Livestock prices this week settled higher: LCM0 +4.625 (+5.60%), LHM0 +11.175 (+21.69%).Â
Jun live cattle on Friday rallied to a 3-week high and finished the week up +5.60%. Cattle prices surged this week on concern about U.S. beef supplies as 10% of U.S. beef output has been idled with the closure of pork and beef processing plants in Iowa, Minnesota, Colorado, South Dakota and Washington after workers at the plants tested positive for the coronavirus. The dwindling supplies pushed wholesale beef prices up to a record high Thursday (data from 2001). Also, beef packer profit margins surged to a record high Monday (data from 2013), which will encourage packers that remain open to boost their cattle purchases. Cash cattle prices remain weak and posted a 2-week low Tuesday 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. 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 were robust as of March after the USDA reported Apr 23 that U.S. Mar commercial beef production rose +13.7% y/y to 2.41 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
Jun lean hog prices on Friday climbed to a 1-month high and finished the week up sharply by +21.69%. Hog prices rallied sharply for a second 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 5-1/2 month high Thursday and also lifted pork packer profit margins to a 5-month high Monday, which will encourage packers that remain open to boost their hog purchases. A negative factor for hog prices is increased hog weights as the closure of processing plants keeps hogs from slaughter. The average hog carcass weight on Wednesday rose to a 2-year high of 217.62 lbs, which may lead to bigger pork supplies. Another negative is weak cash hog prices that are just above the record low from Apr 23 (data from 2003) as an increasing number of slaughterhouses throughout the U.S. have closed due to coronavirus infections among their workers, leaving pig farmers without a market for their animals and causing a backlog of hogs waiting to be processed. 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 were robust though March after the USDA reported Apr 23 that U.S. Mar pork production rose +11.7% y/y to 2.57 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