Friday Morning Livestock Market Summary - Livestock Paper to Open Moderately Higher in Post-Holiday Business

GENERAL COMMENTS:

Given the lateness of the hour, it's difficult to say whether cattle buyers will break up the long holiday weekend by returning this morning to own more steers and heifers. Trade volume total through Wednesday looked no bigger than moderate. Yet it's possible that most packers have enough inventory in tow to get them into new week if that's the day they want to play it. We should see at least a few clean-up deals here and there. Look for opening bids around $119 in the South and $190 in the North. The balance of showlists are probably priced around $120 in the South and $192 plus in the North. Live and feeder futures seem set to open moderately higher, supported by follow-through and recent cash strength.

The cash hog trade should resume this morning with basically steady bids. Between large Saturday kill plans close to 346,000 head and the need for Monday starters, we suspect there will be enough late week buying interest to lend the country trade a steady/firm undertone. Lean futures are staged to open moderately higher with the help of residual buying interest, short covering, and the higher cut-out quoted on Wednesday. 

	BULL SIDE		BEAR SIDE
1)	Cattle futures closed sharply higher on Tuesday, removing much of the bearish sting from Monday's post-on feed report sell-off. Feb and April renewed enough buying interest to close back above their 40-day moving averages.	1)	Though impressive in terms of pre-holiday fireworks, Wednesday's surge in cattle futures may have been little more that oversold charts correcting. While spot Dec live closed near its 40-day moving average, tough overhead resistance exists in the $120-$120.50 area, which Dec approached on Wednesday but could not penetrate.
2)	The cold storage report released late Wednesday morning estimated the late October stockpile of frozen beef to total 503.9 million pounds 5 percent smaller than the year before. With Jan-Oct commercial beef production up 4 percent over 2016, such a drawdown is a decent sign of domestic and foreign demand. Reacting to firm packer spending in feedlot country, cattle futures once again closed sharply higher on Wednesday. Premiums in February and April continue to increase, to levels wider than seen in the last five years.	2)	Furthermore, given how open interest has been sinking this week, the pre Thanksgiving rally in live and feeder contracts was based almost entirely on short covering.
3)	Nearby lean hogs futures jumped to a 2-week high on Friday with late year bulls cheered by the possibility of smaller than expected live supplies through the balance of 2017 as well as the maintenance of strong pork demand.	3)	For the week ending November 18, U.S. hatcheries set 226 million eggs in incubators, up 3 percent from a year ago. At the same time, chicks placed in the United States numbered 177 million chicks, up 3 percent from 2016.
4)	Frozen pork stores as of October 31 totaled 597.3 million pounds, 3 percent below the prior month. Such a reduction during record hog slaughter and production obviously speaks well of demand.	4)	Frozen chicken supplies at the end of last month jumped to 868.3 million pounds, 12 percent greater than the fall of 2016 and the largest stockpile in more than 20 years.

OTHER MARKET SENSITIVE NEWS

CATTLE: (CanFax) -- The Canadian beef cow herd remained steady on July 1, 2017. The beef cow culling rate is in line with the long-term average, but heifer slaughter is up. The feedlot sector saw impressive profitability in the first half of the year but is also facing larger price risks due to swings in fed cattle prices. Good feedlot profitability has been supporting the feeder market. Feeder prices have been generally running above year-ago levels in the second and third quarter. While cow-calf profitability remains positive on average, it does not appear to be encouraging any substantial heifer retention.

Canadian cattle inventories on July 1, 2017, were steady at 12.95 million head, marking the sixth year of consolidation.

Beef cow inventories were up 0.5 per cent at 3.797 million head. This is the second year with a slight increase, following the 0.6 per cent increase last July. Regionally, beef cow numbers were up in the Atlantic provinces (+4.6 per cent), Manitoba (+2.8 per cent), Saskatchewan (+2.2 per cent), and Ontario (+1.6 per cent); but down in Alberta (-0.5 per cent), Quebec (3.8 per cent), and British Columbia (-3.9 per cent). Some of the rebound in Ontario may be a result of improved pasture conditions after dry conditions last summer.

