Meats

Livestock prices on Monday settle mixed: Jun cattle +0.525 (+0.51%), Jun hogs -0.850 (-1.09%). June cattle prices on Monday climbed to a 2-week high as funds covered short positions on cash market strength after cash cattle prices climbed to a 1-week high. USDA slaughter data shows 8.975 mln head of cattle processed this year through Apr 14, up +2.2% y/y, and U.S. Feb beef production rose +2.6% y/y to 1.98 bln lbs. Jun cattle posted a 1-week low Wednesday on domestic beef demand concerns after wholesale beef prices fell to a 2-month low. Cattle prices plunged to a 1-year low Apr 4 on news of China's implementation of a 25% tariff on U.S. pork exports to China and by Wednesday's news that beef is on the list of products subject to China's proposed 25% tariff on $50 billion of U.S. products. The USDA projects that U.S. 2018 beef production will climb +5.8% y/y to a record 27.752 bln lbs. Foreign demand for U.S. beef is robust with U.S. Jan-Feb beef exports up +12.6% y/y at 469.517 mln lbs and with the USDA projecting that U.S. 2018 beef exports will climb +5.7% y/y to a record 3.025 bln lbs.

The Mar 22 USDA Cold Storage report was supportive as it showed beef in cold storage in Feb fell -8.3% m/m and -8.4% y/y to 460.276 mln lbs. The Mar 23 USDA Cattle on Feed report was negative as it showed cattle on feed as of Mar 1 rose +8.8% y/y to 11.715 million head, above expectations of +8.2% y/y, and cattle placements in feedlots during Feb rose +7.3% y/y to 1.817 million head, higher than expectations of a +4.2% y/y. Also, cattle marketed for slaughter in Feb rose +1.6% y/y to 1.675 mln head, above expectations of +1.2% y/y.

June hog prices on Monday closed lower on concern about bigger pork supplies. USDA slaughter data showed the average hog carcass weight last Friday rose to a 1-month high of 216.8 lbs, which should lead to bigger pork supplies. Also, pork packer profit margins dropped to a 3-1/2 week low, which may curb packer demand for hogs. Domestic demand concerns remain as well after wholesale pork prices fell to a 3-year low last Wednesday. Jun hogs rose to a 3-week high Friday on strength in the cash market after cash hog prices rose to a 2-1/2 week high Friday. Jun hogs slumped to a contract low Apr 4 and nearest-futures (J18) fell to a 1-1/2 year low after China said that it may levy a 25% tariff on U.S. pork exports starting immediately, which is likely to nearly shut down U.S. pork exports to China and cause backed-up pork supplies in the U.S. Even aside from tariffs, U.S. pork production is bearish after rising by +3.6% y/y to 2.06 bln lbs in February. Slaughter rates are also on the rise as USDA slaughter data shows 35.61 mln hogs processed this year through Apr 14, up +2.7% y/y. The Mar 22 USDA Cold Storage report was negative as well as it showed overall pork supplies in Feb rose +5.9% m/m and rose +8.3% y/y to 614.918 mln lbs. Foreign demand for U.S. pork is firm with U.S. Jan-Feb pork exports up +7.6% y/y at 977.496 mln lbs and the USDA projects that U.S. 2018 pork exports will climb +5.2% y/y to a record 5.925 bln lbs. The USDA also projects that U.S. 2017/18 pork production will climb +5.2% y/y to a record 26.926 bln lbs.

The USDA Q1 Hogs & Pigs report (released March 29) was bearish as it showed that the U.S. pig herd as of Mar 1 rose +3.1% y/y to 72.908 mln, which was a record high for a March 1st (data from 1964). Also, sows retained for breeding as of Mar 1 rose +1.7% y/y to 6.2 mln, more than expectations of +1.4%, and hogs marketed for slaughter rose +3.3 y/y to 66.708 million, more than expectations of +2.2% y/y and a record high for a March 1st (data from 1964). In addition, piglets per litter in Q1 rose +1.4% y/y to 10.58, higher than expectations of +1.0% y/y and a record high for a March 1st (data from 1964).