Monday Morning Livestock Market Update - Livestock Futures Staged for Mixed Opening

GENERAL COMMENTS:

Cattle country should be typically slow Monday as packers move to gather new showlists. Look for the early-month offering to be somewhat larger than last week. However, packers could easily counter with a bigger appetite. Both sides will be closely monitoring the ability of futures and cutouts to find a bottom. Live and feeder futures are likely to open on a mixed basis thanks to follow-through selling on one hand and early-week short-covering on the other.

Hog buyers should return to work after the weekend break with generally steady bids. Last week's slaughter jumped back over 2.5 million head, but failed to make a seasonal high. Can processors hit 2.6 million this week? So far, we continue to slaughter below general expectations based on USDA supply data. Lean futures should also open with uneven price action tied to spillover buying and a discount of the cash index.

	BULL SIDE		BEAR SIDE
1)	Cattle buyers are expected to start out short bought this week, compounded by the need to boost slaughter speed and supply large holiday meat orders.	1)	Spot December live is now at more than a $3 discount to last week's cash market. Such a strong basis could work to cripple feedlot resolve.
2)	Mindful of the tall premium of February live futures, feedlot managers could significantly tighten the late-year showlists by increasing days on feed and moving more cattle into the first quarter.	2)	For the week ending Nov. 28, noncommercials reduced their net-long position in live cattle futures by 1,300 loads to 128,700. Long liquidation no doubt continued on Thursday and Friday.
3)	The front end of the market is being supported by a modestly rebounding cash hog market with interior prices gaining $2 to $3/cwt this week.	3)	Daily hog slaughter set another new record on Tuesday, Nov. 14 at 468,132 head. Many believe higher and higher records await to be confirmed through the balance of the fourth quarter, possibly stretching as high as 475,000.
4)	Lead month December hogs ended the last week up 100 points at $65.28, up 200-points from last Friday and a 200-point premium to the most recent CME two-day settlement index value. Even with expiration less than two weeks away, the board seemed unafraid of leading the cash market higher.	4)	Hogs continue to gain weight over prior year, now greater than a five-pound spread over last year's counter-seasonal declining weights.

OTHER MARKET SENSITIVE NEWS

CATTLE: (The Cattle Site) -- Cattle and hog weights have followed a somewhat different trajectory this fall and this has impacted the amount of meat actually showing up in the marketplace, reports Steiner Consulting Group, DLR Division, Inc.

Actual weight data is reported with a bit of a lag as USDA needs time to collect and compile all data it receives from inspectors at slaughter facilities. The latest data available is for the week ending 11 November.

The report showed that the average steer weight for the week was 902 pounds (dressed carcass), 16 pounds (-1.7 per cent) less than the same week a year ago. Seasonally fed cattle weights increase in summer and fall but this year the increase has not been as big as in the last two years.

Feedlots have been able to market cattle in a more timely fashion and strong beef demand has allowed beef packers to process more cattle while at the same time preserving their quite lofty margins. The chart below shows our estimates for weights for the last two weeks as well as our expectations for the current week.

The weight data for week ending 18 November will be released Friday and we expect it will show weight near the same level as the previous week. However, we think cattle carcass weights likely declined during Thanksgiving week and will be only marginally higher this week.

HOGS: (National Hog Farmer) -- Argentina is accepting pork exports from Canada once again, announces the Honorable Lawrence MacAulay, Minister of Agriculture and Agri-Food, and the Honorable François-Philippe Champagne, Minister of International Trade.

"Our government is working hard to open markets and create new trade opportunities for Canadian businesses and workers. Canadian pork access to the Argentinian market is an important step in our valued and growing relationship and evidence that engagement produces results. I encourage our Canadian pork industry to take advantage of the opportunities this leading South American market offers," states Champagne.

As the seventh top producing pork country, Canadian hog producers export 16% of the world's pork, shipping 3.8 million pounds outside its borders in 2016.

This restored access will provide significant new opportunities to Canadian pork exporters in the important and emerging Argentinian market, with industry estimating an export value of up to $16 million annually.

"CPI is very pleased with this announcement. The Argentinian market represents a solid opportunity to develop further and diversify Canadian pork exports in South America," stresses Neil Ketilson, chair of the Canada Pork International Board of Directors.

