DTN Early Word Opening Livestock

 
Cattle: Steady w/Wed Futures: Mixed Live Equiv $132.64 + .49* 
Hogs: Steady Futures: Mixed Lean Equiv $ 82.53 + .74**
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

The cash cattle trade seems to be done for the week with buyers and sellers free to finish last minute Christmas shopping. The board will close an hour early Friday, allowing trade to depart for the long holiday weekend as soon as possible. Yet the CME will stay open long enough to briefly mull over the implications of the Dec. 1 Cattle on Feed report set for release at 11 a.m. (CST). Average trade guesses anticipate on feed to be 6% to 7% larger, November placement to be 6% to 7% larger; and November marketing to be 3% larger. Live and feeder futures are expected to open on a mixed basis linked to a slow combination of short-covering and long liquidation.

Late-week cash hog buyers probably don't have too many numbers to gather Friday, but opening bids are expected to be about steady. Saturday kill plans are now expected to total close to 135,000 head. Traders on lean futures will also be jockeying before the release of a major inventory date. The Dec. 1 Hogs & Pigs reported will be unveiled at 11 a.m. (CST). Trade guesses suggest all hogs will be about 2% larger than last year. Hogs kept for market is anticipated to total about 1.5% greater than 2016, and the same goes for hogs kept for breeding.

	BULL SIDE		BEAR SIDE
1)	Beef cutouts finally stabilized Thursday with supplies apparently cleaned up going into the long weekend. Hopefully, we are setting the stage for a decent post-holiday recovery.	1)	There are rumors afoot that the average trade guess on November placement is too small. Specifically, some talk suggest that the full weight of aggressive Texas placement has not be fully factored in.
2)	Some believe Friday's Cattle on Feed report will confirm a record large marketing total for the month of November. Such data would help explain country currentness and feedlot leverage seen in recent weeks.	2)	Thursday's short-covering rally seem a bit on the puny side given earlier board selling and cash strength seen at midweek.
3)	Net pork export sales last week totaled 23,700 metric tons, up 37% from the previous week and 33% from the prior four-week average. Increases were reported for Mexico (10,000 MT), Hong Kong (4,500 MT), Canada (2,700 MT), South Korea (2,000 MT), and Japan (1,400 MT).	3)	Two major inventory reports surfacing on the same day culd turn into double trouble, especially since both are expected to point toward greater production in the first half of 2018.
4)	The pork carcass firmed on Thursday thanks to better buying interest for fresh cuts, picnics and ribs.	4)	Understandably, market watchers are assumping that a new hog plant next spring will help to counter the impact of further herd expansion. Yet the timing of the completion of that facility is far from certain.

OTHER MARKET SENSITIVE NEWS
CATTLE:

(oklahomafarmreport.com) -- Is the feeder cattle contract still viable and how can the market volatility be managed? These are the main questions in a new Feeder Cattle Basis report from the RaboResearch Food & Agribusiness group.

The CME Index is comprised of 12 states, and the Rabobank analysts explores the need for regionalization for a more accurate picture of the Feeder Cattle Basis and Market. Analysts have suggested 5 regions: Montana and Wyoming; Nebraska, South Dakota and North Dakota; Iowa and Missouri; Kansas and Colorado; and Texas, Oklahoma and New Mexico.

"The number of feeder transactions by region comprising the CME Index are not distributed equally through all geographies, a key consideration producers should have when establishing a heading program," explains RaboResearch Food & Agribusiness, Senior Animal Protein Analyst Don Close. "The question as to how well a geographic area is represented in the composition of the index is an important consideration to incorporate in hedging strategies."

The market has also seen an increase in volatility since 2014.

"A widely accepted complaint surrounding cattle futures in recent years is that volatility has escalated to the point that risk management has become increasingly unpredictable, more difficult and much more expensive," notes Close.

No matter your circumstance, Rabobank analysts recommend working with a knowledgeable broker because of the uncertainty in the basis and the numerous influences.

HOGS: (agweek.com) -- Successfully predicting the future is notoriously difficult. But there are valid reasons to be optimistic about long-term U.S. livestock prices, says Tim Petry, a North Dakota State University livestock marketing economist.

"When you consider the supply and demand determinants, the outlook is encouraging," says Petry.

Supply and demand can be likened to the two blades of a scissors working in union. Both blades need to function properly for the scissors to cut. Likewise, both supply and demand need to work in livestock producers' favor to create and maintain attractive prices — and that appears to be the case, Petry says.

On the supply side: Global ability to increase supply is limited. Brazil and Argentina have potential to produce substantially more meat, but they're the exception, Petry says.

On the demand side: The world's population is growing rapidly, and so is the need for — and ability to buy — food, including high-protein meat. The world will have an estimated 9.3 billion people in 2050, up from 6.9 billion in 2010, with the global per capita income doubling in the same period, according to a United Nations report.

"As incomes in developing countries increase, food consumption shifts to diets richer in animal protein," the U.S. Department of Agriculture says.

China already is an important growth market for U.S. beef. Though China's domestic beef production is rising, beef consumption is rising even faster, boosting the need for imports from the United States and other exporters, USDA says.

But USDA also says that several countries, particularly Argentina and Uruguay, offer "fierce competition" for beef sales to China.

Some in production agriculture once wondered if interest in vegetarianism eventually might cut into meat consumption. But that hasn't happened, at least not to a meaningful extent, Petry says.

"People still like meat," he says, noting that young American adults do, too.

U.S. per capita consumption of red meat is expected to increase slightly in both 2017 and 2018, according to USDA projections.

Exports are important for U.S. livestock producers — last year America exported 25.8 percent of its pork and 13.7 percent of its beef — and foreign demand for U.S. meat is growing, too.

Japan is the leading importer of U.S. beef, followed by South Korea, Mexico, Canada and Hong Kong. Those six countries account for the vast majority of 2017 U.S. beef exports, which have gone to 111 different countries.

But consumers in Africa and Central and South America — who typically import very little U.S. meat now — are a growing opportunity for U.S. meat exports, according to the U.S. Meat Export Federation

Meat exports help U.S. livestock prices in ways that sometimes may go unnoticed.

For instance, so-called "variety meats" — items such as livers, hearts, tongues and chicken price — are seldom eaten by U.S. consumers but often are highly valued in other countries, Petry says.

What Petry calls "tastes and preferences" is benefitting sheep producers. Growing ethnic and religious demand for lamb has reinvigorated the long-struggling U.S. sheep industry in recent years.

Livestock production will remain a volatile industry, with feed costs and weather continuing to buffet ranchers from year to year, he says.

Even so, "Looking ahead to the next 20, 30 years, the future is as bright now as I can ever remember," Petry says.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

(BAS)

Copyright 2017 DTN/The Progressive Farmer. All rights reserved.