Livestock prices this week settled mixed: LCG9 -1.075 (-0.84%), LHG9 +0.425 (+0.63%).Â
Feb live cattle on Friday closed lower and finished the week down by -0.84%. Feb cattle dropped to a 1-1/2 week low Thursday after Wednesday’s phase-one trade agreement between the U.S. and China failed to provide concrete details on specific commodity purchases, including beef, that China will make of U.S. goods from the agreement. Another bearish factor was the decline in beef packer profit margins to a 1-3/4 year low Monday, which may curb packer demand for cattle. Losses in cattle prices were limited this week on signs of stronger domestic beef demand after wholesale beef prices rose to a 1-month high on Friday. 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 8-1/4 month high Dec 13 on improved prospects for an increase in U.S. beef exports. 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. 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. The USDA projects U.S. 2019/20 beef exports will climb +7.5% y/y to a record 3.305 bln lbs. Â
Feb lean hog prices on Friday closed higher and finished the week up by +0.63%. Feb hog prices dropped to a 1-1/2 month low Monday on concern that U.S./China trade tensions will persist. Despite Wednesday’s signing of the phase-one trade deal between the U.S. and China, existing U.S. tariffs on $360 billion of Chinese goods are likely to remain in place until after the U.S. presidential election. Also, Wednesday’s trade deal failed to provide concrete details on specific commodity purchases, including pork, that China will make of U.S. goods from the trade agreement. Hog prices rebounded the rest of the week and finished higher as strength in the cash market pulled futures prices higher after cash hog prices climbed to a 2-1/2 month high Wednesday. 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 as China reported Thursday 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