Limited trade volume totals suggest that cattle
buyers still have some work to do this week in order to supply slaughter
needs for late November. Opening bids should start out around $112-114
live and $178-180 dressed. On the other hand, asking prices are likely
to be restated around $116-117 in the South and $180-182 in the North.
Live and feeder futures are set to open higher thanks to supportive
placement data and a degree of cash optimism.
The cash hog trade is expected to open this
morning with bids steady to $1 higher. Packers worked hard to stay ahead
of Thanksgving's down time. This week is forecast at 2.2 million, with a
strong Saturday level expected (probably around 360,000 head). Look for
harvest levels to resume next week, near the 2.6-million level for the
next several weeks.Lean futures are geared to begin with uneven price
action thanks to follow-through selling. and late-week short covering.
| BULL SIDE | BEAR SIDE | ||
| 1) | October feedlot placement activity was confirmed on Wednesday turned out to be smalller than generally anticipated (i.e., 6 percent below 2017 versus an average trade guess of down only 1 percent). | 1) | Though the October placement total turned out to be somewhat smaller than expected, total on feed as of November 1 remained historically large. |
| 2) | For the week ending November 17, U.S. hatcheries set 226 million eggs in incubators during the week ending November 17, 2018, down 1 percent from a year ago. At the same time, broiler growers in the United States weekly program placed 175 million chicks for meat production, down 1 percent from 2017. | 2) | Total pounds of frozen beef in freezers at the end of last month were up 2 percent from the previous month and up 2 percent from last year. |
| 3) | Frozen pork supplies as of October 31 were down 3 percent from the previous month and down 5 percent from last year. Stocks of pork bellies were down 12 percent from last month and down 17 percent from last year. | 3) | Historically, the seaon's largest hog slaughter typically surfaces either the week after Thanksgiving or the first week of December. |
| 4) | For the week November 17, Iowa barrows and gilts averaged 283.4 pounds, .6 pounds lighter than the prior week and. 1.1 pounds smaller. than 2017. | 4) | Belly weakness on Monday and Tuesdsy does suggest pork product demand following the Thanksgiving holiday could be weak. This is not bullish to price the next few weeks, as it works to find a bottom. |
CATTLE: (Wallace Farmer) — Evidence suggests the
structure of the Iowa cattle feeding industry is changing. Analysts and
beef producers are trying to figure out how that may impact pricing
trends, especially during certain times of the year.
Historically, smaller feedlots have been
associated with crop farms using cattle as an alternative way to market
corn and diversify their operations. When corn prices were high, farmers
sold crops for cash. When crop prices were low, they fed cattle if they
could find reasonably priced feeder cattle.
This year is proving to be an anomaly and may
signal a fundamental change in the cattle feeding industry. Calf crops
have been expanding for three straight years, and corn prices have been
supportive for feeding cattle in smaller feedlots. Yet 2018 is not
featuring a similar gain in farmer-feeder cattle marketings.
USDA surveys feedlots that have at least 1,000
head of cattle in 16 major cattle feeding states. The 16 states account
for about 98% of the cattle on feed in feedlots with capacity of 1,000
or more head. The Iowa Ag News -- Cattle on Feed report is a combination
of estimates from the USDA Cattle on Feed survey for Iowa feedlots with
a capacity of 1,000 or more head and the Iowa Department of Agriculture
and Land Stewardship-funded Cattle on Feed survey for Iowa feedlots
with capacity of less than 1,000 head.
Marketings of fed cattle from Iowa feedlots with
a capacity of 1,000 or more head during 2017 represented 59% of total
cattle marketed from all feedlots in Iowa. This compares to 87% in the
U.S. Thus, the survey for Iowa feedlots with a capacity of less than
1,000 head is very important; it provides a more complete picture of
Iowa's cattle feeding situation.
Cattle on feed in Iowa feedlots with a capacity
of 1,000 or more head on Oct. 1 were up 6% from Oct. 1, 2017. Iowa
feedlots with a capacity of less than 1,000 head had 10% fewer cattle on
feed than the previous year. Looking only at the large feedlot number
would suggest Iowa will have substantial market-ready cattle available
late this year and early next year. However, total cattle on feed
inventory in all Iowa feedlots on Oct. 1 was down 0.5% from last year
and up only 0.6% from the 2012 through 2016 Oct. 1 average.
The 12-month moving average of cattle on feed
removes the seasonality of feedlot inventories. For Iowa, it's at the
highest level for feedlots with a capacity of 1,000 or more head and
lowest for those with less than 1,000 head in the history of the data
back to 1996.
Corn holding below $3.25 per bushel for the last
five months has brought no recovery in the share of cattle on feed in
small operations. On the other hand, large operators have seemingly
expanded. Larger feedlots could be growing market share because of their
ability to capitalize on economies of size.
Pricey feeder cattle create drag
September feedlot placements and marketings were
both below year-ago levels, partly due to one less business day in
September 2018 compared to 2017. This was the case for both the large
and small feedlot categories in Iowa. While placements into large
feedlots were 16% below a year ago, placements into small feedlots were
down 61%. Similarly, fed cattle marketings were down 21% and 32%,
respectively.
This could be a sign of feedlots' unwillingness
to purchase relatively expensive feeder-weight animals. The spread
between feeder cattle and live cattle pricing has been a headwind for
placing animals on feed. The larger year-over-year decreases in
placements and marketings of small feedlots could be a sign they are
even more price sensitive in their placement decisions.
In most years, August marks the start of a
ramp-up in cattle entering feedlots, with October being the peak month.
Placements for Iowa feedlots with a capacity of 1,000 or more head seem
to be generally following the typical seasonal tendency.
In August and September, placements into large
feedlots were 24% and 9% over the previous month, respectively. For Iowa
feedlots with a capacity of less than 1,000 head, August and September
placements were 36% and 10% below the previous month, respectively.
