Livestock prices this week closed lower: LCJ0 +0.125 (+0.10%), LHJ0 +4.650 (+7.55%). Apr live cattle on Friday closed higher and finished the week up by +0.10%.Â
Apr cattle fell to a 4-month low Thursday as domestic beef demand weakened after wholesale beef prices fell to a 3-1/2 week low on Friday. Also, weakness in the cash market is weighing on futures prices as cash cattle prices dropped to a 1-1/2 month low on Monday. Concern about Chinese demand for beef is bearish for cattle prices as the spread of the China coronavirus throughout China keeps consumers from going to restaurants. Cattle prices recovered Thursday’s losses into Friday and finished the week slightly higher on optimism Chinese demand for U.S. beef may increase after China on Thursday announced that it had cut tariffs on $75 billion of U.S. goods. U.S. beef supplies are abundant after the Jan 23 monthly USDA data showed that U.S. Dec commercial beef production rose +7.0% y/y to 2.265 bln lbs. Friday’s weekly slaughter data shows 3.52 mln head of cattle slaughtered this year through Feb 8, down -0.6% y/y. In mid-December, nearest-futures Dec-2019 contract rallied to an 8-3/4 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.Â
Apr lean hog prices rallied to a 1-week high on Friday and finished the week up sharply by +7.55%. Apr hog prices rallied on Thursday and Friday on optimism China will boost purchases of U.S. pork after China cut tariffs on U.S. pork exports to 30% from 35%. Apr hogs had slumped to a contract low Monday and nearest-futures (G20) dropped to an 11-1/2 month low on concern the spread of the China coronavirus will derail the global economy and undercut demand for commodities, including pork. 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. Domestic pork demand has also declined and weighed on hog prices after wholesale pork prices fell to an 11-month low Thursday. Also, pork packer profit margins slumped to a 5-1/4 month low Wednesday, which may curb hog demand from packers. U.S. pork supplies are ample after the USDA reported Jan 23 that U.S. Dec pork production jumped +9.4% y/y to 2.443 bln lbs. Also, Friday’s weekly USDA slaughter data shows 14.691 mln hogs slaughtered this year through Feb 8, up +3.0% y/y. 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 reported its 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