Friday Morning Livestock Market Summary - Look For Late-Week Livestock Futures to Open With Uneven Price Action

GENERAL COMMENTS:

Cattle buyers and sellers are running out of excuses, necessitating the development of light-to-moderate trade volume sometime between late morning and midafternoon. Early bids should be renewed at $106 live and $168 to $170 dressed, still well below asking prices around $110 to $112 in the South and $174 to $176. Live and feeder futures should open on a mixed basis with follow-through buying on one hand and late-week profit-taking on the other.

Expect one final round of higher cash hog bids Friday. While packer spending has steadily improved through the week, country movement has remained relatively moderate. That's certainly not to say that market hog supplies are less than ample. It's just that we've moved into a brief period where well-margined packers just have to work a little harder in order to fund aggressive chain speed plans. Saturday's kill should total close to 240,000 head. Lean futures are staged for a mixed opening with deferred probably losing more ground to nearby.

	BULL SIDE		BEAR SIDE
1)	In closing significantly higher on Thursday, nearby live futures act determined to lead the late-week cash market higher. Furthermore, the softening basis should help fortify feedlot leverage.	1)	Beef cutouts slipped moderately lower on Thursday with box movement described as no better than "light to moderate." Such action could urge cattle buyers to remain cautious.
2)	Net beef export sales last week totaled 20,800 metric tons, up 30% from the previous week and 70% from the prior four-week average. Increases were reported for Japan (7,700 MT), Hong Kong (5,100 MT), South Korea (2,500 MT), Taiwan (2,000 MT) and Canada (1,100 MT).	2)	Although basis weakness could promote short-term feedlot leverage, basis strength is much better in encouraging timely marketing and currentness. If the cattle basis stays weak, board premiums become more dangerous in terms of backing up cattle sales and inflating carcass weights.
3)	With expiration just a week away, spot October is in no hurry to fold toward the cash index. Indeed, its $5 premium seems quite a bullish vote of confidence relative to further cash strength.	3)	Net pork export sales last week fell to 21,200 MT, down 42% from the previous week and 13% from the prior four-week average.
4)	The seasonal trend is for October lean hog futures to trade higher from here into expiration, and given this week's board action, we appear to be in that groove.	4)	Market hogs available from September through November increased over prior year by almost 2.6%, a net of 1.7 million additional hogs. Of those additional hogs, 1.3 million are likely coming to harvest well before the end of the year and could put a strain on packer capacity if the new chain speed is not fully ramped up in time.

OTHER MARKET SENSITIVE NEWS
CATTLE:

(AgriPulse) -- There's still no end in sight for the U.S. ban on fresh Brazilian beef, but the two countries are making progress on reopening trade, U.S. government and industry officials tell Agri-Pulse.

Brazilian food safety officials and beef packers told the USDA that they have made significant changes in the way they prepare their beef to be shipped to the U.S., but U.S. officials are demanding proof.

USDA's decision in June to ban imports of fresh beef from the South American country sparked new tensions between the nations and spurred a visit in July to Washington by Brazilian Agriculture Minister Blairo Maggi, where he sat down with USDA Chief Sonny Perdue.

After that meeting, Perdue said the USDA was willing to work with the Brazilians, but he stressed he'd need to see proof that the safety conditions of the beef had improved.

That's still the case, but USDA officials who are working with their Brazilian counterparts say progress is being made and the Brazilians are indeed working to address U.S. concerns.

"It's not only an ongoing dialogue, it's an active process for a solution," U.S. Ambassador to Brazil Michael McKinley told Agri-Pulse. "I can't give you a date on when this will be resolved, but I can tell you that real progress is being made and both sides are happy with the seriousness of the efforts to address the issue."

Brazil has sent two technical delegations to Washington to meet with officials from USDA's Food Safety and Inspection Service (FSIS) and Animal and Plant Health Inspection Service (APHIS). And most recently, Perdue sent a team to Brazil in September that was led by FSIS Deputy Administrator Carmen Rottenberg.

Rottenberg, accompanied by three FSIS and two APHIS specialists (one was a USDA veterinarian stationed in Brazil), toured two Brazilian packing plants in Sao Paulo and sat down for lengthy talks with Brazilian government and industry officials during the Sept. 9--13 trip, according to USDA sources involved in the meetings.

The plants they visited are owned by JBS and Marfrig, two of the companies that were approved to export fresh beef to the U.S..

HOGS: (AgriPulse) -- The U.S. needs to improve trade relationships with Pacific Rim countries where competitors like Australia and the European Union have advantages over U.S. exporters, USDA Secretary Sonny Perdue said Friday. Japan is the first target for new bilateral talks, Perdue stressed.

"We want to bring down high tariffs on beef and pork and dairy and fruits and vegetables and many other products," Perdue said about a potential free trade agreement with Japan during a forum hosted by the Washington International Trade Association. "We're eager to enter into bilateral trade negotiations with Japan and lower those barriers to address the preferences that they seem to have currently for Australia, the EU, Chile, Mexico and other countries."

That may come as a relief for U.S. cattle ranchers and beef exporters, who were disappointed when President Donald Trump pulled the U.S. out of the Trans-Pacific Partnership (TPP), a massive FTA with 11 other nations, including Japan and Vietnam.

Japan had agreed to slash tariffs on several U.S. farm commodities such as beef, potentially taking away Australia's trade advantage in selling to Japan. The country maintains a 38.5 percent tariff on U.S. beef that would have gradually gone down to 9 percent under TPP.

Japan is the largest foreign market for U.S. potato products. It buys about $325 million worth of U.S. spuds every year, despite tariffs of up to 8.5 percent that would have been removed under TPP.

But the Trump administration is concentrating on bilateral FTAs now, and Japan is the highest priority, Perdue said.

"We think our geopolitical relationship with Japan should lead to a preferred status in (trade) as well," he said.

Still, the list of countries that the administration wants to improve trading relations with is a long one, and the U.S., as an agricultural production giant, should have a natural advantage over many competing nations, Perdue said.

"We have significant productive advantages over these countries to grow grain, fruits and produce livestock products," he said. "We need to level the playing field with competitors who have preferential agreements and generally strengthen our commercial ties in this key area of the world."

In addition to Japan, Perdue said the U.S. is also talking to Indonesia, Vietnam, Thailand, Taiwan, the Philippines and India about FTAs.

The next big opportunity to make headway with some of these countries will likely be when Trump travels to Southeast Asia this fall, Perdue said, and USDA is already working on preparation for the trip, Perdue said.

"The president will be making a major Southeast Asia trip … and we are advising his policy makers now on the opportunities we have in that arena," Perdue said.