Livestock prices this week closed higher: LCZ9 +2.525 (+2.13%), LHZ9 +0.800 (+1.31%).
Dec live cattle on Friday rallied to a 7-month nearest-futures high and finished the week up by +2.13%. Cattle prices moved higher throughout the past week after last Friday’s USDA Cold Storage report showed tighter U.S. beef supplies as U.S. beef in cold storage in Oct fell -0.6% m/m and -9.6% y/y to 466.210 mln lbs. Strength in the cash market also propelled cattle futures higher as cash cattle prices soared to a 6-1/2 month high Wednesday. On the negative side is concern about domestic beef demand after wholesale beef prices fell to a 1-month low Tuesday. Also, the USDA reported Nov 21 that U.S. Oct commercial beef production rose +0.4% y/y to 2.44 billion lbs. Cattle prices plummeted to a 2-3/4 year nearest-futures low (V19) Sep 6 on concern about weak demand. Trade tensions between the U.S. and its trading partners are hurting U.S. exports as U.S. Jan-Sep beef exports are down -3.7% y/y to 2.274 bln lbs. Trade optimism had improved slightly last month after Japan removed tariffs on U.S. beef and pork as part of a larger trade pact with Japan. Japan accounts for 25% of all U.S. beef exports. The U.S. Meat Export Federation forecasts 2020 U.S. beef exports will climb 5% y/y. Supplies are projected to be robust as the USDA estimates U.S. 2018/19 beef production will climb +1.0% y/y to a record 27.195 bln lbs. The USDA projects U.S. 2018/19 beef exports will climb +0.3% y/y to 3.151 bln lbs.
Dec lean hog prices climbed to a 1-week high Friday and finished the week up by +1.31%. Strength in the cash market lifted hog futures prices this week as cash hogs climbed to a 3-week high Wednesday. Also, speculation that China may be forced to import U.S. pork, even with the ongoing trade war, is lifting hog prices as China’s hog herd has been decimated by African swine fever with about 30% of the herd having been culled. China’s total pig herd in Sep totaled 203.6 mln pigs, down -39.2% y/y. The UN’s Food and Agriculture Organization (FAO) forecasts global 2019 pork production will drop -8.5% to 110.5 MMT due to the spread of the swine flu. On the negative side, domestic pork demand has slipped as wholesale pork prices fell to a 3-week low Wednesday. Also, supplies are abundant as the USDA reported Nov 21 that U.S. Oct pork production rose +6.5% y/y to a record 2.61 billion lbs. In addition, the Sep 27 Q3 USDA Hogs & Pigs Inventory report showed the total U.S. hog herd as of Sep 1 rose +3.4% y/y to 77.678 million, a record for a September since data began in 1988. Due to Chinese tariffs on U.S. pork, China has mainly imported pork from Europe with European 2019 Jan-Jul pork exports to China up +45% y/y to 1.14 MMT. The USDA FAS projected Sep 11 that European 2020 pork exports to China may climb 4% to a record 3.6 MMT. Escalation of the U.S./China trade conflict hammered hog prices down to an 8-1/2 month nearest-futures low Aug 23 after China announced plans to impose retaliatory tariffs on $75 billion of U.S. goods, including U.S. pork supplies. However, foreign demand for U.S. pork has strengthened with U.S. Jan-Sep pork exports up +3.7% y/y to 4.496 bln lbs as Mexico, the top importer of U.S. pork, has resumed purchases. The USDA projects that U.S. 2018/19 pork exports will climb +9.6% y/y to a record 6.441 bln lbs and that U.S. 2018/19 pork production will climb +5.1% y/y to a record 27.662 bln lbs.