DTN Early Word Opening Livestock

Livestock Futures Seem Likely to Open on a Mixed Basis

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

Cattle: Steady Futures: Mixed Live Equiv: $141.58 + .15*

Hogs: Steady-$1 LR Futures: Mixed Lean Equiv: $ 70.94 - .29**

* based on formula estimating live cattle equivalent of gross packer revenue

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

While the cash cattle trade got started Wednesday (i.e., steady money paid mostly in the North), there's still plenty of work to do, work that should unfold over the next several days. Look for opening bids to start out around $108 on a live basis. Asking prices are expected to be restated around $113 live in Kansas and Texas. Live and feeders should open on a mixed basis Thursday as traders position ahead of further cash business and Friday's release of the monthly Cattle on Feed report.

Hog buyers are expected to remain on the defensive, opening with bids about a dollar lower. As the live cost of inventory continues to drop at a much faster rate than thecarcass value, processing margins are nothing short of excellent. Accordingly, look for the Saturday kill to surge as high as 200,000 head or more.Lean futures should begin with uneven price action, slowly rocked between bear-spreading interest and profit-taking.

BULL SIDE BEAR SIDE
1)

Light-to-moderate trade volume developed at midweek in the Northern tier of cattle-feeding country with essentially fully steady dressed prices (i.e., $172 to $174).

1)

Total red meat supplies in freezers as of July 31 were up 3% from the previous month and up 6% from last year. Total pounds of beef in freezers were up 8% from the previous month and up 12% from last year.

2)

Negotiations regarding NAFTA continue, but are approaching the extended Aug. 25 deadline. Mexico and the United States are reportedly close to reaching a deal, but Canada appears to still be holding out.

2)

Cattle futures contracts continue to trade toward the upper end of ranges that have developed since early April lows. Yet the same range has also worked to limit upside potential.

3)


China's pig cull topped 20,000 animals on Wednesday as officials try to halt an outbreak of deadly African swine fever (ASF) in the world's largest pig market, already reeling from a year-long price rout.

3)

For the week ending Aug. 18, U.S. hatcheries set 227 million eggs in incubators, up slightly from a year ago. At the same time, chicks placed totaled 184 million, up slightly from 2017.

4)

Frozen pork supplies as of July 31 were down 2% from the previous month and down 1% from last year.

4)

For the week ending Aug. 18, Iowa barrows and gilts averaged 277.4 pounds, .2 pound larger than the week before and .8 pounds than 2017.

OTHER MARKET SENSITIVE NEWS

CATTLE: (Wallaces Farmer) -- Fed cattle prices started 2018 strong and remained above year-earlier levels into March, with Iowa-Minnesota prices averaging $126 per cwt and $5 per cwt higher than the same period in 2017. Since March, fed steer prices have consistently held below year-earlier levels, averaging $117 per cwt during April through June, $15 per cwt lower than during 2017's second quarter. July fed cattle prices averaged $111 per cwt, down $8 per cwt from July 2017. Note that March through mid-June 2017 fed cattle prices were very strong, so measuring from a higher base exaggerates some of the year-to-year decline.

Ample factors contribute to lower fed cattle prices. One of them is more beef. Beef production closely follows trends in cattle slaughter, which has been above last year in five of the first six months of 2018. Through June, monthly slaughter has averaged 3% higher than year-ago levels. Heavier weights have pushed beef production up even more than slaughter volume, as beef production rose almost 4% compared to the first half of 2017.

Retail beef prices have not dropped enough to spur the added consumption needed to hold higher prices with more beef on the market. Data provided by USDA show that in the first half of 2018, all fresh retail beef prices were less than 1% lower than in the first half of 2017. Per capita consumption only rose 0.5% over this period.

