Cattle: Steady Futures: 50-100 HR Live Equiv: $140.17 + .67*
Hogs: Steady Futures: 50-100 HR Lean Equiv: $ 73.53 +1.39 **
* based on formula estimating live cattle equivalent of gross packer revenue
** based on formula estimating lean hog equivalent of gross packer revenue
While feedlot country could start to field more bids and asking prices, our guess is that significant trade volume will not develop until Thursday or Friday. Live and feeder futures should open moderately higher, supported by residual buying and more positive fundamentals.
The cash hog trade should open with generally steady bids. Lean futures seem staged to open moderately higher, thanks to follow-through buying and bullish speculation about the implications of China's fight with African swine fever.
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New showlists distributed in cattle-feeding country Tuesday looked generally smaller with only Kansas offerings somewhat larger.
The red meat recovery that typically surfaces in the wake of Labor Day tends to come fast and furious as short-term surges that just doesn't last long.
Cattle futures stormed back after the Labor Day break with spot October closing just below resistance at $110, suddenly acting determined to lead feedlot cash higher as we prepare to move into the fall.
Boxed beef supplies as of the close on Tuesday were described as "heavy," a warning that wholesale prices may need to be steadily lowered in order to keep channels clear.
China reported another outbreak of deadly African swine fever late on Monday, its third new case in two days. The latest case, the eighth since the virus was first reported in the country a month ago, was found in the city of Wuxi, the agriculture ministry said, a two-hour drive west of Shanghai in eastern China's Jiangsu province.
Despite the jump in Tuesday's board, the short-term and long-term trends in lean hogs futures remain bearish as is the structure of the market.
Lean hog futures bolted sharply higher on Tuesday with triple-digits scored in most 2019 contracts as the bullish implications of China's fight with ASF takes on greater credibility.
Given this work holiday-delayed start, this week's hog kill will be reduced to around 2.25-million-hog head. Yet harvest levels should exceed 2.5 million for the remainder of September.
CATTLE: (Dow Jones) -- The European Union said Monday that it was willing to start talks with Washington on increasing U.S. beef imports, a move aimed at cementing a trade truce agreed upon in July.
The announcement comes just days after President Trump warned that an EU offer to go to zero tariffs on cars is insufficient to avert a trade war. Mr. Trump has repeatedly called on Europe to open up its protected agricultural market.
Agriculture is largely off the table in trade talks that Mr. Trump and European Commission President Jean-Claude Juncker said in July they would continue to pursue.
But Mr. Juncker did agree to solve existing trade irritants -- one of which regards high-end beef -- and to boost U.S. soybean exports to Europe. Both agricultural products have been hit by retaliatory tariffs from China and Mexico, with U.S. beef producers having been forced to stockpile meat in cold storage facilities.
U.S. soybean exports to Europe rose 283% in July compared with the same month last year, bringing the EU's total share of imports of U.S. soybeans to 37%, up from 9% a year ago, the commission said last month.
While Europe is importing most of its soy, beef is a more protected product as several countries, notably France, Germany, Spain and Ireland, are significant beef producers.
On Monday, the European Commission said it was seeking the approval of EU governments "to allocate to the United States a part of the existing quota" for beef that wasn't treated with hormones and that is open to other exporting countries, notably in Latin America.
Currently, Argentina uses up more than half of the 45,000 metric tons of high-end beef the EU can import yearly at a zero tariff rate. The U.S. and Canada had exported a total of 2,351.37 tons to the European Union this year by the end of July, according to the commission, the EU's executive arm. That marks a considerable increase compared with the previous two years, when the U.S. and Canada combined exported fewer than 500 tons a year. The negotiations would discuss earmarking as much as 35,000 tons of that quota for U.S. producers, according to an EU diplomat familiar with the talks.
Commission officials insist that negotiations won't affect European producers -- as it is about reallocating quantities within an existing quota -- nor the food-safety standards consumers in Europe are used to.
For the change to be in line with international trade rules, other exporting countries also need to be kept in the loop, with Australia and Uruguay requesting to be part of the negotiations, the commission said.
If approved by all EU governments, the negotiations on beef could start before the end of the year, said an EU official. Meanwhile, a new round of talks between U.S. and EU trade officials is scheduled for Wednesday in Washington.
HOGS: (Bloomberg) -- Agriculture, one of the few areas of the U.S. economy that sells more abroad than it buys, will see its trade surplus shrink next year as shipments to China collapse amid a trade war between the two nations, according to a government forecast.
The world's biggest agricultural exporter will see a surplus of $18 billion in the fiscal year beginning Oct. 1, down 7.7 percent from the current year, the U.S. Department of Agriculture said Wednesday in a quarterly forecast.
China, the largest buyer of U.S. farm goods in 2017, is expected to fall to third place this year, after Canada and Mexico, and then to fifth place behind the European Union and Japan, the USDA said. That follows Chinese tariffs imposed on soybeans and pork earlier this year, a move that has depressed prices for both commodities.
Data is for fiscal years that begin on Oct. 1. of the previous calendar year. 2018 and 2019 sales are forecasts.
Shipments to China will plunge 37 percent to $12 billion, according to the USDA. Still, other trading partners including Mexico and Canada will step up purchases, leading to overall exports increasing by $500 million to $144.5 billion. U.S. imports from other nations will rise by $2 billion.
"The greatest unknown is China's demand for U.S. soybeans," USDA economists wrote in the report.
The department also cut its forecast for the trade surplus in the current fiscal year to $19.5 billion, less than the $21.5 billion projected in May.
The USDA announced Monday a $4.7 billion round of direct payments to producers damaged by the trade war. Farmer organizations are calling for a speedy resolution to the conflict.
John Harrington can be reached at firstname.lastname@example.org
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