DTN Early Word Opening Livestock

Meat Futures Staged to Open With Mixed Price Action

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

Cattle: Steady Futures: Mixed Live Equiv: $139.80 + .37*

Hogs: Steady Futures: Mixed Lean Equiv: $ 75.47 +1.53 **

* 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 will be typically quiet through Tuesday with bids and asking prices poorly defined. Carcass weights should be ready to trend seasonal lower, and the early arrival of winter in recent days may represent the starting flag in that regard. Live and feeder contracts should open on a mixed basis tied to a combination of residual selling interest and short-covering.

Look for the cash hog market to open with near steady bids. Last week's slaughter fell a bit short of 2.6 million head, probably thanks in part to adverse winter weather and the inability of some Saturday kills to be as big as they might have been. Yet we still expect that nut to be cracked before the end of 2018. Lean futures seem set to start out on both sides of unchanged as traders weight late-year fundamentals and new global trade potential.

BULL SIDE BEAR SIDE
1)

Beef cutouts have opened the week solidly higher with early December box movement described as moderate to fairly good.

1)

New showlists distributed on Monday were generally larger than the previous week, especially in Texas. Only Kansas producers offered fewer ready steers and heifers.

2)

For the week ended Nov. 27, noncommercials continued to build their net-long position in live cattle futures by 7,000 to a total of 77,500.

2)

At the end of the last week, most actively traded February live cattle futures attempted to push above last week's highs, but failed to hold and closed near the low of the day. This will remain an area of overhead resistance. Underlying support will be firstly at Thursday's low, then the mid-November low. Since the jump higher in mid-September, the futures market has been unable to sustain rallies for very long.

3)

China's agriculture ministry said on Monday it has confirmed a new African swine fever outbreak on a farm in capital city Beijing, as well as two other outbreaks in Shaanxi and Heilongjiang provinces. In the capital, the outbreak was reported on a farm with 9,835 pigs in the Tongzhou district, according to a statement published on the website of the Ministry of Agriculture and Rural Affairs.

3)

The fact that lean hog futures turned a blind eye on the promise of improving trade relations between the U.S. and China may indicate that plenty of bullishness is already built into the market in terms of large board premiums.

4)

The pork carcass value exploded sharply higher Monday with better demand for all primals noted except the picnic. A $5 plus gain on belly sales proved to be especially value in lifting the cutout by $1.53.

4)

China showed some surprise export sales for U.S. pork late last month, but the market may be trying to read too heavily into it, as China prepares for the Chinese New Year. Tariffs have not come off yet and any buying is not likely to stay in place for long.

OTHER MARKET SENSITIVE NEWS

CATTLE: (USMEF) -- At the G-20 summit in Buenos Aires, Argentina, the U.S.-Mexico-Canada Agreement (USMCA) was signed and the White House announced that the U.S. and China will enter negotiations on several key trade issues, including agricultural trade.

U.S. Meat Export Federation (USMEF) President and CEO Dan Halstrom issued the following statement:

USMEF supports the Trump administration's efforts to finalize the USMCA and to continue seeking resolution of the metal tariffs dispute with Mexico and Canada, which resulted in retaliatory duties on U.S. pork and beef. U.S. meat exports have also become entangled in trade disputes with China, so it is encouraging to see the U.S. and China return to the negotiating table. Global demand for U.S. red meat is very strong, but exports cannot reach their full potential until the retaliatory duties imposed by Mexico, China and Canada are removed.

HOGS: (NPPC) -- The National Pork Producers Council (NPPC) has called for an end to a trade dispute that has cost U.S. pork producers an estimated $1.5 billion this year, according to Iowa State University Economist Dermot Hayes.

"We are very pleased with the new trade agreement with Mexico and Canada, one that preserves zero-tariff pork trade in North America for the long term," said NPPC President Jim Heimerl, a pork producer from Johnstown, Ohio. "But, it's imperative that we remove U.S. tariffs on Mexican metal imports so that retaliatory tariffs of 20 percent against U.S. pork are lifted."

Dr. Hayes estimates that live hog values this year have been reduced by $12 per animal due to retaliatory tariffs imposed by Mexico against U.S. pork in June. The loss estimate of $1.5 billion is based on an expected total harvest of 125 million hogs in 2018. These tariffs, along with China's retaliatory tariffs, have turned what promised to be a profitable year into a year of losses for export-dependent U.S. pork producers. Dr. Hayes estimates U.S. pork producer losses of $ 1 billion, or $8 per animal, from the ongoing trade dispute with China.

Mexico and China represent approximately 40 percent of total U.S. pork exports.

NPPC is the global voice for the U.S. pork industry, protecting the livelihoods of America's 60,000 pork producers, who abide by ethical principles in caring for their animals, in protecting the environment and public health and in providing safe, wholesome, nutritious pork products to consumers worldwide.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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John Harrington