DTN Early Word Opening Livestock

Cattle Futures Likely to Open Moderately Higher

(DTN file photo)

Cattle: Steady-$2 HR Futures: 50-100 HR Live Equiv: $141.10 +0.54*

Hogs: Steady-$1 LR Futures: 50-100 LR Lean Equiv: $77.46 -0.98**

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

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

GENERAL COMMENTS:

Don't look for much action in feedlot country Tuesday as bids and asking prices remain poorly defined. The marketing window of 2018 is closing fast. Many veteran feedlot managers know all too well it can be tough to find shackle space in the last two weeks of December. Live and feeder futures should open moderately higher, supported by cash premiums and appreciating carcass value.

Hog buyers should be out to save more money Tuesday morning. Their defensive efforts may be bolstered by plentiful country offerings and eroding carcass value. Monday's kill was estimated at 479,000 head, a total that seems quite large given the ugly winter storm blowing through the southeast. It will be interesting to see if we catch a revision in that regard. Lean futures are likely to open moderately lower, checked by plentiful live supplies and uncertain pork demand.

BULL SIDE BEAR SIDE
1)

New showlists distributed on Monday were mixed, but the aggregate was somewhat smaller than last week (especially thanks to fewer numbers in Nebraska and Texas). Late-year numbers remain manageable.

1)

The next seasonal trend on beef ribs and loins will be significantly lower, pressuring cutout values until the end meats pick up seasonal gains in late December and on into the new year.

2)

October beef exports totaled 117,838 metric tons (mt), up 6% from a year ago, valued at $727.4 million -- up 10% and the second-highest monthly total on record.

2)

Beef retail demand stands to be significantly challenged this week given the larger-than-expected round of early-month production. With expectations of this week's cattle harvest in the region of 640,000 to 645,000 head, USDA came out with a much higher estimate of 666,000 head.

3)

Next year is set to see additional pork export growth, mainly a result of resolution of the trade wars. This year's tepid growth will make next year's growth appear larger on a relative basis.

3)

October pork export volume was 207,725 mt, the largest since May, but still 2% lower year-over-year, reflecting smaller variety meat exports.

4)

Despite Monday's pullback, the pork cutout is firmly away from perceived lows from two weeks ago and appears to be establishing a rising cutout environment. If this can continue, then maybe packers could be willing to put some support under cash hogs sooner rather than later.

4)

The pork carcass value took it on the chin Monday, losing nearly a buck thanks to eroding demand for loins, ribs and hams.

OTHER MARKET SENSITIVE NEWS

CATTLE:(CGTN America (D.C.) -- It's been more than two years since China lifted what had been a 13-year ban on U.S. beef imports -- but China remains a relatively small market for U.S. cattle producers. One challenge is China's strict regulations on what kind of beef can come into the country. U.S. researchers are now working on ways to educate American cattle ranchers on how to get the rules right.

CGTN's Hendrik Sybrandy explains.

Steve Gabel owns Magnum Feedyard, a large cattle operation in Wiggins, Colorado.

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"We feed about 23,000 cattle two times every day," Gabel said recently.

The animals are raised here until they're ready for slaughter and sent off to a packing plant. They come from all over the U.S.

"Wisconsin to New Mexico and from Alabama to Oregon," Gabel said.

Tuesday, U.S. beef is exported predominantly to countries like Japan, Korea and Mexico. Two years after lifting its ban on U.S. beef imports, China is not a big buyer but the market has potential.

"We as a cattle feeding industry think there's a huge opportunity in China," Gabel said.

A key to boosting beef sales there may be found in U.S. laboratories where researchers are poring over a list of growth-promoting or other compounds that China does not allow in its beef products.

"Their list is 136 compounds," said Keith Belk, Professor of Animal Sciences at Colorado State University. C.S.U., together with Texas A&M University, were awarded $750,000 by the U.S. Department of Agriculture to develop rules of the road for beef producers who want to sell to China.

"I think most producers don't have a clue about how they have to go about raising cattle to hit that market right now," Belk said.

For example, the feed additive ractopamine, which promotes leaner beef, is allowed in the U.S. but not in China. A trickier case: the rarely used zeranol, a growth agent also on the banned list, can also show up naturally as mold that forms on crops.

"And when you feed those crops to the cattle, they'll end up testing positive for zeranol even though they were never provided the growth hormone," Belk said. "It's issues like that we're sort of having to feel our way with."

Producers like Gabel argue the banned compounds they rely on were developed using sound science and enable them to get a bigger return on the beef they sell. They said raising cattle to more organic standards would be much costlier. Chinese consumers who've yet to develop a taste for U.S. grain-fed beef and tariffs on U.S. beef sent to China also make that market less attractive.

"It's not cost-effective Tuesday," Gabel said.

HOGS:(The Guardian) -- A global outbreak of African swine fever will reach the US within a year unless border protections are tightened and imports of high-risk pork products banned, warn biosecurity experts. It would cost the US economy $16.5bn (ÂŁ12.9bn) in the first year alone, it has been estimated.

An ongoing epidemic of the virus, which is deadly for pigs but cannot yet be transmitted to humans, has prompted the US Department of Agriculture to review and strengthen its border protections. After outbreaks in Belgium and China this year, the USDA has increased the use of sniffer dogs at major ports, airports, land borders crossings, and has also built quarantine stations and increased passenger and cargo inspections on flights from China and Russia, the worst hit countries.

However, scientists say these measures do not go far enough and call on the US government to make "immediate and radical" changes, including banning imports of soy products from infected countries. The arrival of the deadly swine virus could cost $16.5bn in losses in the first year alone, according to research published in the Public Library of Science.

"If we continue to do business as usual then [the US] will probably get ASF in a year. If we change some of our practices, which we are trying to do, then there's a chance we can keep it out," said Dr Scott Dee, biosecurity specialist and chief scientist at one of the America's largest veterinary practices, Pipestone Applied.

"If it got into the wild pig population it would be a disaster. I don't even like to have the conversation about what we'd do if it got in because by that point we've already lost the war."

The virus is spread either through contact, or through contaminated meat products; it can survive in processed meat for several months, and in frozen meat for a number of years. In October, a packet of sausages confiscated at a Japanese airport was tested and found to contain the virus. At present it is not a danger to humans, but there are fears that it could mutate.

There is currently no vaccine or known cure. Once the virus is detected, the whole herd must be killed, creating severe financial consequences for producers.

In Poland, Lithuania, Latvia and Estonia, pork exports have fallen by $961m, representing up to 50% of their total. An outbreak was reported in Belgium on 13 September, sparking fears that the virus will spread through western Europe.

Since August, the virus has swept through China, home to nearly half the world's pigs. More than 600,000 pigs have been culled since the first case was reported in the north-eastern province of Liaoning. In five months, ASF has spread to 21 provinces, causing severe losses to farmers and major disruptions to the domestic pork market. It has jumped vast distances in a short period of time, appearing in the north, Shenyang, and Sichuan within a three-month period.

Given the integrated nature of global supply chains, the virus could jump borders and enter the US, which could destabilise pork markets and international trade.

The risk to the US is high because of the large volumes of agricultural produce imported from China, according to biosecurity specialists, and due to the ASF's strong viral resilience; it can survive journeys of 30 hours or more and live in foodstuffs. "We are dealing with a very stable virus. It can live outside the host, outside the pig in all sorts of different conditions -- low PH, high PH, dirt, meat," said Dr Dee.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow him on Twitter @feelofthemarket

(BAS)

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