Livestock prices this week closed lower: LCJ0 -10.675 (-9.03%), LHJ0 -4.750 (-7.09%).Â
Apr live cattle on Friday tumbled to a contract low and finished the week down sharply by -9.03%. Nearest-futures (G20) cattle dropped to a 4-1/4 month low Friday on concern global beef demand could plunge if the China coronavirus expands into a pandemic. Weakness in the cash market also weighed on cattle futures prices after cash cattle prices dropped to a 3-1/2 month low Thursday. Further losses in cattle prices may be limited after beef packer profit margins jumped to a 2-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 9-1/2 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. Trade tensions have undercut U.S. beef exports as U.S. 2019 beef exports fell -4.4% y/y to 3.022 bln lbs. The U.S. Meat Export Federation forecasts 2020 U.S. beef exports will climb 5% y/y. 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 fell to a 3-1/2 week low and finished the week down sharply by -7.09%. Hogs prices plunged on concern that global pork demand could plunge if the China coronavirus expands into a pandemic. Also, packer demand for hogs may decline after pork packer profit margins slumped to a 6-month low Friday. Weak demand amid ample pork supplies is a bearish combination for hog prices. The USDA reported in Monday’s Cold Storage report that pork in cold storage in Jan rose +7.7% m/m and +11.1% y/y at 625.188 mln lbs. Also, 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 over 40 million people to contain the spread of the new Chinese 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 FAS on Sep 11 projected that European 2020 pork exports to China might 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 had 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 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