DTN Early Word Opening Livestock

Hog Paper to Open Lower in Response to Supply Reality

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

Cattle: Steady-$2 HR Futures: mixed Live Equiv $132.26 + 0.13*

Hogs: Steady-$1 LR Futures: 50-150 LR Lean Equiv $ 77.72 - 0.19**

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

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

GENERAL COMMENTS:

Assuming that at least moderate trade volume was generated in Kansas and Texas on Thursday (i.e., $108, steady money), the cash market probably starts out this morning about half baked. In other words, if the South is essentially done, the North still has plenty of cattle to sell before area feedlot managers can call it a week. Asking prices are around $108-110 in the South and $172 plus in the North. Live and feeder futures are likely to open on a mixed basis as traders await more cash news.

Cash hog buyers should go to work this morning with bids steady to $1 lower. As if anyone doubted the generous live supplies waiting in the wings, the market hog weight breakdown leaves no doubt that the sky will be pretty much raining hogs for another 30-60 days. Note another daily kill record was set yesterday at 261,000 head. The Saturday slaughter is not projected to total close to 242,000 head. Lean futures seem staged to open under pressure thanks to long liquidation, follow-through selling, and of course the black and white of the September 1 H&P report.

BULL SIDE BEAR SIDE
1) Fed cattle sales in Kansas and Texas on Thursday were fully steady at $108, and a few dressed deals in the North were marked as much as $2 higher ($172). Such news should lend support to nearby live futures. 1) For the week ending September 16, cattle carcass continue to grow: cattle averaged 831 lbs, 2 lbs heavier than the prior week and 6 lbs below last year; steers averaged 897 lbs, 1 lb bigger than the week before and 8 lbs lighter than 2016; heifers averaged 821 lbs, 5 lbs bigger than the previous week and 2 lbs below a year earlier.
2) Net beef export sales last week totaled 15,995 MT, up 28 percent from the previous week and 10 percent from the prior 4-week average. Actual exports last week totaled 16,954 MT, up 10 percent from the previous week and 1 percent from the prior 4-week average. 2) Live cattle futures face tough overhead resistance linked to the bearish chart created on Monday when the board opened sharply lower.
3) Net pork export sales last week totaled 36,700 MT (a marketing-year high), up 82 percent from the previous week and 69 percent from the prior 4-week average. At the same time, actual exports totaled 20,600 MT, down 7 percent from the previous week, but up 6 percent from the prior 4-week average. 3) Though generally well anticipated, the September 1 H&P underscored widespread assumption the record pork production is certainly in store for as long as the eye can see. More specifically, the market hog weight breakdown is even more front-load than assumed.
4) The U.S. economy expanded a bit faster than previously estimated in the second quarter, recording its quickest rate of growth in more than two years. Gross domestic product increased at a 3.1 percent annual rate in the April-June period, according to the Commerce Department. 4) December and February lean hog futures closed sharply lower, repelled by 100-day moving averages. Besides ugly fundamental realities, this market has a very bearish technical profile.

OTHER MARKET SENSITIVE NEWS

CATTLE: (agrinews-pubs.com) --The Cattlemen’s Beef Promotion and
Research Board will invest about $38 million into programs of beef
promotion, research, consumer information, industry information,
foreign marketing and producer communications during fiscal 2018,
subject to U.S. Department of Agriculture approval.
In action at the end of its September meeting in Denver, the
Operating Committee approved checkoff funding for a total of 14
“authorization requests,” or proposals, brought by seven contractors
for the fiscal year beginning Oct. 1.
The committee, which includes 10 producers from the Beef Board and
10 members from the Federation of State Beef Councils, also
recommended full Beef Board approval of a budget amendment to reflect
the split of funding between budget categories affected by their
decisions.
The seven contractors had brought a total of $45 million worth of
funding requests to the Operating Committee — $7 million more than
what was available from the CBB budget.
“We showed up Tuesday morning ready to roll our sleeves up and get
to work. We knew that we were going to have to make cuts of about $7
million,” said Beef Board Chairman Brett Morris, a cattle producer
from Oklahoma.
“They are all good programs, and we hate for any of them to get
cut, but with the amount of resources we had to work with, we had to
make cuts,” Morris said. “I think the whole committee came through in
agreement. Bottom line, we had a great task to accomplish, and we got
there. I think the beef industry is in good shape because of it.”

HOGS: (foodmarket.com) -- October is known as National Pork Month. A
long held tradition along with large hog supplies at this time of the
year and attractive wholesale prices are expected to bring more chops,
shoulder roasts, and other pork cuts to the forefront in grocers’
advertisements in October.
Cooler temperatures usually result in increased sales of roasts and
generate a desire for heavier meals often prepared in the oven or slow
cookers. But there are still opportunities for grilling too throughout
the month including tail-gating at sporting events.
Hog supplies are record large this year, and slaughter rates this
month have been running about 3% above a year ago. Meanwhile,
wholesale pork prices based on Urner Barry’s daily cutout data have
averaged about 1.5% below a year ago. Price changes from a year ago
for individual pork cuts vary from the average, but in general the
wholesale levels have been attractive enough to generate active retail
features in the weeks ahead.
While pork is definitely expected to be more widely promoted next
month, beef, chicken and fish/seafood will also have a strong presence
in the advertisements. In the first week of October last year, beef
cuts held a larger share of the protein ad space than did pork by a
count of 26% to 23%, and seafood had a 25% share. Chicken came in at
17%. However, a repeat of the year-ago retail mix would represent a
more balanced offering than this week which is heavier on beef at
nearly 33% of the advertising space followed by seafood at 22.6%, pork
at 18.5% and chicken at 17.4%. Eggs, turkey, lamb and veal shared in
the remaining 8.6% of the ad space.
This week’s Urner Barry retail feature beef index was at $6.07 per
pound, up from $5.95 last week. Pork came in at $3.75 versus $4.01
last week, while chicken was at $2.87 this week, down from $2.94 a
week ago.
Shoppers should have a wide selection of protein options from which
to choose next month and at prices comparable with a year ago.

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

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John Harrington

John Harrington
Connect with John: