Meats

Livestock prices on Thursday closed higher: Jun cattle +1.225 (+1.20%), Jun hogs +0.575 (+0.76%). June cattle on Thursday posted a 1-month low but recovered its losses and closed higher on bullish factors that included (1) signs of strength in domestic beef demand after wholesale beef prices rose to a 10-1/2 month high and (2) improved packer profit margins that rose to an 10-1/4 month high, which may boost packer demand for cattle. Jun cattle had posted that 1-month low on cash market weakness that undercuts futures prices lower after cash cattle fell to a 5-week low. The USDA in the May 10 WASDE report projected U.S. 2018/19 beef production will climb +1.8% y/y to a record 27.778 bln lbs. USDA slaughter data shows 11.528 mln head of cattle processed this year through May 12, up +2.5% y/y. Jun cattle on Apr 1 fell to a 1-year low on news of China's implementation of a 25% tariff on U.S. pork exports to China and by news that beef is on the list of products subject to China's proposed 25% tariff on $50 billion of U.S. products. Foreign demand for U.S. beef is robust with U.S. Jan-Mar beef exports up +12.2% y/y at 730.145 mln lbs and with the USDA projecting that U.S. 2018/19 beef exports will climb +3.5% y/y to a record 3.150 bln lbs.

The Apr 20 USDA Cattle on Feed report was mixed as it showed cattle on feed as of Apr 1 rose +7.4% y/y to 11.729 million head, below expectations of +7.7 y/y, but still the highest for an April in 12-years. Cattle placements in feedlots during Mar fell -9.3% y/y to 1.921 million head, lower than expectations of a -8.7% y/y. Also, cattle marketed for slaughter in Mar fell -3.9% y/y to 1.84 mln head, above expectations of -4.2% y/y. The Apr 23 USDA Cold Storage report was mixed as it showed beef in cold storage in Mar rose +1% m/m and was unch y/y to 463.871 mln lbs.

June hog prices on Thursday closed higher on cash market strength as cash hog prices jumped to a 3-month high Wednesday. Also, wholesale pork prices climbed to a 2-month high, a sign of stronger domestic pork demand. Domestic pork demand had been stagnant after wholesale pork prices plunged to a 3-year low Apr 11. On the negative side is the slide in pork packer profit margins to a 3-month low, which may cub packer demand for hogs. The USDA in the May 10 WASE report projected that U.S. 2018/19 pork production will climb +3.1% y/y to a record 27.624 bln lbs. Also, USDA slaughter data shows 45.011 mln hogs processed this year through May 12, up +2.8% y/y. 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. The Apr 23 USDA Cold Storage report was negative as well as it showed overall pork supplies in Mar rose +0.2% m/m and rose +12.0% y/y to 611.048 mln lbs. Foreign demand for U.S. pork is firm with U.S. Jan-Mar pork exports up +5.8% y/y at 1.516 bln lbs and the USDA projects that U.S. 2018/19 pork exports will climb +3.5% y/y to a record 6.125 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).