and missile programs after a sixth North Korean missile test this week. There are Trump advisers urging the president to stick with the deal and avoid straining relations with a key ally in Asia.

The U.S.-Korea Free Trade Agreement, known as KORUS, was negotiated by Trump's predecessor, Barack Obama. KORUS has been a frequent target of Trump's, noting that America runs a $28 billion trade deficit with South Korea. 2

John Harrington can be reached at feelofthemarket@yahoo.com

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John Harrington