DTN Early Word Opening Livestock

Live and Feeder Futures Seem Set to Open Moderately Lower

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

Cattle: Steady-$2 LR Futures: 50-100 LR Live Equiv: $139.50 - $1.01*

Hogs: Steady-$1 LR Futures: Mixed Lean Equiv: $ 72.14 + 0.38**

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

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

GENERAL COMMENTS:

Look for cattle buyers to be slow in getting back on track after the long holiday weekend. Tuesday's activity will be limited to the distribution of new showlists. We expect ready numbers to be somewhat larger than last week. Light-to-moderate cash activity reluctantly surfaced late Friday (i.e., dressed at $170 in the North, $3 lower; $107, $2 lower). Live and feeder futures should open moderately lower, checked by softening fundamentals.

The cash hog trade should open with bids steady to $1 lower. Processing margins are very strong as we begin a new month. Yet the country run remains seasonally large, and seasonal demand pork is sagging. Lean futures are set to open mixed with nearbys losing ground to deferreds.

BULL SIDE BEAR SIDE
1) Required to secure slaughter needs for the first full production week of September, cattle buyers should be more aggressive players through the week (especially given the realities of decent processing margins and relatively light trade volume from totals last week). 1) For the week ending Aug. 28, noncommercials decreased their net-long positions in live cattle futures by 2,800 to a total of 65,100 loads.
2) The appetites of retailers and food managers for meat production should improve significantly this week as they restock after Labor Day clearance. 2)

In terms of the seasonal trend, October live cattle tends to be flat through mid-September and then drop late in the month.

3) For the week ending Aug. 28, noncommercial traders reduced their short position in lean hogs by 5,100 contracts to 12,400 net short. At the same time, commercial traders increased their long position by 4,100 contracts (now long 4,700). 3) The bullish excitement tied to the announcement of the new U.S./Mexico trade agreement early last week didn't seem to last for long. However, within 24 hours, the market got news that it could take months to ratify, with the possibility of the tariffs not being lifted by Mexico until late this year, possible early next year.
4) The African swine fever could be a sleepy monster. China could lose a million hogs and only lose 0.23% of its herd, but if sows are affected in mass, it will put a hole in the herd for 2019. 4) With declining seasonal demand for pork expected and an increasing availability of hogs, hog pricing has several more weeks of potential weakness.

OTHER MARKET SENSITIVE NEWS

CATTLE: (National Association of Farm Broadcasting News Service) -- The tit-for-tat trade war with China means a lower forecast for the value of U.S. beef and pork exports next year.

The Department of Agriculture's Economic Research Service said in its latest quarterly Situation and Outlook Report released this week that forecasts total exports of beef, pork, dairy, poultry and other livestock products combined are expected to decline $300 million to $30.3 billion next year, compared with 2018. Beef is projected down $100 million as growth in volume is offset by lower values, and Pork is forecast down $300 million despite volume growth. USDA says the lower values are expected due to weaker demand and the pressures from retaliatory tariffs.

However, poultry exports are expected to be slightly higher next year. Exports of poultry and poultry products are forecast $100 million higher to $5.3 billion, due to elevated prices and volumes for most products.

HOGS: (scmp.com) -- A new case of African swine fever has been confirmed in Wuxi in eastern China's Jiangsu province, China's agriculture ministry said on Monday The latest outbreak killed nine pigs and infected another 12 on a farm with 97 pigs, the ministry said.

Earlier in the day, the ministry said two African swine fever cases had been reported in Anhui province and that 2,310 hogs had been culled as of September 2.

The transport of pigs and pork products was banned on Sunday from and through Chinese provinces which have reported outbreaks of African swine fever, following a sixth case of the highly contagious virus, which is not harmful to humans.

Live hog markets have also been shut down in the regions, in the most drastic measures yet by China's Ministry of Agriculture and Rural Affairs as it works to contain the outbreak amid growing concerns about its spread through the world's largest pig herd.

For the first time, live hogs from unaffected provinces cannot be transported through those that have reported infections, a move expected to significantly disrupt the country's pig trade.

Until now, authorities had only stopped transportation of pigs and products and shut live markets in and around infected areas.

China's swine fever outbreak may spread in Asia, UN agency warns

Five provinces have been affected since the country's first-ever case of the deadly virus a month ago: northeastern Liaoning, central Henan and the eastern provinces of Anhui, Jiangsu and Zhejiang.

The prohibition effectively prevents slaughterhouses and meat processing factories from using pigs or pork from these regions.

In Henan, one of China's top pig producing regions, stocks have jumped because farmers there can no longer sell animals to other parts of the country, said an agent surnamed Ni who trucks pigs around the province.

"I haven't had any business in the past two days because there are too many pigs in the market," he said. "Prices are bad and there is not much demand."

Ni said he used to transport up to 700 pigs a day, but current volumes are around 700 a week.

"Costs will go up and it will take much longer to get pigs to the consumption areas," Ni said.

The agriculture ministry said 134 hogs died from the disease in Xuancheng city, in the second outbreak in eastern China's Anhui province.

Xuancheng is around 70km (43 miles) southeast of Wuhu city, where another African swine fever case was reported last week.

The ministry said it had culled more than 38,000 hogs as of September 1.

Epidemic culling has basically finished in Liaoning, Henan, Jiangsu and Zhejiang provinces, where a total of 37,271 hogs were culled. Another 1,264 hogs were put down by Saturday in Anhui.

Last week, the government warned it cannot rule out the possibility of new outbreaks, highlighting its challenge in controlling the disease.

The virus is transmitted by ticks and direct contact between animals, and can also travel via contaminated food, animal feed and people moving from one place to another.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow him on Twitter @feelofthemarket

(BAS)

John Harrington