Livestock prices this week closed lower: LCG0 -1.225 (-0.97%), LHG0 -0.625 (-0.92%).Â
Feb live cattle on Friday closed higher but still finished the week down by -2.13%. Feb cattle dropped to a 2-week low Thursday on domestic beef demand concerns. Wholesale beef prices trended lower over the past week and fell to a 1-1/2 month low Friday, a sign of weak domestic demand. Also, packer demand for cattle may wane after beef packer profit margins tumbled to a 3-3/4 month low Friday. Beef supplies are abundant as USDA slaughter data shows 31.036 mln head of cattle processed this year through Dec 7, up +1.5% y/y. 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. Â
Feb lean hog prices on Friday closed higher but still finished the week down by -1.31%. Feb hogs tumbled to a 3-3/4 month low Monday on U.S. trade uncertainty after President Trump said he might wait until after the 2020 presidential election before he signs a trade deal with China. A fall in pork packer profit margins to a 1-month low Thursday was also negative for hog prices as that may undercut hog demand from packers. Hog prices recovered the rest of the week after cash hog price rose to a 1-month high Thursday. Also, hogs rallied Friday on positive trade news after China’s finance ministry said it has started to process applications from some domestic companies to exempt their purchases of U.S. agricultural goods, including pork. Pork supplies are abundant as USDA slaughter data shows 120.679 mln hogs processed this year through Dec 7, up +9.0% y/y. Also, 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. 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. 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. Â