Livestock prices this week settled mixed: LCM0 +2.025 (+2.07%), LHM0 -1.925 (-3.28%).Â
Jun live cattle on Friday closed lower but still finished the week up +2.07%. A decline in wholesale beef prices Thursday to 1-month low signals weak domestic beef demand, which undercut cattle prices. Jun cattle rallied to a 2-1/2 month high Thursday on record-high beef packer profit margins. Beef packer profit margins surged to a record high Wednesday (data from 2013), which should keep cattle demand strong from packers. Also, beef supplies have fallen as the USDA reported May 21 that U.S. Apr commercial beef production fell -24.7% m/m and -19.7% y/y to 1.815 bln lbs. Slaughter rates have fallen, which signals lower beef supplies, after Friday’s USDA slaughter data showed 2.657 mln head of cattle processed through May 30, down -26.2% y/y. Cash cattle prices had plummeted to a 9-1/2 year low last month as an increasing number of slaughterhouses throughout the U.S. 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. The USDA estimates U.S. 2019/20 beef production will fall -5.1% y/y to 25.83 mln lbs, the first decline in 5 years. The USDA also estimates U.S. 2019/20 beef exports will fall -4.2% y/y to 3.16 mln lbs. 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. Foreign demand for U.S. beef has improved with U.S. Jan-Mar beef exports up +10.5% y/y to 769.252 million lbs. Â
Jun lean hog prices on Friday fell to a 1-week low and finished the week down -3.28%. Domestic pork demand concerns weighed on hog prices after wholesale pork prices dropped to a 1-month low Wednesday, a sign of weaker domestic demand, and after pork packer profit margins dropped to a 3-1/2 week low Thursday, which may prompt packers to purchase fewer hogs. Jun hogs had climbed to a 2-1/2 week high Wednesday on a surge in Chinese demand after trade data showed China Apr imports of U.S pork surged 600% y/y to 86,507 MT, the biggest monthly total in 4 years. 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 as U.S. pork demand plummeted as the spread of the coronavirus prompted the cancellation of events and the closure of schools and restaurants. Pork supplies have fallen after the USDA reported May 21 that U.S. Apr commercial pork production fell -20.9% m/m and -10.5% y/y to 2.031 bln lbs. 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 is solid 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-Mar pork exports jumped +39.9% to 2.023 bln lbs. The USDA estimates U.S. 2019/20 pork production will fall -0.7% y/y to 27.45 mln lbs, the first decline in U.S. pork production in 6 years. The USDA also estimates U.S. 2019/20 pork exports will climb +13.1% y/y to 7.148 mln lbs.Â