Livestock prices this week closed lower: LCG0 -1.500 (-1.19%), LHG0 -0.450 (-0.66%).Â
Feb live cattle on Friday fell to a 1-1/2 month low and finished the week down by -1.19%. Signs of abundant U.S. beef supplies weighed on cattle prices after Thursday’s monthly USDA data showed that U.S. Dec commercial beef production rose +7.0% y/y to 2.265 bln lbs. Losses in cattle prices were limited this week on signs of stronger domestic beef demand after wholesale beef prices rose to a 1-1/4 month high on Thursday. In mid-December, Feb cattle surged to a contract high and the nearest-futures Dec-2019 contract rallied to an 8-1/4 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 monthly USDA Cattle on Feed report was slightly negative as U.S. cattle on feedlots Jan 1 rose +2.3% y/y to 11.958 million, slightly more than expectations of +2.2% y/y. Cattle placed on feedlots in Dec rose +3.5% y/y to 1.828 million, right on expectations. Cattle marketed for slaughter in Dec rose +5.3% y/y to 1.834 million, right on expectations.
Feb lean hog prices on Friday closed lower and finished the week down by -0.66%. Bearish factors included concern about weak Chinese pork demand and rising U.S. supplies. 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. Also, Thursday’s monthly USDA data showed that U.S. Dec pork production rose +9.4% y/y to 2.443 bln lbs. In addition, Wednesday’s USDA Cold Storage report showed that U.S. pork supplies in cold storage rose +1.1% m/m and +15.0% y/y to 580.904 mln lbs and that U.S. pork belly supplies in cold storage in Dec surged +25.0% m/m and +61.0% y/y to a 3-1/2 year high of 68.015 mln lbs. Feb hog prices on Thursday rallied to a 2-week high on strength in the cash market and improved domestic pork demand, Cash hog prices climbed to a 3-month high Thursday, which was supportive for hog futures, while wholesale pork prices rose to a 1-1/4 month high Thursday, a sign of stronger domestic demand. 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 on Thursday reported that China 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