The cattle feeding part of a farmer-feeder
operation is usually worked around the farming, such as feeding cattle
before or after crops are planted or harvested. This year, because of
wet conditions that delayed harvest, placements into small feedlots
could peak a month or so later than normal. The November Cattle on Feed
report, providing information about placements during October, will have
important insight on changes of small feedlots.
Delaying fed cattle marketings always adds
pounds to cattle in feedlots. The latest USDA report that breaks down
Iowa-Minnesota steer and heifer weights (report LM_CT167 published each
Monday) showed live steer weights for the week ending Nov. 11 at 1,519
pounds, 15 pounds higher than the previous year. Heifer weights were 5
pounds higher. Analysts will closely scrutinize weight data for any sign
that feedlots are falling further behind in their marketings and
potentially losing bargaining power.
This year cattle on feed over 120 days on Oct. 1
in all Iowa feedlots decreased by 23,000 head from one month earlier.
This compares to an 80,000-head decrease in 2017 and an average drop of
77,400 between these same months during the 2012-16 interval.
The bulk of the drop-in cattle on feed in Iowa
for more than 120 days has been in small feedlots. They trimmed
inventories by 25,000 head from September to October. Large feedlots
increased these inventories 2,000 head in October. Small feedlots
holding fewer market-ready supplies certainly helps keep Iowa feedlot
marketings current.
With the books for October slaughter cattle
markets closed, demand for 120-day feedlot inventories was impressive.
Iowa-Minnesota negotiated fed cattle prices stayed near $110 per cwt
(live weight) from mid-September until early November, when prices
perked up another $2 to $3.
Oct. 1 inventories on hand for 90 to 120 days
for all Iowa feedlots were up 15,000 from a year ago. Inventories on
hand for 90 to 120 days in large Iowa feedlots were up 5,000 head
compared to last year, while these inventories in small feedlots were up
10,000. These cattle should be mostly ready for slaughter in December
and January. Last year, the Choice boxed beef cutout slipped $6 per cwt
from beginning of November to the mid-December based on market-ready
cattle supplies that were much bigger than prior years.
Iowa-Minnesota cattle prices fell $1 to $2 per
cwt. A supply-driven perspective on this market would suggest that the
increase in 90- to 120-day feedlot inventories on Oct. 1 would provide a
bit more bearish cattle market action locally this December as a year
ago. Last year cash prices traded near $120 per cwt in December.
Projecting demand for the rest of 2018 and into
2019 is more difficult. Cattle-beef market bulls note that the
comprehensive boxed beef cutout has sustained an elevated level over
last year primarily from the strength of the middle meats and the strong
export value for briskets and rib plates. Beef export forecasts for
2018 and 2019 have been revised higher based on demand from Asia.
The buildup for holiday business starts earlier
each year, and retailers long ago planned holiday specials and made
those forward purchases, helping spur beef demand. However, bears fear a
bountiful supply of other protein sources provides increased
competition at the meat case during the holiday season. Still, general
prosperity in the economy will continue to support demand for beef.
HOGS: (thepigsite.com) — The latest quarterly
pork report not only reviews the production and demand situation as well
as evolution of key prices in China's pork market, but also forecasts
the market trend for the next three months from November 2018 to January
2019.
Different from our previous quarterly reports,
this report gives the influence of African Swine Fever in China wide
coverage, especially the enlarged price gap among different Chinese
provinces since the first outbreak of ASF in China early this August.
For example, the local live pig price in Zhejiang Province increased by
35% from August to October while the price in Liaoning Province
decreased by 27.8% during the same period.
On the supply side, the slaughtering volume of
domestic pigs increased by 2.8% to 19.2 million head this September on a
y-o-y basis. It is also 6.4% higher than the average slaughtering
volume of 18.1 million head in September from 2013 to 2017. As for the
domestic inventories, the live hog inventory stopped dropping and
started to rise this September on an m-o-m basis, while the sow
inventory continued to decline during the same period. However, the sow
and live hog inventories decreased by 4.8% and 1.8% respectively,
compared with those last September.
As for pork import, China imported 94,317 tons
of pork this September, increasing by 8.4% on a y-o-y basis. From this
January to September, the total pork import volume was 923,053 tons,
growing by 0.3%, compared with the same period of last year. For the
last four months from this June to September, all pork import volumes
have kept slightly larger than year-ago levels.
Compared with those in Q2 2018, the live hog,
wholesale and retail pork prices showed signs of sustainable rebound,
greatly narrowing the y-o-y decrease rate to 2.8%, 4.5% and 2.1%
respectively. Nevertheless, the domestic piglet price continued to slide
this September, with a larger y-o-y decrease rate of 37% than that of
this June.
As for the hog-breeding margin, domestic
pig-breeding companies started to transform losses into profits in Q3
2018, from earning CNY14 per pig this July to CNY292 per pig this
September. Despite a y-o-y decrease rate of 8.5%, the hog-corn ratio has
also been significantly improved compared with that of this June.
However, due to the negative influence of African Swine Fever in China,
domestic pig-breeding companies, especially those small and medium-sized
farms, are cautious in restocking. Some of them may even liquidate and
withdraw from the industry.
In terms of imported pork, the best-selling
products in Q3 2018, as forecast in the last quarterly report, include
front feet, hind feet, stomach and earflap. Besides holiday demand for
the Mid-Autumn Festival and National Day and certain short supply caused
by the trade war, another major reason for hot sale was a sharp decline
of import volume for these products via Hong Kong during the same
period. For Q4 2018, driven by seasonal demand and Spring Festival
holidays, front feet (North China), hind feet (South China), tongues
(East China) and spare ribs (East China) are expected to sell well.
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| #ccc |
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