Livestock prices this week closed lower: LCG0 -3.475 (-2.78%), LHG0 -10.100 (-15.02%).Â
Feb live cattle on Friday closed lower and finished the week down by -2.78%. Feb cattle tumbled to a 1-1/2 month nearest-futures low Thursday on concern the spread of the China coronavirus will derail the global economy and undercut demand for commodities, including beef. U.S. beef supplies are abundant after the Jan 23 monthly USDA data showed that U.S. Dec commercial beef production rose +7.0% y/y to 2.265 bln lbs. In mid-December, Feb cattle surged to a contract high and the nearest-futures Dec-2019 contract rallied to an 8-1/2 month high on improved prospects for an increase in U.S. beef exports after China agreed to buy more U.S. ag products as part of the US/China phase-one trade deal. Trade tensions have undercut U.S. beef exports with U.S. Jan-Nov beef exports down -4.6% y/y to 2.767 bln lbs. The U.S. Meat Export Federation forecasts 2020 U.S. beef exports will climb 5% y/y. The USDA projects U.S. 2019/20 beef exports will climb +7.5% y/y to a record 3.305 bln lbs. Supplies are projected to be robust as the USDA estimates U.S. 2019/20 beef production will climb +1.7% y/y to a record 27.515 bln lbs. Wednesday’s USDA Cold Storage report was neutral with U.S. beef supplies in cold storage in Dec up +0.6% m/m but down -2.9% y/y at 481.012 mln lbs.
Friday’s USDA Bi-Annual Cattle Inventory report showed the U.S. cattle herd as of Jan 1 fell -0.4% y/y to 94.413 mln head, a smaller decline than expectations of -0.5% y/y. The calf crop fell -0.7% y/y to 36.060 million head , a bigger decline than expectatins of -0.2% y/y.
Feb lean hog prices plunged to a 10-1/2 month nearest-futures low Friday and finished the week down sharply by -15.02%. Hog prices sold-off this week on concern the spread of the China coronavirus will derail the global economy and undercut demand for commodities, including pork. Chinese domestic pork demand is expected to be dampened by the government’s travel restrictions on over 40 million people to contain the spread of the new Chinese coronavirus. Losses in hog prices accelerated Wednesday after the American Society for Microbiology announced late Tuesday that it has developed a vaccine for hogs that has proven 100% effective against the African swine fever. Domestic pork demand has also declined and is weighing on hog prices after wholesale pork prices fell to a 4-month low Thursday. Also, pork packer profit margins slumped to a 5-month low Thursday, which may curb hog demand from packers. U.S. pork supplies are ample after the USDA reported Jan 23 that U.S. Dec pork production rose +9.4% y/y to 2.443 bln lbs. Due to Chinese tariffs on U.S. pork, China has mainly imported pork from Europe with European 2019 Jan-Sep pork exports to China up +55% y/y to 1.55 MMT. The USDA FAS on Sep 11 projected that European 2020 pork exports to China may climb 4% to a record 3.6 MMT. China’s hog herd has been decimated by African swine fever as China reported its 2019 pork production dropped -21.3% y/y. Also, Vietnam said it has culled 5.9 million hogs, or 22% of its total swine population, to try to stop the spread of African Swine Fever. Foreign demand for U.S. pork has strengthened with U.S. Jan-Nov pork exports up +5.4% y/y to 5.640 bln lbs as Mexico, the top importer of U.S. pork, has resumed purchases. The USDA projects that U.S. 2019/20 pork exports will climb +12.8% y/y to a record 7.10 bln lbs and that U.S. 2019/20 pork production will climb +3.6% y/y to a record 28.68 bln lbs. Â