The cash cattle trade seems to be done for the
week with buyers and sellers free to finish last minute Christmas
shopping. The board will close an hour early Friday, allowing trade to
depart for the long holiday weekend as soon as possible. Yet the CME
will stay open long enough to briefly mull over the implications of the
Dec. 1 Cattle on Feed report set for release at 11 a.m. (CST). Average
trade guesses anticipate on feed to be 6% to 7% larger, November
placement to be 6% to 7% larger; and November marketing to be 3% larger.
Live and feeder futures are expected to open on a mixed basis linked to
a slow combination of short-covering and long liquidation.
Late-week cash hog buyers probably don't have
too many numbers to gather Friday, but opening bids are expected to be
about steady. Saturday kill plans are now expected to total close to
135,000 head. Traders on lean futures will also be jockeying before the
release of a major inventory date. The Dec. 1 Hogs & Pigs reported
will be unveiled at 11 a.m. (CST). Trade guesses suggest all hogs will
be about 2% larger than last year. Hogs kept for market is anticipated
to total about 1.5% greater than 2016, and the same goes for hogs kept
for breeding.
|
BULL SIDE |
|
BEAR SIDE |
| 1) |
Beef cutouts finally
stabilized Thursday with supplies apparently cleaned up going into the
long weekend. Hopefully, we are setting the stage for a decent
post-holiday recovery. |
1) |
There are rumors afoot that
the average trade guess on November placement is too small.
Specifically, some talk suggest that the full weight of aggressive Texas
placement has not be fully factored in. |
| 2) |
Some believe Friday's Cattle
on Feed report will confirm a record large marketing total for the month
of November. Such data would help explain country currentness and
feedlot leverage seen in recent weeks. |
2) |
Thursday's short-covering rally seem a bit on the puny side given earlier board selling and cash strength seen at midweek. |
| 3) |
Net pork export sales last
week totaled 23,700 metric tons, up 37% from the previous week and 33%
from the prior four-week average. Increases were reported for Mexico
(10,000 MT), Hong Kong (4,500 MT), Canada (2,700 MT), South Korea (2,000
MT), and Japan (1,400 MT). |
3) |
Two major inventory reports
surfacing on the same day culd turn into double trouble, especially
since both are expected to point toward greater production in the first
half of 2018. |
| 4) |
The pork carcass firmed on Thursday thanks to better buying interest for fresh cuts, picnics and ribs. |
4) |
Understandably, market
watchers are assumping that a new hog plant next spring will help to
counter the impact of further herd expansion. Yet the timing of the
completion of that facility is far from certain. |
CATTLE:
(oklahomafarmreport.com)
-- Is the feeder cattle contract still viable and how can the market
volatility be managed? These are the main questions in a new Feeder
Cattle Basis report from the RaboResearch Food & Agribusiness group.
The CME Index is comprised of 12 states, and the
Rabobank analysts explores the need for regionalization for a more
accurate picture of the Feeder Cattle Basis and Market. Analysts have
suggested 5 regions: Montana and Wyoming; Nebraska, South Dakota and
North Dakota; Iowa and Missouri; Kansas and Colorado; and Texas,
Oklahoma and New Mexico.
"The number of feeder transactions by region
comprising the CME Index are not distributed equally through all
geographies, a key consideration producers should have when establishing
a heading program," explains RaboResearch Food & Agribusiness,
Senior Animal Protein Analyst Don Close. "The question as to how well a
geographic area is represented in the composition of the index is an
important consideration to incorporate in hedging strategies."
The market has also seen an increase in volatility since 2014.
"A widely accepted complaint surrounding cattle
futures in recent years is that volatility has escalated to the point
that risk management has become increasingly unpredictable, more
difficult and much more expensive," notes Close.
No matter your circumstance, Rabobank analysts
recommend working with a knowledgeable broker because of the uncertainty
in the basis and the numerous influences.
HOGS: (agweek.com) -- Successfully predicting
the future is notoriously difficult. But there are valid reasons to be
optimistic about long-term U.S. livestock prices, says Tim Petry, a
North Dakota State University livestock marketing economist.
"When you consider the supply and demand determinants, the outlook is encouraging," says Petry.
Supply and demand can be likened to the two
blades of a scissors working in union. Both blades need to function
properly for the scissors to cut. Likewise, both supply and demand need
to work in livestock producers' favor to create and maintain attractive
prices — and that appears to be the case, Petry says.
On the supply side: Global ability to increase
supply is limited. Brazil and Argentina have potential to produce
substantially more meat, but they're the exception, Petry says.
On the demand side: The world's population is
growing rapidly, and so is the need for — and ability to buy — food,
including high-protein meat. The world will have an estimated 9.3
billion people in 2050, up from 6.9 billion in 2010, with the global per
capita income doubling in the same period, according to a United
Nations report.
"As incomes in developing countries increase,
food consumption shifts to diets richer in animal protein," the U.S.
Department of Agriculture says.
China already is an important growth market for
U.S. beef. Though China's domestic beef production is rising, beef
consumption is rising even faster, boosting the need for imports from
the United States and other exporters, USDA says.
But USDA also says that several countries,
particularly Argentina and Uruguay, offer "fierce competition" for beef
sales to China.
Some in production agriculture once wondered if
interest in vegetarianism eventually might cut into meat consumption.
But that hasn't happened, at least not to a meaningful extent, Petry
says.
"People still like meat," he says, noting that young American adults do, too.
U.S. per capita consumption of red meat is expected to increase slightly in both 2017 and 2018, according to USDA projections.
Exports are important for U.S. livestock
producers — last year America exported 25.8 percent of its pork and 13.7
percent of its beef — and foreign demand for U.S. meat is growing, too.
Japan is the leading importer of U.S. beef,
followed by South Korea, Mexico, Canada and Hong Kong. Those six
countries account for the vast majority of 2017 U.S. beef exports, which
have gone to 111 different countries.
But consumers in Africa and Central and South
America — who typically import very little U.S. meat now — are a growing
opportunity for U.S. meat exports, according to the U.S. Meat Export
Federation. Meat exports help U.S. livestock prices in ways that sometimes may go unnoticed.
For instance, so-called "variety meats" — items
such as livers, hearts, tongues and chicken price — are seldom eaten by
U.S. consumers but often are highly valued in other countries, Petry
says.
What Petry calls "tastes and preferences" is
benefitting sheep producers. Growing ethnic and religious demand for
lamb has reinvigorated the long-struggling U.S. sheep industry in recent
years.
Livestock production will remain a volatile
industry, with feed costs and weather continuing to buffet ranchers from
year to year, he says.
Even so, "Looking ahead to the next 20, 30 years, the future is as bright now as I can ever remember," Petry says.
