DTN Early Word Opening Livestock

Cattle: Steady-$2 HR Futures: 50-100 HR Live Equiv $130.64 - .19*
Hogs: $1-2 LR Futures: Mixed Lean Equiv $ 81.59 unch**
* 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-buying interest could start to improve Thursday with opening bids around $104 to $105 in the South and $164 to $165 in the North. Yet it goes without saying that asking prices are being hiked as we speak, thanks to the way live futures broke to new highs at midweek. Our guess is that feedlot managers are now pricing ready steers and heifers around $110 plus in the South and $172 to $174 plus in the North. Given this new bullish stubbornness, significant trade volume could easily be delayed until sometime Friday (even after cow news is released at 2 p.m. CDT). Live and feeder futures should open at least moderately higher, supported by follow-through buying and technical considerations.

The cash hog trade seem staged to open with bids generally $1 lower. The combination of large country offerings and decent packer margins explains why Saturday kill plans are currently as large as 228,000 head. Lean futures are set to open on a mixed basis tied to short-covering and inconsistent spreading.

	BULL SIDE		BEAR SIDE
1)	Cattle futures ripped sharply higher on Wednesday with live contracts scoring significant technical gains. For example, spot October live spiked above its 40-day moving average for the first time since late July. December live also took out overhead resistance, closing significantly north of 100-day average for the first time since early August.	1)	On the other hand, if the cash cattle trade stalls and the basis stays historically weak, this could become another factor that slows country marketing, making feedlots increasingly out of date.
2)	With the last feedlot sales now nearly $5 under the board, the historically weak basis should lend producers a good deal of leverage as they move into Thursday and Friday with higher asking prices.	2)	The combination of overbought charts and the need to position ahead of Friday's Cattle on Feed report should prompt at least a short term sell-off.
3)	The pork carcass value seemed to stabilize at midweek, perhaps at least temporarily benefiting from the fact that wholesale pork prices have fallen much harder than beef prices this month, thereby becoming more competitive.	3)	For the week ending Sept. 16, Iowa barrows and gilts averaged 282.2 pounds, .2 lbs.more than the previous week, and .6 lbs.more than 2016.
4)	The October lean hog contract is now trading $3 to $4 below the cash index. Given the seasonal tendency for October to rally into expiration, it is likely that at least a modest rally can be expected over the next few weeks.	4)	For the week ending Sept. 16, U.S. hatcheries set 217 million eggs in incubators, up 5% from a year ago. At the same time, chicks placed totaled 182 million chicks, up 2% from 2016.

OTHER MARKET SENSITIVE NEWS

CATTLE: (USMEF) -- The U.S. Meat Export Federation (USMEF) is preparing for its first major marketing events for U.S. beef in China, which recently reopened to U.S. beef after a 13-year absence from the market.

Joel Haggard, USMEF senior vice president for the Asia Pacific, explains that although China officially opened to U.S. beef in June, the first sea shipments only recently arrived in the market and most Chinese buyers have had very little direct exposure to the product.

To bring qualified Chinese buyers and U.S. exporters together, USMEF is conducting a trade show in each of China's three largest cities. These events are set for Sept. 25 in Beijing, Sept. 27 in Shanghai and Sept. 29 in Guangzhou. Haggard is expecting 300 to 400 buyers at each event, with about 20 U.S. companies participating. Deemed the "U.S. Beef Roadshow," USMEF is conducting this series of events in cooperation with the USDA Foreign Agricultural Service with funding support from the Nebraska Beef Council.

HOGS: (Feedstuffs) -- Commercial pork production for the third and fourth quarters is expected to be record-high in 2017, according to the latest U.S. Department of Agriculture's (USDA) "Livestock, Dairy, and Poultry Outlook." In fact, USDA forecasts third-quarter production at 6.3 billion pounds, 2.8% above a year earlier, and fourth-quarter production at 7 billion pounds, 5.7% above the fourth quarter of 2016.

Despite the increase, USDA said the new Seaboard Triumph Foods and Clemens Food Group pork processing plants that each opened on Sept. 5, will reduce the probability that large anticipated hog numbers will exceed U.S. slaughter capacity and significantly pressure U.S. hog prices.

The Clemens Food Group plant located in Coldwater Michigan has a single-shift capacity of about 10,000 head per day. The Triumph-Seaboard Foods plant located in Sioux City, Iowa has a single-shift capacity of about 12,000 head per day.

"While it is unlikely that either plant will reach full single-shift capacity immediately, increasing slaughter rates are likely to be adequate to alleviate the significant effect on hog prices that anticipated large fourth-quarter weekly hog slaughters might otherwise bring," USDA noted.

According to the outlook, prices for live equivalent 51-52 percent lean hogs are expected to average $57-$58/cwt. in the third quarter, about 17% higher than a year ago. Fourth-quarter prices are expected to be $44-$46/cwt., almost 22% above a year ago.

"Strong hog price expectations signal continued solid domestic and foreign pork demand."

The wholesale belly price, which USDA said is a reflection of much of the domestic demand strength in 2017, was 44% below their late-July peak in the first week of September. However, they were still 42% above the same week in 2016.

USDA will release the Quarterly Hogs and Pigs report on September 28, providing an indication of producer farrowing intentions into early 2018.

John Harrington can be reached at feelofthemarket@yahoo.com
Follow John Harrington on Twitter @feelofthemarket

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