DTN Early Word Opening Livestock

 
Cattle: Cash Steady w/Wed     Futures Mixed        Live Equiv $137.40 - .42*
Hogs:   Cash Steady-$1 LR     Futures Mixed        Lean Equiv $85.74 - .08**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Look for the cash cattle market to be very limited through the day. We see a few clean-up deals here and there, but for the most part the country trade seems to be done for the week. The November 1 Cattle on Feed report scheduled for release Friday afternoon will most probably be bearish in terms of fed cattle supplies. "How bearish?" may be the only question in play. Averages guesses look like this: on feed, up 5% to 6%; placed in October, up 7% to 8%; marketed in October, up 5%. Live and feeder futures are staged to open on a mixed basis as traders position before official on feed news.

Look for the cash hog trade to open business Friday morning with bids steady to $1 lower. Processing margins went from good-to-better this week, and it's a good bet packing profits will continue to improve over the next 2 to 4 weeks. Saturday's kill is expected to total close to 153,000 head. Lean contracts should open on a mixed basis in slow volume.

	BULL SIDE		BEAR SIDE
1)	Actual exports improved to 15,841 MT, up 7% from the previous week and 1% from the prior 4-week average.	1)	For the week ended November 4, fed carcasses increased in size: steers averaged 902 pounds, 1 pound more than the previous week and 11 pounds smaller than 2016; heifers averaged 833 pounds, 4 pounds heavier than the prior week and 9 pounds lighter than last year.
2)	Net pork export sales last week increased to 13,200 metric tons, up 69% from the previous week, but down 16% from the prior 4-week average. At the same time, actual exports totaled 24,100 mt, up 4% from the previous week and 6% from the prior 4-week average.	2)	Net beef export sales last week dropped to 9,291 MT, down 45% from the previous week and 42% from the prior 4-week average.
3)	From the first week of October to the current week, the belly primal has rebounded in value by 35%. Exceptional demand for fresh product following the rapid decline in prices after the record-breaking summer peak appears to be the main source of support pushing values counter-seasonally.	3)	Lead month December lean finished Thursday's session just over 100-points lower at $60.10, nearly a 590-point discount to the most recent two-day CME settlement index value. Extremely negative late-year psychology seems unshakable.
4)	Although the pork cut-out is not exactly a ball of fire, huge quantities of pork product continue to clear at a remarkable rate.	4)	If packers can pressure producers, and producers are mounting an increasing hog supply, cash hogs can head back lower after the recent counter-seasonal price run.

OTHER MARKET SENSITIVE NEWS
CATTLE:

(brownfieldagnews.com) -- An analyst with Rabo AgriFinance says the U.S. cattle herd is still expanding.

Don Close says up to one million cows could be added to the U.S. cattle herd over the next two years.

"With cow numbers peaking in 2018-2019, we don't think we'll see the peak in U.S. beef production numbers until 2020-2021 as the offspring of those cows work their way through the system," he says.

He tells Brownfield although the industry has been expanding slowly, U.S. cattle numbers should stay above 30 million head, which he says is encouraging news for the industry.

"That will enable us to hold a production level that will support all the infrastructure of the feed yard structure and our packing structure to hold the U.S. industry together," he says.

But, Close says trade remains critical and if there are any market disruptions it could cause cattle prices to tumble.

He says US beef exports have been holding around 10 percent of its annual production. But…

"The longstanding industry goal to beat that 10 percent puts us back above where we were in 2003 before BSE ," he says.

Close spoke to Brownfield last week at the National Association of Farm Broadcasting's annual meeting in Kansas City.

HOGS:

(Bloomberg.com) -- Mounting inflationary pressure in China may get a boost from rising prices for one of the country's main dietary staples: pork.

Food prices are one of the biggest factors in consumer inflation, and one of the main components is pork. The meat accounts for almost 3 percent of the consumer price index, according to an estimate from Citic Securities Co. The government's statistics bureau doesn't disclose weights for components in the CPI basket.

Pork prices have collapsed on cheaper corn, the main feed for hogs, and greater production. Prices soared 33.6 percent year on year in May 2016, the most in more than four years, but have been falling this year. However, losses have been narrowing over the past four months, with fresh data showing a 10.1 percent drop in October.

That's happening as economists project faster consumer price increases this year and next. Faster price gains also may be welcomed by policy makers working to rein in financial risk as they help inflate away debt obligations.

"While inflation is still in the government's comfort zone, pressures are broadening," said Lou Feng, an analyst at the Chinese Academy of Social Sciences, a government think tank in Beijing.

Shoppers aren't seeing much inflation, thanks to food prices falling for the past nine months. The consumer price index rose 1.9 percent year on year last month, the most since January but still short of the government's 3 percent target. Economists surveyed by Bloomberg forecast it will pick up to 2 percent in the fourth quarter and 2.3 percent in the first three months of next year.

But pressure is building. A core inflation gauge that strips out food and energy was steady last month, matching a six-year high of 2.3 percent.

Reduced price-supports for agriculture led to falling prices for various kinds of food, from grains to pork, said Wen Bin, a researcher at China Minsheng Banking Corp. in Beijing. Corn prices fell after authorities scrapped a longtime price support, which had helped hold down pork prices because it's the main feed for hogs.

"The low-base effect means consumer prices, which are heavily weighted toward food, especially pork, are set to recover," Wen said.

Domestic corn futures in Dalian fell almost 20 percent last year as authorities scrapped a price-support program for growers. They've rallied more than 11 percent so far this year.

"The price of pork has a dominating role in China's food price inflation," Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, wrote in a recent report. Coupled with pollution control measures, he said, the pass-through from producer goods inflation "could have significant consequences for China's inflation in 2018."

John Harrington can be reached at feelofthemarket@yahoo.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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