Livestock prices last week settled mixed: LCM0 -3.675 (-4.26%), LHM0 +7.800 (+17.84%).Â
June live cattle on Friday fell to a 1-1/2 week low and finished the week down -4.26%. Cattle prices are under pressure as an increasing number of slaughterhouses throughout the U.S. have closed due to coronavirus infections among their workers, leaving cattle ranchers without a market for their animals and causing a backlog of cattle waiting to be processed. Another negative for cattle prices was Wednesday’s USDA Cold Storage report that showed the amount of beef in cold storage in March rose +1.6% m/m and +11.2% y/y to 502.424 lbs. The cash cattle market remains weak as cash cattle prices fell to a 1-week low Wednesday, just above the 9-1/2 year low from Apr 15. On the positive side, wholesale beef prices soared to a record high Thursday (data from 2001) as 10% of U.S. beef output has been idled with the closure of beef processing plants throughout the U.S. as workers at the plants became ill from the coronavirus. Also, beef packer profit margins surged to a record high Friday (data from 2013), which will encourage packers that remain open to boost their cattle purchases. Jun cattle tumbled to a contract low Apr 6 and nearest-futures (J20) plunged to a 10-1/4 year low on concern the coronavirus pandemic has yet to peak in the U.S., which may keep restaurants closed for longer and is negative for domestic beef demand. Beef supplies are ample as the USDA reported Mar 19 that U.S. Feb commercial beef production rose +7.2% y/y to 2.131 bln lbs. However, future beef supplies may shrink with the current closure of beef processing plants. The USDA projects U.S. 2020 beef exports will climb +8.0% y/y to a record 3.265 bln lbs. Foreign demand for U.S. beef has improved with U.S. Jan-Feb beef exports up +11.5% y/y to 502.1146 million lbs. Beef supplies are projected to be robust with USDA estimates for U.S. 2019/20 beef production to climb +2.0% y/y to a record 27.766 bln lbs. Â
Friday’s monthly USDA Cattle on Feed report was supportive for cattle prices as the report showed the U.S. feedlot herd on Apr 1 fell -5.5% to 11.297 mln head, a larger decline than expectations of -5.1% y/y. Placement of cattle into feedlots in Mar fell -22.7% y/y to 1.557 mln head, a sharper decline than expectations of -21.1% y/y. Cattle marketed for slaughter in Mar rose +13.1% y/y to 2.01 mln head, more than consensus of +12.0% y/y.
June lean hog prices on Friday rose to a 2-week high and finished the week up sharply by +17.84%. Jun hogs trended higher this week on concern about pork supplies as 25% of U.S. hog-slaughtering capacity is shuttered with the closure of pork processing plants throughout the U.S. after workers at the plants tested positive for the coronavirus. Tighter pork supplies sent wholesale pork prices up to a 4-week high Friday and also boosted pork packer profit margins that jumped to a 4-1/2 month high Friday. However, cash hog prices remain weak on pork demand concerns as cash hog prices plummeted to a record low Thursday (data from 2003). Hog prices plunged to a 17-1/2 year low Apr 14 on concern the coronavirus pandemic has yet to peak in the U.S., which may keep restaurants closed for longer and is negative for domestic pork demand. Wholesale pork prices plunged to a 17-1/2 year low Apr 9, a sign of tepid domestic pork demand. U.S. pork demand has plummeted as the spread of the coronavirus prompted the cancellation of events and the closure of schools and restaurants. Current pork supplies are ample after the USDA reported Mar 19 that U.S. Feb pork production rose +6.4% y/y to 2.306 bln lbs, although future supplies will tighten as 25% of U.S. pork processing plants remain idle. The Mar 27 USDA Q1 Hogs & Pigs report showed a record U.S. hog herd on Mar 1 at 77.6 million hogs. Foreign demand for U.S. pork has strengthened as Mexico, the top importer of U.S. pork, has resumed purchases and China has ramped up its pork buying after its recent Phase-1 agreement. U.S. Jan-Feb pork exports jumped +42.1% to 1.321 bln lbs. The USDA projects that U.S. 2020 pork exports will jump +22.6% y/y to a record 7.75 bln lbs and that U.S. 2020 pork production will climb +4.9% y/y to a record 28.999 bln lbs. Â
Wednesday’s USDA Cold Storage report was mixed for hogs as the amount of pork in cold storage in March fell -4.2% m/m but rose +2.2% y/y. The amount of pork bellies in cold storage in March surged +34.1% y/y to a 5-3/4 year high of 78.82 mln lbs.