Cattle buyers are running out of time to start/complete procurement chores before adjourning for the week. Most sense that live inventory is going to cost more with "how much more" the only real question. Indeed, if today's business turns out to be no better than steady, it will be seen as a major disappointment. Look for open bids around $111 in the South and $174-175 in the North, well below asking prices of $116-118/$180-185. Look for at least moderate trade volume to surface sometime between late morning and mid afternoon. CME officials announced no delivery activity on Thursday. Live and feeder futures should open moderately higher thanks to following buying and cash optimism.
While October's cash hog rally continued this week, it definitely slowed. Indeed, yesterday's business averaged somewhat lower. We don't think opening bids this morning will be any better than steady. Saturday's kill is estimated at 201,000 head. If this guess is close, the weekly slaughter total could notch a new record around 2.54 million head. Lean futures also appear ready to open some higher, supported by spillover buying and late week short covering.
| BULL SIDE | BEAR SIDE | ||
| 1) | Live cattle premiums went from "real fat" to "near obese" on Thursday as the first four contracts soared with triple digit gains (Feb and Apr once again notched new contract highs. Given such a tall wall, feedlot asking prices should have all the rigidity of steel wrapped in concrete. | 1) | Given the dangerously combination of the $9 plus Dec premium, cheap feed, and feedlot red ink, a serious decay in feedlot currentness and leverage over the next 30 days seems inevitable. |
| 2) | Net beef export sales last week jumped to 16,900 MT, up 25 percent from the previous week and 7 percent from the prior four-week average. | 2) | Although out-front boxed beef sales popped nicely last week, forward sales had been dropping in the preceding two to three weeks. If slaughter levels pick up once again in November, packers will need to get more volumes across the sales categories. |
| 3) | Net pork export sales last week jumped to 18,100 MT, up 58 percent from the previous week (but down 15 percent from the prior four-week average). At the same time, actual exports totaled 23,000 MT, up 9 percent from the previous week and 10 percent from the prior four-week average. | 3) | While spillover buying from the cattle complex has lifted deferred lean hog futures to new contracts highs, concerns linger whether domestic and export pork interest will be able to clear the anticipated large hog supplies in the months ahead. |
| 4) | The pork carcass value popped more than a dollar higher on Thursday, supported by better demand for processing items and fresh cuts. | 4) | Lean hog futures are seriously overbought with oscillators at multi-month highs. For example, June hogs closed yesterday with an RSI reading of 77 (the overbought threshold is 70). |
CATTLE: (foodmarket.com) -- The seasonal transition in retail meat features is moving along more briskly as cooler temperatures are arriving and likely here to stay.
The change in focus from grilling cuts to more roasts and heavier meals has been underway for a few weeks but is now more evident in the weekly advertisements.
Portions of the Midwest had the first frost of the season midweek, and several inches of snow are even predicted for the upper Midwest today and overnight into Friday. The colder temperatures are forecast to move eastward with frost and even some freeze warnings seen for portions of the Mid-Atlantic region as the week draws to a close, according to the National Weather Service.
Cooler temperatures typically result in a boost in sales of roasts and other items making up heavier meals that are usually prepared in the oven, crock pots or slow cookers. As the opportunities for backyard grilling decline, many of the gas and charcoal grills will be stored away for the winter.
For those who are willing to brave the colder temperatures and extend the grilling season, there could be some late-season bargains for steaks, ribs and pork chops as grocers may need to move the extra inventories.
Beef was again the leader in the number of items featured this week with the category capturing 28.1% of the protein items advertised, according to the Urner Barry Retail Activity Index. Seafood snuck past pork and chicken for second place at 23.1%, followed by pork at 20.9% and poultry close behind at 20.6%.
This week's Urner Barry retail beef index was $5.82 per pound, up from $5.66 last week. Pork came in at $3.65 versus $3.86 last week, while chicken was at $2.71 this week, down slightly from $2.75 a week ago.
The advertisements for next week's beginning of the month features are expected to have a wide selection of meat and poultry cuts likely again led by beef. The average retail price for beef roasts overall this week was $4.85 a pound, up from $4.67 a year ago. Pork roasts averaged $2.43 a pound, slightly below the year-ago figure of $2.45.
HOGS: (agriculture.com) -- The U.S. pork industry will likely expand through 2025, but growth hinges on increasing exports, according to a recent report from Rabobank.
Senior Analyst Sterling Liddell said in the report that he expects the industry to grow "steadily" and see increased efficiencies with rising carcass weights and pigs-per-female as key drivers of the expansion.
The hog and pork sectors in the past decade moved from sluggish output and tight margins to a production recovery phase that was incentivized by positive margins, Rabobank said. Contributing to this was the rise and fall of feed costs, the breakout of Porcine Epidemic Diarrhea virus (PEDv), the ensuing recovery and the aftermath, increased consumption, and the rise in global demand.
Increased processing capacity and efficiency "removes a bottleneck that periodically limits the flow of pork to consumers," Liddell said.
Expansion in the industry will be based broadly on pork exports from the U.S., which need to increase by 400,000 metric tons to remain in a profitable expansion mode, as domestic consumption per-capita is expected to only grow slightly, he said.
Rabobank said in the report it expects exports to China will increase by 100,000 tons by 2025 and shipments to Mexico to rise by 200,000 tons.
"The challenge will be to find an additional 100,000 tonnes of export in the global market," the bank said.
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