The government of Canada is helping producers and processors bring their high-quality products to more and more countries around the globe. Restoring market access to the Argentinian market builds on Prime Minister Justin Trudeau's successful visit to Argentina last year when both leaders acknowledged the progress made to date and the necessary remaining steps to allow trade of Canadian pork to Argentina to resume.

Friday Closing Livestock Market Summary - Cattle Futures Close Week in State of Collapse

GENERAL COMMENTS

Light to moderate cattle trading was generally evident across the area with the best market test probably evident in the North. While prices were generally higher than last week, late week business softened somewhat from Thursday’s best. The National hog base closed off $0.42 compared with the Prior Day settlement ($54.00-$60.50, weighted average $59.00). From Friday to Friday, livestock futures scored the following changes: Dec LC off $1.35; Feb LC off $2.60; Jan FC off $2.98; Mar FC off $3.75; Dec LH up $2.02; Feb LH up $1.32. Corn futures closed .03 cents higher, supported by La Nina talk and possible threats of dry weather for South America. The stock market closed lower with the Dow off 40 and the NASDAQ down by 26.

LIVE CATTLE

Futures closed sharply lower, off 197-300. It would appear that disappointing beef demand following Thanksgiving has seriously spooked noncommercial buyers in live cattle. Massive long-liquidation today drove contracts to the lowest price level seen since mid-October. Note that all 2018 months finished below 40-day moving averages. Spot December now hopes to stabilize above its 100-day moving average early next week ($115.80). Beef cut-outs: higher on Choice and weak on Select (Choice, $205.99 up $1.35, Select $183.61 off $0.60) on light to moderate demand and moderate offerings (66 loads of choice cuts, 19 loads of select cuts, 18 loads of trimmings, 32 loads of coarse grinds).

MONDAY'S CASH CATTLE CALL:

Steady. Monday’s activity will be typically slow as packers focus on the collection of new showlists. Ready numbers could be somewhat larger given limited trade volume in some areas. Also, feedlot managers could be increasingly mindful of Decembers short marketing window.

FEEDER CATTLE:

Futures closed sharply lower, off 87-425. Needless to say, buying interest quickly dried up here once deferred live cattle started dropping like a stone. Spot January will now look for support around $148.85, its 100-day moving average. CME cash feeder index: 11/30: $157.20, up $0.28.

LEAN HOGS:

Futures closed mostly higher, up 100 to off 15. Friday’s rally went far to offset defensiveness seen early in the week. Indeed, with February closing well above $70.00, early week defensiveness looks no more harmful than short-term profit-taking. Keep in mind that spot December is set to expire a week from next Thursday, December 14. Pork cut-out: $83.35 (FOB Plant) off $0.05. CME cash lean 11/29: $62.99, up $0.03 (DTN Projected lean index for 11/30: $63.26, up $0.27).

MONDAY'S CASH HOG CALL:

Steady to $1 lower. Hog buyers are expected to resume procurement chores on Monday with steady/weak bids.

Friday Midday Livestock Market Update - Sharp Morning Losses Create Widespread Liquidation

GENERAL COMMENTS: 

Aggressive triple-digit losses in cattle markets focusing on end-of-week liquidation has created live cattle futures at- or near-limit losses at midday. This is likely to keep markets bearish through the end of the session. Corn prices are higher in light trade. December corn futures are 3 cents per bushel higher. Stock markets are lower in light trade. The Dow Jones is 100 points lower while Nasdaq is down 49 points.

LIVE CATTLE:

Sharp triple-digit losses have been the focus across live cattle trade during the morning with nearby contracts seen at or near limit losses through the last half of the morning. Widespread market pressure is seen across the complex with traders quickly erasing previous gains seen in the week. This sets the tone for potential volatility through the month of December as traders remain stuck between fundamental moves and longer-term technical direction. Cash cattle markets are sluggish with light trade seen similar to prices paid Thursday afternoon. Live cattle have been sold at $120 with $190 seen dressed. There continue to be bids seen through most areas, although it is uncertain how much additional trade will develop given the pressure in futures markets. Beef cut-outs at midday are mixed, $0.63 lower (select) and up $1.51 per cwt (choice) with active movement of 93 total loads reported (49 loads of choice cuts, 9 loads of select cuts, 9 loads of trimmings, 25 loads of ground beef).

