Livestock prices this week settled higher: LCM0 +0.700 (+0.72%), LHM0 +0.900 (+1.56%).
Jun live cattle on Friday closed lower but still finished the week up +0.72%. Jun cattle posted a 2-1/2 month high Monday on tight beef supplies. Beef supplies have fallen as the USDA reported Thursday that U.S. Apr commercial beef production fell -24.7% m/m and -19.7% y/y to 1.815 bln lbs. CoBank estimates the closure of U.S. meat processing facilities from the coronavirus outbreak may curb meat supplies to grocery stores by almost 30% by Memorial Day and cause 20% y/y beef price inflation. Also, packer demand for cattle should remain strong as beef packer profit margins remained at a record high Friday (data from 2013). Cattle prices have rallied sharply over the past month on concern about U.S. beef supplies. Cash cattle prices also recovered and posted a 1-3/4 month high Tuesday. Cash cattle prices had plummeted to a 9-1/2 year low last month as an increasing number of slaughterhouses throughout the U.S. closed due to coronavirus infections among their workers, leaving cattle ranchers without a market for their animals and causing a backlog of cattle waiting to be processed. The USDA estimates U.S. 2019/20 beef production will fall -5.1% y/y to 25.83 mln lbs, the first decline in 5 years. The USDA also estimates U.S. 2019/20 beef exports will fall -4.2% y/y to 3.16 mln lbs. Jun cattle tumbled to a contract low Apr 6 and nearest-futures (J20) plunged to a 10-1/4 year low on concern the coronavirus pandemic has yet to peak in the U.S., which may keep restaurants closed for longer and is negative for domestic beef demand. Foreign demand for U.S. beef has improved with U.S. Jan-Mar beef exports up +10.5% y/y to 769.252 million lbs. Thursday’s USDA Cold Storage report was mixed for cattle as beef supplies in cold storage in Apr fell -2.5% m/m and rose +12.0% y/y to 489.999 mln lbs.
Friday’s USDA Cattle on Feed report was neutral for cattle prices as U.S. cattle in feedlots on May 1 fell -5.1% y/y to 11.200 mln head, right on expectations. Cattle placed on feed in Apr fell -22.3% y/y to 1.432 mln head, a smaller decline than expectations of -23.0% y/y. Cattle marketed for slaughter in Apr fell -25.3% y/y to 1.459 mln head, a bigger decline than expectations of -24.3% y/y.
Jun lean hog prices on Friday closed lower but still finished the week up +1.56%. Jun hogs fell back Friday after pork packer profit margins dropped to a 1-1/2 week low, which may curb packer demand for hogs. Pork packer profit margins had surged over the past month and posted a record high Tuesday (data from 2013). Jun hogs fell to a 3-week low Wednesday as U.S. meat processing plants reopened, and pork processing recovered to 85% of capacity after plants had been shuttered when workers at the plants tested positive for the coronavirus. Wholesale pork prices fell to a 3-week low Tuesday as retail pork demand plummeted after wholesale pork prices soared to a 5-1/2 year high May 11, which led to a surge in retail pork prices in grocery stores and prompted consumers to switch to cheaper cuts of meats. Hog prices plunged to a 17-1/2 year low Apr 14 on concern the coronavirus pandemic has yet to peak in the U.S., which may keep restaurants closed for longer and is negative for domestic pork demand. Wholesale pork prices plunged to a 17-1/2 year low Apr 9 as U.S. pork demand plummeted as the spread of the coronavirus prompted the cancellation of events and the closure of schools and restaurants. Jun hogs recovered from Wednesday’s 3-week low and finished higher on the week on signs of smaller pork supplies after the USDA reported Thursday that U.S. Apr commercial pork production fell -20.9% m/m and -10.5% y/y to 2.031 bln lbs. Also, the USDA’s Cold Storage report on Thursday was supportive for hog prices as pork supplies in cold storage in Apr fell -0.3% m/m and -1.1% y/y to 614.811 mln lbs. The Mar 27 USDA Q1 Hogs & Pigs report showed a record U.S. hog herd on Mar 1 at 77.6 million hogs. Foreign demand for U.S. pork is solid as Mexico, the top importer of U.S. pork, has resumed purchases and China has ramped up its pork buying after its recent Phase-1 agreement. U.S. Jan-Mar pork exports jumped +39.9% to 2.023 bln lbs. The USDA estimates U.S. 2019/20 pork production will fall -0.7% y/y to 27.45 mln lbs, the first decline in U.S. pork production in 6 years. The USDA also estimates U.S. 2019/20 pork exports will climb +13.1% y/y to 7.148 mln lbs.