DTN Early Word Opening Livestock

Cattle: Steady-$2 HR Futures: Mixed Live Equiv $132.13 -1.34* 
Hogs: Steady-$1 LR Futures: Mixed Lean Equiv $ 77.91 + .15**
* 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 inquiry could start to gear up Thursday with opening bids around $104 in the South and $167 to $168 in the North. Encouraged a bit by Wednesday's board recovery, feedlot managers should put asking prices around $110 to $112 in the South and $172 to $174 in the North. If the impasse deepens, significant trade volume could once again be delayed until Friday. Live and feeder futures should open on a mixed basis as specs and commercials position ahead of late-week cash news.

Negotiated sales in hog country on Wednesday were huge, more than 29,000 head, according to the national summary. The weight average price was lower, but not by much. At the very least, it seems like the erosion of cash sales seems to be slowing, even as slaughter levels continue to grow. Does this mean that greater packer competition is working to support country prices? Maybe. Opening cash bids are expected to open steady to $1 lower. Of course, Thursday's big event comes in the afternoon at 2:00 p.m. CDT when the Sept. 1 Hogs & Pigs report will be released. Generally speaking, analysts are expecting to see total hog numbers to be about 3% larger than last year. The sow herd is likely to be confirmed 2% greater. Lean hog futures are staged for a mixed opening as traders cautiously position ahead of the report.

	BULL SIDE		BEAR SIDE
1)	Cattle futures rallied sharply higher at midweek. Although live contracts still face significant overhead resistance, December did manage to nose back above its 100-day moving average.	1)	The spread between spot October live cattle and December is becoming dangerously wide (i.e., $6.33 as of Wednesday close). The temptation to feed cattle more and make them heavier may get irresistible.
2)	Total open interest in live cattle futures continues to increase with bullish involvement from the noncommercials probably working to further inflate their net-long positions.	2)	Beef cutouts closed sharply lower at midweek, reversing a good part of the early-week gain and suggesting that retailers now have their boats loaded.
3)	December and February lean hog futures caught a decent pre-report bounce on Wednesday with both contracts nosing back over 40-day moving averages.	3)	For the week ending Sept. 23, 2017, U.S. hatcheries set 223 million broiler eggs in incubators, up 4% from a year ago. At the same time, chicks placed totaled 179 million, up 3% from 2016.
4)	Iowa barrows and gilts last week averaged 282.1 pounds, actually down a little from the previous week (282.2 lbs.) and 2.1 lbs. more than 2016. Given the aggressive marketing seen of late, is it possible that producers are pulling numbers forward.	4)	The Sept. 1 Hogs & Pigs will be released Thursday afternoon, and nearly everyone believes it will confirm a higher level of expansion. Indeed, the only question seems to be the exact level of aggressive herd growth.

OTHER MARKET SENSITIVE NEWS

CATTLE:(The Star Tribune) -- Beef continues to bolster Cargill Inc.'s financial results with high consumer demand and ample cattle supply helping the company's bottom line.

The Minnetonka-based conglomerate reported a profit Wednesday of $973 million for the first quarter of its fiscal 2018, which ended Aug. 31. That's a 14 percent gain from the same period a year ago. Revenue was slightly up at $27.3 billion.

"We're off to a good start in our new fiscal year, powered by the significant work we've done over the last few years and continuing to accelerate our performance," said David MacLennan, Cargill's chairman and chief executive. "Even as market conditions vary across our sectors, our teams are delivering for our customers and achieving results to fuel future growth."

Its protein business carried over its momentum from last year. The cattle supply has fully rebounded following years of drought in Texas and the southern U.S. Plains states, meaning Cargill can process more head through its massive slaughterhouses and sell beef to customers. This is passed on to consumers who are responding by buying more beef. Cargill is also exporting more beef abroad. The company's chicken business, which operates outside the U.S., land its global animal feed business lagged slightly over a year-ago.

Cargill's food ingredient business was its second-largest contributor to financial gains, led in most regions by cocoa and chocolate products, as well as food sweeteners and starches.

The company's origination and processing business — or its agricultural supply chain — was down from last year's strong comparative quarter. While global demand for grain and oil continues to grow, Cargill said an overabundance of production during the last four crop cycles has depressed commodity prices and market volatility.

Cargill's industrial and financial services, which includes shipping, metals trading and structured finance, was down slightly from a year ago. Strengths within this business included earnings from iron ore and steel trading in Asia, and from trade and structured finance services in emerging markets.

During the first quarter, Cargill sold its North American power and gas business to Australia-based Macquarie Group. It also agreed to sell its U.S. metals business to Metal One, a Japanese steel trader and distributor. Cargill will still be a player in the energy industry through its Asia metals business, as well as in biofuels, tanker shipping and bio-industrial businesses.

HOGS: (Brownfield) -- The director of congressional relations for American Farm Bureau says it's probably a reach to believe the renegotiation of NAFTA will be finalized by the end of the year.

Dave Salmonsen tells Brownfield trade officials from the U.S., Canada and Mexico are working hard to come to an agreement using an accelerated schedule.

"So as trade negotiations go along, you hear about progress or a lack of progress. But all of this is very usual when you're dealing with 28 chapters in the agreement, some pretty significant ideas out there for change. It just takes a while to work through them all."

He says most issues are on the table, but tough negotiations lie ahead.

"There are some more contentious areas where negotiating texts really haven't really been put out there for discussion yet. That's not unusual. You try to get the progress you can on a lot of things that are probably easier to accomplish because you've done them before."

Salmonsen views dispute settlement, rules of origin in the manufacturing sector, and Canada's supply management system for dairy and poultry as some of the bigger sticking points.

The third round of NAFTA negotiations concludes Wednesday in Ottawa, Canada.

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

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