Beef heifers for replacement were up 0.6 per cent at 673,200 head, to be the highest since 2006 and up 5.0 per cent from the five-year average. Heifer retention was up in the Atlantic provinces (+4.8 per cent), Ontario (+4.4 per cent), Manitoba (+1.6 per cent), Saskatchewan (+1.3 per cent), and Quebec (+1.4 per cent), but down in Alberta (0.5 per cent) and British Columbia (-3.1 per cent). Breeding heifer numbers for July 2015 and 2016 were both revised to be up 4.3 per cent. The revisions show that breeding heifer inventories have been increasing since 2015, with a 4.0 per cent per year growth rate, which slowed down to 0.6 per cent in 2017.

Slaughter heifer numbers were the only category that declined. They were down 5.0 per cent to one million head, to be the lowest level since 1999. The July 1, 2016 slaughter heifer inventories were revised 12 per cent or 147,000 head lower from 1.20 million head to 1.06 million head.

The number of calves was up marginally by 0.2 per cent at 4.21 million head. A steady calf crop and a 43 per cent or 104,000-head decline in feeder cattle exports from July 2016 to June 2017 is anticipated to increase fed cattle marketings in 2018. According to the Canfax Cattle on Feed report, Alberta and Saskatchewan feedlot placements from January to August this year are 19 per cent higher than 2016 and 8.0 per cent higher than the five-year average. The September 1 on-feed inventories were up 5.0 per cent from 2016 but only slightly higher than the five-year average.

Dairy cow inventories were up 1.6 per cent to 945,000 head, back to the 2014 level. For the last 30 years, dairy cows have decreased on average 2.0 per cent per year as productivity advancements have resulted in fewer cows needed to fill the quota. The increase in inventories was due to additional quota being made available over the last several years. The implication is potentially larger supplies of dairy calves for finishing in the future if this trend continues.

HOGS: (agrimoney) -- Corn is the top bullish bet among agricultural commodities for 2018, followed by lean hogs, Rabobank said, in a briefing which cautioned over the potential for market influences from La Nina to freight.

The bank, in its annual briefing on year-ahead price forecasts, said that Chicago corn futures were in 2018-19 "likely to spend considerably more time above $4.00 a bushel" than during the previous two seasons.

The forecast reflected an expectation of world corn stocks falling below 200m tonnes in 2018-19 for the first time in five years, "allowing for some price support", although most of the decline will be recorded in China, whose inventories are less sensitive for world prices.

The outlook sees corn sowings in the US, the top producer, easing by 500,000 acres to 89.9m acres, losing out to spring wheat, which is seen being favoured by current price dynamics.

Acres are seen falling in Argentina too, as growers switch to soybeans, although Brazilian area will rebound by 400,000 hectares from levels constrained to 17m hectares this year by dryness, including the knock-on effects on safrinha corn sowings of late soybean seedings.

In Chicago lean hogs, the bank forecast prices recovering from an average of 59 cents a pound in the current quarter to 78 cents a pound in the April-to-July period of next year, supported by strong demand from both the US and export markets.

"The recent strength in US domestic demand should carry into 2018, as pork remains an important traffic driver in a highly competitive retail market," the bank said, forecasting exports too gaining 3.7% next year thanks to "high demand in the key destinations of Mexico, China and Japan".

The upbeat forecast, which allowed for 3.8% growth in US hog production next year, contrasted with a downbeat outlook on live cattle futures, which Rabobank rated as its second most bearish bet, behind palm oil.

While forecasting a drop in US beef production growth next year to 3%, from 4% this year, the bank flagged "risks" including "any indications of a slowing economy", dollar strength, and "uncertainty" over US trade agreements.