Livestock prices this week closed lower: LCG9 -1.975 (-1.56%), LHG9 -2.025 (-2.87%).Â
Feb live cattle on Friday closed lower and finished the week down by -1.56%. Feb cattle dropped to a 3-week low Thursday on beef demand concerns amid abundant supplies. Wholesale beef prices dropped to a 14-1/2 month low Thursday, which signals weak domestic beef demand. Also, the fall in beef packer profit margins to a 11-1/2 month low Friday is bearish for cattle as the weak profit margins may curb packer demand for cattle. Supplies are ample as the USDA Cattle on Feed report from Dec 20 showed the U.S. feedlot herd on Dec 1 rose +2.5% to 12.031 mln head, the most cattle in feedlots in 8 years. Feb cattle had surged to a contract high and nearest-futures (Z19) rallied to an 8-month high Dec 13 on improved prospects for an increase in 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 slid to a 3-week low, settled limit-down, and finished the week down by -2.87%. Hog prices dropped Friday after weekly USDA export data showed U.S. pork exports in the week ended Dec 26 dropped -20% w/w to 27,400 MT and that China cancelled -3,520 MT of US pork purchases.  Also, pork packer profit margins fell to a 2-1/4 month low Thursday, which may reduce hog demand from packers.  Feb hogs had rallied to a 1-1/2 month high Thursday on strength in the cash market as cash hog prices climbed to a 2-month high Tuesday. The Dec 23 U.S. Q4 Hog & Pig Inventory report was slightly negative as it showed the total U.S. pig herd at 77.338 mln head on Dec 1, up +3% y/y and right on expectations. Sows retained for breeding in Q4 rose +2.1% y/y to 6.461 mln head, above expectations of +1.6%. Pigs per litter in Q4 rose +3.1% y/y to 11.09, above consensus of +2.9% to 11.07 pigs per litter. 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 projected Sep 11 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 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. 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-Oct pork exports up +3.7% y/y to 5.017 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.