DTN Early Word Opening Livestock

Livestock Futures Staged for Mixed Opening

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

Cattle: Steady Futures: Mixed Live Equiv $134.77 + .37*

Hogs: Steady Futures: Mixed Lean Equiv $ 88.59 -0.16**

* 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 country should be typically slow Monday as packers move to gather new showlists. Look for the early-month offering to be somewhat larger than last week. However, packers could easily counter with a bigger appetite. Both sides will be closely monitoring the ability of futures and cutouts to find a bottom. Live and feeder futures are likely to open on a mixed basis thanks to follow-through selling on one hand and early-week short-covering on the other.

Hog buyers should return to work after the weekend break with generally steady bids. Last week's slaughter jumped back over 2.5 million head, but failed to make a seasonal high. Can processors hit 2.6 million this week? So far, we continue to slaughter below general expectations based on USDA supply data. Lean futures should also open with uneven price action tied to spillover buying and a discount of the cash index.

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BULL SIDE BEAR SIDE
1) Cattle buyers are expected to start out short bought this week, compounded by the need to boost slaughter speed and supply large holiday meat orders. 1) Spot December live is now at more than a $3 discount to last week's cash market. Such a strong basis could work to cripple feedlot resolve.
2) Mindful of the tall premium of February live futures, feedlot managers could significantly tighten the late-year showlists by increasing days on feed and moving more cattle into the first quarter. 2) For the week ending Nov. 28, noncommercials reduced their net-long position in live cattle futures by 1,300 loads to 128,700. Long liquidation no doubt continued on Thursday and Friday.
3) The front end of the market is being supported by a modestly rebounding cash hog market with interior prices gaining $2 to $3/cwt this week. 3) Daily hog slaughter set another new record on Tuesday, Nov. 14 at 468,132 head. Many believe higher and higher records await to be confirmed through the balance of the fourth quarter, possibly stretching as high as 475,000.
4) Lead month December hogs ended the last week up 100 points at $65.28, up 200-points from last Friday and a 200-point premium to the most recent CME two-day settlement index value. Even with expiration less than two weeks away, the board seemed unafraid of leading the cash market higher. 4) Hogs continue to gain weight over prior year, now greater than a five-pound spread over last year's counter-seasonal declining weights.

OTHER MARKET SENSITIVE NEWS

CATTLE: (The Cattle Site) -- Cattle and hog weights have followed a somewhat different trajectory this fall and this has impacted the amount of meat actually showing up in the marketplace, reports Steiner Consulting Group, DLR Division, Inc.

Actual weight data is reported with a bit of a lag as USDA needs time to collect and compile all data it receives from inspectors at slaughter facilities. The latest data available is for the week ending 11 November.

The report showed that the average steer weight for the week was 902 pounds (dressed carcass), 16 pounds (-1.7 per cent) less than the same week a year ago. Seasonally fed cattle weights increase in summer and fall but this year the increase has not been as big as in the last two years.

Feedlots have been able to market cattle in a more timely fashion and strong beef demand has allowed beef packers to process more cattle while at the same time preserving their quite lofty margins. The chart below shows our estimates for weights for the last two weeks as well as our expectations for the current week.

The weight data for week ending 18 November will be released Friday and we expect it will show weight near the same level as the previous week. However, we think cattle carcass weights likely declined during Thanksgiving week and will be only marginally higher this week.

HOGS: (National Hog Farmer) -- Argentina is accepting pork exports from Canada once again, announces the Honorable Lawrence MacAulay, Minister of Agriculture and Agri-Food, and the Honorable François-Philippe Champagne, Minister of International Trade.

"Our government is working hard to open markets and create new trade opportunities for Canadian businesses and workers. Canadian pork access to the Argentinian market is an important step in our valued and growing relationship and evidence that engagement produces results. I encourage our Canadian pork industry to take advantage of the opportunities this leading South American market offers," states Champagne.

As the seventh top producing pork country, Canadian hog producers export 16% of the world's pork, shipping 3.8 million pounds outside its borders in 2016.

This restored access will provide significant new opportunities to Canadian pork exporters in the important and emerging Argentinian market, with industry estimating an export value of up to $16 million annually.

"CPI is very pleased with this announcement. The Argentinian market represents a solid opportunity to develop further and diversify Canadian pork exports in South America," stresses Neil Ketilson, chair of the Canada Pork International Board of Directors.

The government of Canada is helping producers and processors bring their high-quality products to more and more countries around the globe. Restoring market access to the Argentinian market builds on Prime Minister Justin Trudeau's successful visit to Argentina last year when both leaders acknowledged the progress made to date and the necessary remaining steps to allow trade of Canadian pork to Argentina to resume.

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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