DTN Early Word Opening Livestock

Hog Futures Should Open Moderately Higher

John Harrington
By  John Harrington , DTN Livestock Analyst
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Cattle: Steady-$2 HR Futures: Mixed Live Equiv $132.65 - .21*

Hogs: Steady-$1 HR Futures: 50-100 HR Lean Equiv $ 78.12 + .42**

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

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

GENERAL COMMENTS:

Although we should see more cash toes in the water Thursday, that doesn't necessarily mean the cattle market will generate significant trade volume. Serious business could easily be delayed once again until Friday. Look for opening bids to be renewed at $106 live and $168 dressed. Asking prices should be posted around $110 plus in the South and $174 plus in the North. Believe it or not, the basis is close to normal for this time of year (i.e., spot October live about $1 over cash). Live and feeder futures seem set to open on a mixed basis as traders await clues to late-week cash.

The cash hog recovery remains on a decent roll this week, presumably a function of momentarily tighter supplies. Look for buyers to continue Thursday with firm bids encouraged by decent processing margins and some reduction in the country offering. The Saturday kill is currently estimated at 240,000 head. Lean futures should open moderately higher, supported by encouraging fundamentals and short-covering.

BULL SIDE BEAR SIDE
1) Though FCE sales at midweek were not comparable with last Wednesday (when nothing sold), live sales in the South looked fully steady with last week's country trade. 1) Cattle futures reversed from session highs near midday to close mostly lower, reinforcing several layers of overhead chart resistance.
2) Beef cutouts are holding up quite well in the face of such large red meat production so far this fall. The rib primal continues adding to the strength that started in mid-September. A seasonal increase on the ribs is expected through much of October as retailers and food managers lay down a foundation to meet late-year holiday needs. 2) The premium on December live cattle may tempt some to slow their marketings, especially if there is a lack of further advancement in the cash market. While this could be supportive in the very near term, it could lead to pushing cattle back into the latter part of the quarter or on into the new year.
3) The pork carcass value closed moderately higher with better demand for hams and picnics overshadowing weakness in bellies, ribs and butts. 3) For the week ending Sept. 30, U.S. hatcheries set 215 million broiler eggs in incubators, up 3% from a year ago. At the same time, chicks placed totaled 176 million chicks, up 3% from 2016.
4) For the second week in a row, the average weight of Iowa barrows and gilts drifted counter-seasonally lower (i.e., 281.9 pounds, .2 lbs. lighter than the previous week and .9 lbs. heavier than 2016. Aggressive chain speed since Labor Day may be pulling hogs forward. 4) Although the short-term trend in lean hog futures has shifted into neutral, the long-term market trend remains solidly bearish.

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OTHER MARKET SENSITIVE NEWS
CATTLE:

(NCBA) -- Registration for the 2018 Cattle Industry Convention and NCBA Trade Show in Phoenix, Ariz., opened Oct. 2 and participants are encouraged to register early. This year's event will be held Jan. 31 to Feb. 2, with a schedule packed full of business meetings, educational opportunities and world-class entertainment.

The annual Cattle Industry Convention provides an opportunity for members of the National Cattlemen's Beef Association, Cattlemen's Beef Board, CattleFax, the American National CattleWomen and the National Cattlemen's Foundation to meet and set policy for the year ahead, while also experiencing the best the cattle business has to offer. This year, the NCBA Trade Show, which is always a highlight, includes more than 300 exhibitors on more than six acres of floor space and a newly expanded outdoor exhibit space.

NCBA President Craig Uden said it's paramount for cattlemen and women to make plans for Phoenix as these important organizations plan for the future of the industry.

"The Cattle Industry Convention is our opportunity to determine the future of our business. Thursday, we're playing offense and times are good, but the challenges facing our industry have never been greater," Uden said. "This is an opportunity to make your voice heard and participate as a beef industry leader. I'm confident that your investment and participation in this great event will pay dividend in your operation. This year's convention features so many great events, speakers and business opportunities, you won't want to miss it. On top of that, this year's host city, Phoenix, will be an outstanding destination at the end of January for those of us who will benefit from a winter getaway."

All 2018 convention registrants who book before Jan. 5, receive an early-bird discount, so register Thursday. This year's participants are also eligible for travel discounts provided by Southwest Airlines, including a 15 percent discount off Anytime & Business Select fares and a 5 percent discount off select Wanna Get Away fares for travel to and from the conference. Book your travel between Oct. 1 and Jan. 5 to take advantage of the discounted rates. Enterprise and National are the official rental car partners of the Cattle Industry Convention and NCBA Trade Show, providing this year's participants with a 5 percent discount off rental car rates by utilizing the contract ID/Promo Code "L12GF94."

For additional information about the 2018 Cattle Industry Convention and NCBA Trade Show, or to register, please visit http://convention.beefusa.org.

HOGS: (Dow Jones) -- More hogs than ever are heading to U.S. slaughterhouses, producing so much extra pork that futures prices have fallen nearly 40% since mid-July.

New meatpacking plants in the Midwest have put the industry on track to kill a record number of hogs this year. To supply them, farmers have expanded their herds to the largest ever for this time of year -- 73.5 million hogs and pigs, the U.S. Department of Agriculture said.

Americans aren't eating enough pork chops and ham to keep up. Slaughterhouse owners and hog farmers are banking on selling the surplus in countries like Mexico and South Korea, where demand for U.S. pork is climbing. For now, though, the glut is weighing on lean-hog futures, wholesale pork prices and the price of some consumer staples. Wholesale prices for pork bellies, used to make bacon, fell more than 50% from an all-time high in July that came as consumers ate through tight stocks of the meat cut.

Pork chops were 7% cheaper at retail in August than a year earlier, according to the Bureau of Labor Statistics.

"We're really betting that we're going to be able to sell this pork outside of our country," said Jan Archer, a hog farmer in Goldsboro, N.C., and former president of the National Pork Board. "That's a big bet."

A fifth of the pork produced in the U.S. this year will be exported, the USDA projects. Pork exports were up 11% in the first seven months of 2017 compared with a year earlier.

But hog-processing capacity is growing too. Plants that opened in Iowa and Michigan in September will kill an estimated 22,000 hogs a day. Prestage Farms Inc. plans to open another Iowa plant next year that can slaughter 10,000 more.

Already, some farmers who ramped up production to feed the new plants are losing money as pork piles up in the U.S.

Livestock industry analysts say rising foreign demand justifies the build-out. But U.S. pork exports rely on politically vulnerable trade agreements. If the Trump administration's efforts to renegotiate the terms of trade disrupt those pacts, the U.S. pork industry could suffer, farmers say.

"We can get them dead, but they've got to go someplace," said Curtis Meier, who raises hogs near Clarinda, Iowa. Mr. Meier traveled to Washington in September to stress Iowan hog farmers' reliance on trade to the state's congressional delegation.

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington

John Harrington
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