DTN Early Word Opening Livestock

Cattle Paper Likely to Open Mixed as Traders Wait for More Cash News

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

Cattle: $3-5 HR Futures: Mixed Live Equiv $137.43 + .15*

Hogs: Steady-$1 LR Futures: Mixed Lean Equiv $ 84.51 +1.37**

* 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 buyers definitely got their feet wet on Thursday, successfully generating light to moderate trade volume in the North with sharply higher dressed bids (i.e., $192, $10 higher than last week). But there still remains a great deal of work to complete Friday, especially in the South. Expect opening bids to be around $192/$120 to $122 live in the North and $120 in the South. Asking prices should be around $195 plus in the North and $125 plus in the South. Live and feeder futures are staged to open on a mixed basis thanks to a combination of residual selling and pre-cash short-covering.

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The cash hog trade should open Friday with bids steady to $1 lower. Packers appear to have late-week slaughter plans pretty much covered as well as starters for next week. Assuming Saturday's kill turns out to be close to 165,000 head, the weekly slaughter may not total much more than 2.45 million head, roughly 2.5% below 2016. Lean futures seem set to open with mixed prose act.

BULL SIDE BEAR SIDE
1) Short-bought cattle buyers in parts of the North moved to own moderate numbers Thursday, despite the necessity to jack dressed bids as much as $10 higher than last week. 1) Nearby live futures broke hard Thursday as nervousness surfaced regarding the possibility that board premiums had reached a point where late-year cash potential was overstated.
2) Actual beef exports last week totaled 17,700 metric tons, up 25% from the previous week and 14% from the prior four-week average. For the same period, beef export sales amounted to 16,500 MT, down 2% from the previous week, but up 3% from the prior four-week average. 2) For the week ending Oct. 21, cattle carcass weights jumped higher: all cattle averaged 826 pounds, 2 lbs. more than the prior week and 15 lbs. lighter than 2016; steers averaged 899 lbs., 3 lbs. heavier than the week before and 16 lbs. smaller than last year; heifers averaged 829 lbs., 10 lbs. larger than the previous week and 8 lbs. smaller than a year earlier.
3) Net pork export sales last week surged to 25,800 MT, up 42% from the previous week and 55% from the prior four-week average. At the same time, actual exports increased to 23,800 MT, up 4% from the previous week and 11% from the prior four-week average. 3) Iowa Select of Iowa Falls announced last week that it intends to increase capacity by 90,000 head across the state. Combine it with the news that the Iowa Department of Natural Resources recently took aerial photos, showing at least 5,000 more hog facilities than previously accounted for.
4) The pork carcass value surged higher on Thursday, supported by stronger demand for belly, rib and picnic cuts. 4) Lean futures were pressured on Thursday by weakening cash hog prices, prospects of large hog supplies this fall and winter, and whether the recent strong demand pull will continue through the remainder of the fall and early winter.

OTHER MARKET SENSITIVE NEWS

CATTLE: (oklahomafarmreport.com) -- The fact that the price for beef has remained so strong lately in the face of larger supplies rolling through the pipeline, is solid evidence that demand for beef is remaining relatively strong for this particular season, when the product typically takes a back seat to poultry and pork as featured entrees on holiday menus. While this is generally the case this time of year, most in the beef industry start preparing for a slide off in demand over the next 60 days or so. But, with such strong demand currently, people are wondering if demand will slacken at all this year? Extension Livestock Market Economist Dr. Glynn Tonsor says, maybe not - simply because there is actually more beef available this year.

"Now that we have larger beef supplies, compared to say three years ago, beef is actually available to be a featured item as well," Tonsor said. "That in itself doesn't mean demand is going up. It depends on how much we're going to cut prices… but the fact that beef is available to be part of a retailers featuring plan is a nice thing."

In some sense for years past, Tonsor says retailers had their hands tied when it came to featuring beef in their stores during the end of the year, because supplies were really so limited. But with supplies being up, retailers who choose to, will have plenty of beef available to use as a featured product, which could sustain the current demand levels being observed currently, and most likely at a discounted price - still give retailers the returns they hope to get from featuring the product.

"How that all shakes out over the next three or four months is to be determined of course, but I'm optimistic that the current demand signals for beef is strong," he said," and that they will carry us through."

HOGS: (National Hog Farmer) -- Seeing the importance of capitalizing on the expanding marketing opportunity in Asian countries, the Canadian Pork Council welcomes the opportunity to participate in the government of Canada's consultation on trade with Asia-Pacific nations.

Pork producers have been serving international markets for more than 25 years and reach consumers in more than 100 countries. Valued at $3.8 billion, exports represented nearly 70% of Canadian pork production in 2016.

"We urge the government of Canada to take a leadership role in the Trans-Pacific Partnership-11 negotiations with the intention of completing a deal in the very near term," says Rick Bergmann, chair of the Canadian Pork Council. "Canada's pork producers request that the government of Canada work to ensure a TPP-11 agreement is implemented without jeopardizing the negotiated outcomes on market access that were agreed to in the original TPP agreement."

Enhanced market access is of critical importance to Canadian producers and government's efforts to expand economic ties in key Asia-Pacific markets are very much appreciated. The Pacific region is experiencing significant economic growth and is also a region with an evolving need for agricultural products.

The government of Canada has identified Asia-Pacific as "a priority market" and notes it is working with the current TPP participants to assess alternatives. The value these markets bring to the trade of Canadian pork is key to the expansion of the industry. While Japan is the most lucrative market, there is room to quickly improve Canadian market shares in Singapore, Vietnam and Malaysia.

Canada has the capacity and ability to complete this deal so that Canadians can take full advantage of this opportunity while other countries continue to negotiate. However, the status quo is not an option. If a free trade agreement with Asia-Pacific nations is not implemented, Canada will face ongoing erosion of its ability to compete in Japan and other rapidly growing Asian markets.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington

John Harrington
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