FEEDER CATTLE:

Sharp losses continue to be seen in feeder cattle trade as traders in the entire cattle market are focusing on overall lack of support across the complex. This may add to even more pressure through the end of the session and early next week.

LEAN HOGS:

Mixed trade is seen through the lean hog futures complex with nearby support holding based on firming fundamentals. But overall lack of support in the cattle market is putting pressure on lightly traded deferred lean hog futures. This may continue to weaken the market price through the end of the session. Cash prices are lower on the National Direct morning cash hog report. The weighted average price fell $0.22 at $58.64 per cwt with the range from $56.00 to $60.00 on 5,364 head reported sold. Cash prices are lower on the Iowa/Minnesota Direct morning cash hog report. The weighted average price fell $0.46 at $59.41 per cwt with the range from $54.00 to $60.00 on 355 head reported sold. The National Pork Plant Report posted 170 loads selling with carcass values gaining $0.14 per cwt. Lean hog index for 11/29 is at $62.99 up $0.03 with a projected two-day index of $63.26, up $0.27.

Friday Morning Livestock Market Update - Livestock Futures Set for Mixed Late-Week Opening

GENERAL COMMENTS:

Light to moderate fed cattle volume was generated in most areas on Thursday with the best market test evident in the South where most live deals were marked at $121 ($3 higher than last week). Business in the North seemed more hit-or-miss (some $190 dressed/$120 to $121) with a good number of feedlot managers passing packer bids. Packers should need to own more cattle before calling it a week, especially in the North. The balance of showlists are priced around $122 to $123 in the South and $195 in the North. Live and feeder futures should open on a mixed basis as traders position ahead of late-week packer spending.

Look for the cash hog market to open steady to $1 higher Friday. With the rising cost of live inventory, processing margins have narrowed somewhat through the week. Yet profit opportunity remains decent enough to plan a Saturday kill close to 240,000 head or better. Lean futures are geared to open with uneven price action thanks to follow-through selling and late-year short-covering.

	BULL SIDE		BEAR SIDE
1)	Short-bought cattle buyers in the South really came with it Thursday, spending as much as $3 more than last week for ready steers and heifers (i.e., $121).	1)	Thursday's cattle board took back much of the midweek rally thanks to long liquidation, technical selling and cash uncertainty.
2)	Net beef export sales last week totaled 13,800 metric tons, up 49% from the previous week and 7% from the prior four-week average.	2)	Post-Thanksgiving beef demand continued to disappoint Thursday with cutouts quoted significantly lower and box offerings still described as "moderate to heavy."
3)	The cash hog market has consistently marched higher this week, throwing water on bearish ideas that late-year numbers will be more than ample relative to demand.	3)	Net pork export sales last week drooped to 15,400 MT, down 6% from the previous week and 3% from the prior four-week average. At the same time, actual pork exports of 21,700 MT were down 12% from the previous week and 9% from the prior four-week average.
4)	Despite this week's fairly consistent retreat in lean hog futures, the short-term trend remains positive as does the long-term trend.	4)	Although the summer 2018 contracts posted new life-of-contract highs during the session, contracts ended the session well off those highs. This week's more defensive board behavior probably suggests more commercial selling interest and caution.

OTHER MARKET SENSITIVE NEWS

CATTLE: (National Hog Farmer) -- The U.S. Government Accountability Office delivers five recommendations for checkoff programs after a comprehensive review. At the request of House Minority Leader Nancy Pelosi (D-Calif.), the GAO examined the USDA's Agriculture Marketing Service process overseeing checkoff programs.

In 2016, checkoff funds totaled over $885 million for 22 commodity programs that conduct research and promotion activities to strengthen a commodity's position in the market.

"Got milk?", "The Incredible, Edible Egg" and "Pork: The Other White Meat" are examples of advertising campaigns undertaken by two of the 22 federal agricultural research and promotion programs. These programs, funded by a fraction of the sale of each unit of a commodity, are led by boards consisting of industry members appointed by the Secretary of Agriculture.