Further reductions in retail beef prices seem likely. Lower retail prices that boost sales volume can help support fed cattle prices. Meantime, robust economic growth, rising incomes and wealth, and one of the lowest unemployment rates on record could help spur beef demand

HOGS:(Science Magazine) -- A nightmare is unfolding for animal health experts: African swine fever (ASF), a highly contagious, often fatal disease of domestic pigs and wild boars, has appeared in China, the world's largest pork producer. As of today, ASF has been reported at sites in four provinces in China's northeast, thousands of kilometers apart. Containing the disease in a population of more than 430 million hogs, many raised in smallholder farmyards with minimal biosecurity, could be a monumental challenge.

"The entry of ASF into China is really a very serious issue," says Yang Hanchun, a swine viral disease scientist at China Agricultural University in Beijing. Given the scale of China's pork sector, the economic impact could be devastating, Yang says, and the outbreak puts a crucial protein source at risk. From China, the virus could also spread elsewhere; if it becomes endemic, "it will represent a major threat for the rest of the world, including the American continent," says François Roger, an animal epidemiologist at the Agricultural Research Center for International Development in Montpellier, France.

The virus that causes ASF does not harm humans, but it spreads rapidly among domestic pigs and wild boars through direct contact or exposure to farm workers' contaminated shoes, clothing, and equipment. It can survive heat and cold and persists for weeks in carcasses, feces, and fresh and semicured pork products, such as sausages. Ticks can also spread it. Infection causes a high fever, internal bleeding, and, often, death. There is no ASF vaccine and no treatment for infected animals.

Endemic in most African countries, ASF jumped to the nation of Georgia in 2007 and later spread through Russia; it has also been reported in Poland and the Czech Republic, and scientists worry about a jump to major pork producers such as Germany and Denmark.

East Asia's first confirmed outbreak occurred on 1 August in Shenyang, a city in Liaoning province, China's Ministry of Agriculture says. Investigators have traced the disease back through sales of pigs and concluded the virus has been circulating in the area since at least March, says Wantanee Kalpravidh, a veterinarian at the Food and Agriculture Organization's (FAO's) Emergency Centre for Transboundary Animal Disease in Bangkok.

A genetic analysis suggests the virus is closely related to the strain circulating in Russia, scientists from the Institute of Military Veterinary Medicine in Changchun, and other Chinese institutions reported on 13 August in Transboundary and Emerging Diseases. "The increasing demand for pork has resulted in a great increase in the volume of live pigs and pork products imported to China," heightening the risk of introduction, they wrote. The virus probably arrived in imported pork products, Kalpravidh says, which then infected pigs that were fed contaminated table and kitchen scraps.

A second outbreak occurred on 14 August at a slaughterhouse in Zhengzhou, the capital of Henan province; the afflicted pigs had been shipped from a market in Jiamusi, a town in Heilongjiang province, more than 2000 kilometers to the northeast. The virus struck again on 15 August at a farm in Lianyungang, in Jiangsu province. The Chinese government has responded by culling sick and exposed animals -- nearly 9000 were killed in Shenyang alone -- blockading outbreak areas; disinfecting farms, markets, and processing facilities; controlling the movement of live pigs and pork products; screening animals; and conducting epidemiological surveys.

But there are serious challenges to containing the virus. Pig producers in China range from massive, sophisticated operations to small backyard farms; tailoring a response to suit them all "is the biggest challenge for China to control ASF," Yang says. The complexity of the production chain makes tracing paths of infection "an incredible effort to tackle," says Juan Lubroth, chief veterinarian at FAO's headquarters in Rome. Kalpravidh says China is trying to earn the cooperation of producers by immediately compensating them for culled animals, in hopes of stopping them from slaughtering sick pigs and selling their meat. But ticks and wild boar could also spread the disease, although their role is poorly understood.

So far, Lubroth says, China's "very sophisticated and knowledgeable veterinary workforce" has operated aggressively, and the government has been transparent about ASF's spread. But containing ASF "won't happen overnight," he warns.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow him on Twitter @feelofthemarket

(BAS)

John Harrington