DTN Early Word Opening Livestock

 
Cattle: Cash Steady           Futures Mixed        Live Equiv $133.88 - .83*
Hogs:   Cash $1 to $2 LR      Futures 100-200 LR   Lean Equiv $81.78 - $4.61**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cash cattle potential should start to take greater shape this morning with starter bids around $115 in the South and $184 to $186 in the North. Some showlists seem to be priced around $119 to $120 in the South and $188 to $190-plus in the North. Significant trade volume could easily be delayed until Friday. Look for live and feeder futures to begin with mixed price action as specs and commercials cautiously watching for the development of feedlot news.

In the face of substantially large late-year offerings and faltering wholesale pork values, cash hog buyers should go to work Thursday morning with bids $1 to $2 lower than midweek. Fundamentals through the last weeks of 2017 may prove very problematic. And, of course, the uncertainty surrounding the December 1 Hogs & Pigs report (scheduled for release on December 22) could further discourage new spec buying. Saturday's kill is currently expected to total around 247,000 head. Lean futures should open lower, pressured by long liquidation and struggling product demand.

	BULL SIDE		BEAR SIDE
1)	The premiums in Feb and Apr over Dec live cattle futures have narrowed somewhat, but remain wider than typical. The structure of the market continues to look supportive for the early part of 2018.	1)	Early signs of beef buying interest this week didn't last long. Cut-outs closed significantly lower at midweek with demand described as light to moderate.
2)	Seasonally speaking, February live cattle futures tends to move higher from mid to late December.	2)	For the week ended December 9, U.S. hatcheries set 221 million eggs in incubators, up 1% from a year ago. At the same time, chicks placed totaled 184 million chicks, up 2% from 2016.
3)	For the week ended December 9, Iowa barrows and gilts averaged 286.1 pounds, .8 pounds lighter than the prior week and 5.4 pounds heavier than 2016.	3)	Holy Smoke! Who burned the bacon, Batman? The pork carcass value crashed a staggering $4.61 with the belly primal quoted $13.81 lower.
4)	Soon-to-be-spot February closed moderately higher and is holding a decent premium over the cash index, suggesting a good deal of early week confidence.	4)	The late-year cash hog trade seems to be struggling. The national dressed base on Wednesday was sharply lower while generating significant trade volume at the same time. That's never an encouraging combination.

OTHER MARKET SENSITIVE NEWS
CATTLE:

(Capital Press) -- The U.S. cattle inventory is growing and beef production is rising, but domestic and foreign demand are keeping things in balance.

The industry is in the building phase of the latest cattle cycle. The cattle inventory was 3 percent higher year-over-year on Jan. 1, 2016, and 2 percent higher at the start of 2017, Joel Packham, University of Idaho extension educator for Cassia County, said during the university's annual Idaho Ag Outlook seminar.

"The beef industry is growing the beef herd in the U.S. and will continue to do so," he said.

At the first of the year, the beef cow inventory was 31.2 million head, up 3.5 percent year over year. That number is expected to be up another 700,000 head in 2018 and another 200,000 head in 2019 before flattening out, he said.

The 2017 calf crop, at 36.2 million, is up 3.4 percent and is expected to grow to 37.7 million by 2019 before evening out.

Producers have also continued to retain replacement heifers, increasing those numbers to more than 6.4 million at the start of 2017, up 1.2 percent year over year.

It all adds up to more cattle on feed, which stood at more than 11.3 million head on Nov. 1. Feedlots are keeping current in their marketing and slaughter weights are lower, so there's not as much beef in feedlots as one might think. But cattle on feed and beef production are rising and will continue to do so, he said.

Commercial beef production in the fourth quarter of 2017 is expected at about 6.7 billion pounds, compared with the average for that time frame of about 6.3 billion pounds for 2012 through 2016.

Beef production is expected higher year over year in both 2018 and 2019 and is projected to reach 7.3 billion pounds in the third quarter of 2019.

But consumption is also up and is expected to increase, he said.

Per capita beef consumption is up 2 percent in 2017 to 55.6 pounds, and it's projected to rise another 2.6 percent in 2018 to 58.1 pounds. The increase is due to rising U.S. median income, which increased 3 percent in 2016 and another 1 percent in 2017, he said.

"We believe people have the ability to pay for beef and are willing to do that," he said.

But pork and poultry production are also on the rise, which could be a limiting factor for beef, he said.

Beef exports are a bright spot and are taking care of a lot of the extra beef production. Beef consumption in Japan is up 8 percent, and U.S. exports there are benefiting from tight supplies of Australian beef and high prices on that beef, he said.

But some of that market will dry up when Aussie production recovers due to higher tariffs on U.S. beef, he said.

Total U.S. beef exports were up 9 percent in quantity and 16 percent in value year to date through October, according to the U.S. Meat Export Federation.

While the 2018 export forecast is promising, trade agreements are uncertain. And with beef production increasing, there is no room for error -- such as a case of bovine spongiform encephalopathy, he said.

HOGS:

(kticradio.com) -- Farmers need a backup plan if the U.S. exits the North American Free Trade Agreement, according to a top Department of Agriculture official.

Ted McKinney, USDA undersecretary for trade and foreign agricultural affairs, told Agriculture.com that he "would advise anybody to be prepared with contingencies," despite the administration knowing "very well where the farm and ag industries stand." The ongoing talks to renegotiate NAFTA aren't going as well as hoped, and McKinney says abandoning the trade agreement still seems to be a real possibility.

While McKinney says he and others within the Agriculture Department are optimistic that the Trump administration will successfully "carry the day" during the negotiations, he says it would be prudent for crop and livestock producers to look at some contingencies in the event the U.S. were to exit the 23-year-old trade agreement.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

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