The GAO evaluated the extent to which AMS has addressed previously identified weaknesses in its oversight along with how the effectiveness of the programs has been evaluated and what the results have indicated. Eight programs, based on total funds collected, were selected and review laws, regulations and agency guidance. Interviews of agency officials, checkoff board executives and economists were also conducted.

In the report publicly released last week, the GAO advises the following changes to USDA AMS oversight of 22 checkoff programs to enhance transparency.

1. Subcontracts: The GAO says AMS has made a noticeable stride in improving its oversight of checkoff programs based on the USDA's Office of Inspector General's recommendations in 2012. However, GAO found that AMS does not consistently review subcontracts or ensure that certain documents are shared with stakeholders on program websites.

2. Increase follow-up: AMS should establish a mechanism for documenting and tracking follow-up with checkoff boards on the implementation of management review recommendations

3. Audit rules: AMS should ensure that annual independent audits include the five statements of assurance as outlined in the standard operating procedures.

4. SOPs: AMS should include in the guidelines and standard operating procedures that key checkoff board documents, such as bylaws and policy statements, annual reports and independent evaluations of economic effectiveness are posted on the checkoff programs' websites.

5. Independent evaluations: Independent economic evaluations of the effectiveness of checkoff programs, required by law to be conducted every five years, have generally shown positive financial benefits. For the eight evaluations GAO reviewed, benefits ranged from an average of $2.14 to $17.40 for every dollar invested in the programs. However, the evaluations varied in the methods used and had certain methodological limitations. Without developing criteria to assess the methodology and results of evaluations, the agency's assessments of independent economic evaluations may be inconsistent across checkoff programs and misleading to stakeholders. Therefore, GAO recommends AMS to develop criteria by which to assess the methodology and results of independent evaluations and document those reviews to ensure that the standard operating procedures are met.

As stated in the report, AMS officials also identified ongoing challenges in oversight across the 22 commodity checkoff programs. Specifically, AMS marketing specialists and senior agency officials identified three challenges: (1) the increase in some checkoff boards' use of social media, (2) the absence of an information system to track approvals, and (3) complex and time-consuming Freedom of Information Act requests for some programs. Because of competing priorities, some oversight duties may be delayed as a result.

HOGS: (Farm Journal) -- Raymond "Bob" Rowland, is doing his part to eradicate porcine reproductive and respiratory syndrome (PRRS) at Kansas State University. It is estimated that the virus costs the U.S. pork industry more than $600 million in losses every year.

"In his latest study, Rowland, professor of diagnostic medicine and pathobiology in the College of Veterinary Medicine, has created a way to protect offspring from the PRRS virus during pregnancy," a news release from KSU said. "He has found that mothers without the CD163 protein are resistant to the PRRS virus and give birth to healthy, normal piglets. The work appears in Nature's Scientific Reports."

"We have created a protective shell against the PRRS virus during the reproductive phase of production," Rowland said in the release. Offspring don't become infected during pregnancy, hence healthy piglets are born, which means during this particular phase of production, the disease can't exist.

The PRRS virus causes disease in two forms: a respiratory form that weakens young pigs' ability to breathe and a more severe reproductive form that causes mass deaths in pigs during late pregnancy.

"The reproductive form not only has a tremendous economic impact, but also a psychological impact on people who work with pigs," Rowland said in the news report. He has spent more than 20 years studying the PRRS virus, and said, "When we look at ways to control this disease, it really begins with reproduction. We want to keep this disease out of the reproductive process and we have found a way to do that."

Rowland collaborated with Randall Prather, a professor at the University of Missouri, and a team to develop PRRS-resistant pigs. PORKBusiness.com reported on this breakthrough in Dec., 2015. Using CRISPR/Cas9 technology, the researchers found that pigs without the CD163 protein showed no signs or evidence of being infected with the PRRS virus. CD163 is the receptor for the virus.

The research has the potential to save pig farmers millions of dollars, Rowland said.

However, it's not a silver bullet. Even though offspring can be born without the virus, they may still be susceptible to the disease later in life.

"This is one tool that we can use," Rowland explains. "It doesn't mean that we can give up on vaccines or diagnostics, but it does create more opportunities for other tools to become more effective. Because this pig is born healthy, it will respond better to a vaccine or a diagnostic test. We are enhancing other aspects of disease control as well.