DTN Early Word Opening Livestock

Hog Futures Set for Moderately Higher Recovery

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

Cattle: Steady Futures: Mixed Live Equiv $135.54 - 1.16*

Hogs: Steady-$1 HR Futures: 50-100 HR Lean Equiv $ 88.80 + 1.22**

* 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 cattle-buying interest to slowly take shape Thursday with starter bids around $117 to $118 in the South and $190 in the North. Asking prices should be floated around $121 to $122 in the South and $193 to $195 in the North. Needless to say, it will help country leverage if the board stays firm. Significant trade volume could easily be delayed until sometime Friday.

The cash hog trade continues on an unusual post-Thanksgiving roll. Opening bids are likely to begin steady to $1 higher. Look for a harvest level this week to exceed 2.5 million, with the potential to hit 2.6 million head. Lean futures should open moderately higher, supported by short-covering as well as strong cash and product sales.

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BULL SIDE BEAR SIDE
1) Cattle bulls continued to build board premiums Wednesday. The weakening basis should help stiffen the resolve of feedlot managers in terms of pricing ready steers and heifers. 1) Beef cutouts dropped sharply lower at midweek. Furthermore, the description of box offerings as "heavy" suggests that more discounting may be necessary.
2) Spot December live cattle tends to weaken in the early part of December and then move higher through the rest of the month. 2) Continued large declines in open interest in December live cattle and a modest decline in February resulted in total open interest declining by 1,500 on Tuesday to 379,000 contracts.
3) The pork carcass value exploded higher on Wednesday, powered by better demand for all primals except the rib and butt. 3) For the week ending Nov. 25, U.S. hatcheries set 224 million eggs in incubators, up 2% from a year ago. At the same time, chicks placed totaled 175 million chicks; up slightly from 2016.
4) Although lean hog futures closed moderately lower Wednesday, the pullback seemed little more than short-term profit-taking. Long- and short-term trends remain positive. 4) For the week ending Nov. 25, Iowa barrows and gilts averaged 285.8 pounds, 1.3 lbs. bigger than the prior week and 5.3 lbs. greater than 2016.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Nikkei) -- Japan's government is poised to maintain a provision that jacks up tariffs on frozen U.S. beef in the event of a sharp increase in imports -- a mechanism that initially riled the Trump administration when it was triggered in August.

The so-called safeguard measure was agreed on as part of the 1995 Uruguay Round of multilateral trade negotiations. In exchange for voluntarily lowering the beef tariff to 38.5%, Japan gained the right to raise it to 50% should import volumes exceed a predetermined limit. The Ministry of Finance wants to maintain this framework in the fiscal year starting April 2018.

This summer saw the safeguard put into use for the first time in 14 years. The ministry determined that imports of American beef exceeded the limit in the April-June quarter. The higher tariff will remain in place until the end of March 2018.

The U.S. beef industry and President Donald Trump's agriculture secretary called on Japan to immediately lower the tariff, to no avail. But during Trump's summit with Japanese Prime Minister Shinzo Abe here this month, the U.S. side exerted little pressure on Japan to open up its agricultural markets, and the Finance Ministry saw no particular American objections to maintaining the safeguard mechanism.

Given the rising Japanese demand for U.S. frozen beef, this may not be the last time the snapback provision is triggered.

HOGS: (foodmarket.com) -- The National Pork Board, the Iowa Pork Producers Association, Smithfield Foods, Inc. and PrairieFresh® Premium Pork joined forces to support the second annual #HamsAcrossAmerica campaign in Central Iowa. The organizations hosted a kickoff event, on Giving Tuesday, to serve clients of the Central Iowa Shelter and Services and provided a nearly 70,000-pound pork donation to the Food Bank of Iowa, courtesy of Smithfield Foods, Seaboard Foods, Triumph Foods and U.S. pig farmers.

"As pig farmers, giving back to our community always has been an integral part of who we are," said Bill Tentinger, a pig farmer from Le Mars, Iowa, who serves on both the National Pork Board and the Iowa Pork Producers Association board of directors. "Hams Across America and this kickoff event allow me and other farmers to live the We CareSM ethical principles and share our love of the product that we produce."

The annual #HamsAcrossAmerica campaign encourages farmers and those involved in the pork industry to show appreciation for friends, family and neighbors through the gift of ham and other pork products.

"Smithfield is proud to participate in Giving Tuesday with the National Pork Board and support the positive impact it provides for so many of our neighbors in need," said Dennis Pittman, senior director of hunger relief for Smithfield Foods. "As a global food company with Iowa-based facilities, Hams Across America aligns with Smithfield's commitment to resolve hunger across the country and to cater to the communities we call home."

"On behalf of all those in our connected food system at Seaboard Foods and Triumph Foods who raise and care for our pigs and produce pork for the PrairieFresh® brand, we understand the importance of supporting our communities whether that be someone next door in Iowa or a world apart," said Terry Holton, Seaboard Foods president and CEO. "With Hams Across America, we're honored to share our products so others might enjoy delicious, wholesome meals this holiday season."

Pig farmers and those involved in the pork industry are encouraged to extend Giving Tuesday through Dec. 23 with Hams Across America. Individuals can participate by purchasing a gift of ham and paying it forward to loved ones and those in need. Participants are encouraged to share their pay-it-forward stories on social media using #RealPigFarming and #HamsAcrossAmerica.

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: