DTN Early Word Opening Livestock

 
Cattle: Steady Futures: Mixed Live Equiv: $140.99 +.40* 
Hogs: Steady-$1 LR Futures: Mixed Lean Equiv: $ 75.28 + .82**
* 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 Dec. 1 Cattle on Feed report turned out to be well advertised, and we don't expect much reaction from the board Friday morning. November placement was a bit larger than expected, but hardly enough to ruffle any feathers. Rather, traders will be slowly focusing on the late-week development of feedlot cash. Indeed, it doesn't seem likely with Christmas vacation close at hand that buyers and sellers will spend a great deal of time actually settling on cash terms. Asking prices should remain firm at $120 to $122 live in the South and $90 plus dressed in the North. Live and feeder futures seem staged to open narrowly mixed in slow volume.

At the same time, the quarterly snout-count came in quite close to trade expectations, and it's tough to imagine significant CME price waves in its wake. Yes, both breeding inventory and market hog inventories were down from last quarter but set new fourth quarter records, at 6.33 million head and 68.2 million head, respectively. But defenders of the tall 2019 lean premiums have traded such likelihoods for many months. A sudden round of supply fears seems unlikely. Look for late-week hog buyers to resume activity Friday with bids steady to $1 lower. Lean contracts also appear geared to begin with uneven price action with many players probably already gone for the holidays.

	BULL SIDE		BEAR SIDE
1)	Beef cutouts closed moderately higher Thursday and demand was described as "good on light offerings."	1)	Though feedlot managers have enjoyed excellent late-week leverage over more than a month of Fridays, country bargaining power could be compromised Friday given the limited packer appetite through the holidays ahead.
2)	For the week ended Dec. 8, cattle carcass weight fell, probably marking a seasonal top. Steers averaged 896 lbs., 3 lbs. lighter than the prior week; heifers averaged 835 lbs., also 3 lbs. smaller than the week before.	2)	If retailers pay any attention to the historical calendar, we probably remain 10 days to two weeks away from a serious reassessment of red meat needs and rejuvenated buying strategies.
3)	The pork carcass value recovered on Thursday with the help of better demand for all primals except the rib.	3)	The Dec. 1 Hogs & Pigs report confirmed record pork supplies as we move into the next several quarters of 2019. No surprises. Yet given the premiums in deferred lean futures, the document supply realities certainly puts the emphasis squarely on strong pork demand next year as well as the importance of bullish implications of Africa swine fever.
4)	China on Thursday said it had confirmed a new outbreak of African swine fever in Fujian province, as the highly contagious disease spreads through the world's largest hog herd. China has already reported more than 90 cases of the incurable disease since it was first detected in the country in early August.	4)	Now that new quarterly data is clearly on the table, the seasonal tendency is for February lean hog futures to move lower into contract expiration.

OTHER MARKET SENSITIVE NEWS

CATTLE:(Successful Farming) -- The 2018 farm bill is nearly official, having passed the House and Senate without the vote of one if its stalwart supporters. After playing a key role in development of the bill, Iowa Senator Charles Grassley voted "no" in the final tally.

"I don't want it to sound like I think [Senator Pat] Roberts isn't a good Ag Committee Chair or isn't fighting hard enough for farmers. It's a good farm bill, and he and Senator Debbie Stabenow, the Ranking Democrat on the Ag Committee, did a good job. It's a bi-partisan bill and passed with a bi-partisan vote," Grassley offered in his weekly Capitol Hill Report. "But there was an issue that was left out, and if I had voted for the bill, I wouldn't have been taken seriously again."

For the past three Farm Bills, Grassley has advocated for caps on farm subsidies. In 2008, 2014, and again in 2018, he introduced amendments that would limit payments to $125,000 per year per person, $250,000 per couple, to be paid to one manager per farm -- one that is actively engaged in the farming operation.

All three rounds the measure was cut from the final version.

What we're doing is subsidizing the bigger farmers to get bigger and making it harder for the young farmer to get started," Grassley said, "when we should be protecting the small and mid-sized guy."

The new bill eliminates the means test and makes extended family members eligible to collect farm subsidies, sometimes with multiple payees per farm, even if they do not directly work on the farm.

Grassley, a member of the Senate Ag Committee, and one of 13 Republican Senators to vote against the bill, was not invited to participate in the Conference Committee that hammered out the final bill. But last fall, he and other senators sent a letter to the committee stating: "Current law allows for most farmers who organize their farms as general partnerships or joint ventures to designate an unlimited number of farm managers for the purposes of collecting additional farm subsidies. The impact of this loophole is that large farms crowd out young and beginning farmers by increasing the price of land and cash rent. The fact that few young people are starting farms and staying in rural America is not surprising considering they have to compete with established farmers who have millions in equity and access to unlimited farm subsidies."

According to the USDA, 77% of commodity subsidies, around $158 billion, goes to farms in the top 10% of sales. In addition, with more than half of the nation's farmland rented, the subsidies often benefit the landowner rather than the farmer. Grassley criticized the "dark rooms of conference committee meetings" and said Washington lobby groups and their members are the real winners. As of the September 30 lobbying disclosure deadline, more than 500 groups and companies hired lobbyists in 2017 and 2018 to advocate for them during farm bill negotiations, making it the fourth most-lobbied bill in the 115th Congress.

The farm bill does offer much for farmers to celebrate. Lawmakers were able to protect crop insurance, an element most farmers claim is vital, and allows for smoother navigation of the PLC and ARC programs as well as expanded funding of the popular EQIP program. It also legalizes hemp production, allowing the USDA to regulate the plant and giving hemp farmers access to government programs. Hemp proponents claim the plant has potential for products ranging from clothing to biodegradable Legos.

There are changes to the Conservation Reserve Program (CRP), including expanding the program by 3 million acres to 27 million acres nationwide. "The bill corrects a couple of things from the 2014 Farm Bill," Grassley explained. "In the old version, the government could pay more than cash renters could pay, and farmers could put whole farms in the program." Both of those measures made available pasture in short supply, particularly in the Midwest.

In the 2018 version, government payments are capped at 80% of the average cash rent for the area, and whole farms are no longer allowed. "The point of the CRP program is to help the environment by targeting environmentally fragile land," said Grassley. "When the whole farm is put in the program, that means the productive land is put in, too, not just the environmentally fragile land. That's not the best use of the government's money."

The $867 billion farm bill passed the Senate 87-13 and the House 386-47, without the work requirements for SNAP the House originally wanted.

HOGS:(thepigsite.com) -- With the recent surge in cases of African swine fever around the world, and its prevalence in Eastern Europe, stakeholders in the agricultural sector are keener than ever to gain a deeper insight into the causes, management and implications of these outbreaks.

As the name indicates, African swine fever (ASF) originally comes from Africa, where it is endemic. It first appeared in Eastern Europe in Georgia in 2007, and from there the virus spread to Russia and other countries, reaching the European Union in 2014. Now, following the 2018 outbreak of ASF in Belgium, there is a pressing need to find the best measures for both preventing and controlling the disease.

ASF is a viral disease that only wild boars and domestic pigs are susceptible to. No vaccine against African swine fever is available. Research into the spread of ASF in Eastern Europe indicates that human intervention played a major role, which is suggested by the often large distances between outbreaks.

The virus spreads directly from animal to animal and indirectly through contaminated materials, biting flies and ticks (in which the virus multiplies). It is also easy for the virus to enter into the feed chain via food waste or offal from infected pigs. The diagram below shows how animals can become infected.

The incubation period for ASF varies from between two and 10 days, depending on the virulence of the virus. Laboratory tests are always essential to make a definitive diagnosis. Clinical symptoms may look similar to those of classical swine fever: fever, listless pigs, a lack of appetite, red skin, (bloody) diarrhoea, vomiting. Bleeding, cyanosis (blue skin) and necrosis of parts of the skin (blackening) may occur. Sows may abort upon infection. Pigs may suddenly die without symptoms being observed beforehand.

Domestic pigs can experience mortality of up to 100 percent, and 30 and 70 percent for lower mortality-rate strains. Pigs surviving the acute phase may remain carriers of the virus for several months; symptoms may disappear but can return at a later stage.

The virus may be found in sick animals in the blood, tonsils, lymph nodes, spleen and liver, among other places. Laboratory tests are always essential to make a definitive diagnosis.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow John Harrington on Twitter @feelofthemarket

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