Livestock prices this week settled mixed: LCJ0 -1.825 (-1.70%), LHJ0 +3.650 (+5.86%).Â
Apr live cattle on Friday sold off to a 5-month nearest-futures low and finished the week down -1.70%. Cattle prices plummeted over the past week on concern global beef demand could plunge if the China coronavirus expands into a pandemic. On the positive side, beef packer profit margins rose to a 2-1/4 month high Friday, which may boost cattle demand from beef packers. Beef supplies are ample as the USDA reported Feb 20 that U.S. commercial beef production in Jan rose +5.4% m/m and +3.4% y/y to 2.388 mln lbs. In mid-December, the nearest-futures Dec-2019 contract rallied to a 9-3/4 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 U.S./China phase-one trade deal. The U.S. Meat Export Federation forecasts 2020 U.S. beef exports will climb 5% y/y after the -4.4% y/y decline in 2019. The USDA projects U.S. 2020 beef exports will climb +9.2% y/y to a record 3.300 bln lbs. Beef supplies are projected to be robust with USDA estimates for U.S. 2019/20 beef production to climb +1.2% y/y to a record 27.546 bln lbs. The USDA reported in Monday’s Cold Storage report that beef in cold storage in Jan rose +1.9% m/m and fell -4.1% y/y to 489.136 mln lbs.
Apr lean hog prices on Friday climbed to a 2-week high and finished the week up by +5.86%. Hogs prices moved higher over the past week on signs of stronger domestic pork demand after wholesale pork prices rose to a 1-month high Thursday. Also, strength in the cash market underpinned futures prices after cash hog prices climbed to a 1-month high Thursday. Packer demand for hogs may decline after pork packer profit margins slumped to a 6-month low Friday. Pork supplies are ample after the USDA reported Feb 20 that U.S. commercial pork production in Jan rose +4.5% m/m and +7.6% y/y to 2.553 mln lbs. Apr hogs slumped to a contract low Feb 3 and nearest-futures (G20) dropped to a 1-year 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 has been dampened by the government’s travel restrictions on more than 40 million people to contain the spread of the coronavirus. 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’s FAS on Wednesday forecast EU 2020 pork production will climb +0.9% to a record 24.15 MMT and that EU 2020 pork exports will climb +9.8% to a record 3.9 MMT. China’s hog herd has been decimated by African swine fever as China reported its 2019 pork production dropped -21.3% y/y. Foreign demand for U.S. pork has strengthened as U.S. 2019 pork exports rose +7.6% y/y to 6.321 bln lbs as Mexico, the top importer of U.S. pork, has resumed purchases. The USDA projects that U.S. 2020 pork exports will climb +16.7% y/y to a record 7.375 bln lbs and that U.S. 2020 pork production will climb +4.5% y/y to a record 28.899 bln lbs. Â