DTN Early Word Opening Livestock

Livestock Paper Staged to Open With Mixed Prices

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

Cattle: Steady Futures: Mixed Live Equiv: $141.18 - .16*

Hogs: Steady Futures: Mixed Lean Equiv: $ 69.69 - .22**

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

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


Our guess is that cattle traders will try to stir the pot hard enough Thursday to get sufficient business completed and then break for a long holiday weekend. Maybe not. Look for packer bids to open around $106 on a live basis and $170 dressed. On the other hand, asking prices are around $111 to $112 live and $175 plus dressed. Live and feeder futures are expected to open on a mixed basis as specs and commercials bide time waiting for cash news to develop.

Look for the cash hog trade to open with near steady bids. If the Saturday kill comes close to 124,000 head, the weekly total slaughter should be around 2.4 million head. Lean futures should start out with uneven price action as traders wrestle to get a better hold on late-month fundamentals.


Though lightly tested days before expiration, spot August live cattle surged back over $109 Wednesday, certainly a positive sign of confidence in late-week cash strength.


The live cattle futures market continues to gyrate within the relatively wide trading band that has been in place over the last few months. There is overhead technical resistance in the October contract in the $110 area, and then at $111. The late July high was $112.25. Overhead resistance in the December contract exists in the $114 to $115 area, with the recent high in late July being $115.87.


Cattle markets essentially ignored Wednesday's USDA announcement that a Florida cow was found with atypical BSE. This is a good sign of general market confidence rather than a group of nervous traders looking for any excuse to panic.


Australian export opportunities to China have seen exceptional growth, up 43% throughout the first half of the year. Global competition for market share continues to increase, and the latest round of drought, while detrimental to Australia's cattle industry, will further pressure the trade woes of the United States as well.


China's agriculture ministry said on Wednesday it cannot rule out the possibility of new African swine fever outbreaks. The ministry said in a statement on its website that it was not clear how widely the disease had spread, and there was much uncertainty on how the situation would develop.


For the week ending Aug. 25, U.S. hatcheries set 226 million eggs in incubators, up slightly from a year ago. At the same time, chicks placed totaled 187 million, up 1% from 3017.


There is evidence that pork producers are fighting hard to stay current through aggressive marketing. For the week ending Aug. 25, Iowa barrows and gilts averaged 277.6 pounds, only .2 pounds heavier than the prior week and .3 pounds lighter than 2017. Furthermore, producers have done a decent job with weight given the cooler temperatures of late.


Concerns regarding prospects of increasing hog supplies in the coming months and whether the additional product will be able to clear both domestic and export channels continues to overshadow the market.


CATTLE: (USA AgNet) -- All cattle and calves in the United States and Canada combined totaled 116 million head on July 1, 2018, up 1 percent from the 115 million head on July 1, 2017. All cows and heifers that have calved, at 46.6 million head, were up 1 percent from a year ago.

For just the U.S., the total was 103 million head, 1 percent above the 102 million head on July 1, 2017. All cows and heifers that have calved, at 41.9 million head, were up 1 percent from a year ago.

All cattle and calves in Canada was 12.4 million head, down 1 percent from the 12.5 million head on July 1, 2017. All cows and heifers that have calved, at 4.70 million head, were down 1 percent from a year ago.

HOGS: (Farm Journal) -- Details of the $12 billion trade mitigation package were announced by USDA Monday, offering $8 per head of 50% of a producer's inventory as of Aug. 1. View the full details, including payment limits, here.

Dustin Backer, deputy director, economics & domestic production issues for the National Pork Producers Council says the amount is helpful, but long-term, the solution is ending trade disputes.

While some grain farmers questioned USDA's relief pricing, Baker says the $8 figure for pig farmers was determined by several USDA economic models. Furthermore, about 6% of the overall expenditures in the market building programs under tariff relief will go to the pork industry.

"More than 40% of our pork exports are facing retaliatory tariffs Thursday. The export markets are incredibly important to the bottom line of all producers in the U.S.," Baker says. "In 2017, we exported over a quarter of production and that added about $53 to every head that was marketed in the U.S. So, the export markets are critically important to our industry and to the future of our industry."

"USDA announced their trade mitigation programs Wednesday—it's really a three-pronged approach to help alleviate the pain that America's farmers are facing and in the face of retaliatory terrorists," Baker says.

1.Direct payment to producers based on actual production: $8 per hog based on 50% of the number of animals owned as of Aug. 1, 2018.

2.USDA will purchase $559 million of pork products for federal nutrition assistance and child nutrition programs.

3.USDA will spend $200 million for developing foreign markets for the agricultural trade promotion program.

To show eligibility, producers will have to show they have ownership interest in hog production and they had an adjusted gross income average over the past three years of less than $900,000. This means large contract pig owners (Smithfield, Tyson, etc) would likely not be eligible for the program. There is a payment cap of $125,000 per person or entity.

"By no means does this payment make our producers whole, but it does certainly provide some short-term relief in the face of the retaliatory tariffs," Baker says. "Perhaps just as importantly, as part of the food purchase and Distribution Program, USDA is committed to purchasing $559 million worth of pork products to put into food assistance programs, which is about 45% of their total expenditures for that overall program. So that's definitely some positive news for us."

That purchase should help keep cold storage numbers low moving into the seasonal uptick.

Producers can work with their local Farm Service Agency beginning Sept. 4, to sign up for these programs. Grain payments and associated limits are separate from livestock payments. Visit www.farmers.gov/MSP for more details.

Looking ahead at the U.S.-Mexican trade agreement, Baker says it's still too early in the process to know how that will affect the current tariff situation with that country.

"When we look at the Mexican market, they take an incredible amount of our hams and shoulders [cuts} that we produce," Baker says. Mexico is our No. 1 market for U.S. pork by volume, and a 20% tariff is significant pressure for producers.

"Our No. 1 priority at NPPC for America's pork producers, is to continue to push for a quick and swift resolution to the trade disputes in order to continue to be able to export our product across the world," he adds.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow him on Twitter @feelofthemarket


John Harrington