Meats

Livestock prices on Thursday settled mixed: Aug cattle -0.525 (-0.49%), Jul hogs +0.450 (+0.56%). Aug cattle closed lower Thursday on domestic beef demand concerns after wholesale beef prices fell to a 1-3/4 month low. Another negative factor is weakness in the cash market after cash cattle prices fell to an 8-1/2 month low Tuesday. Aug cattle had rallied to a 3-month high Wednesday on speculation cattle slaughter rates will decline as recent rains in the Great Plains improved pasture conditions and may allow ranchers to keep their herds feeding in pasture longer. Cattle supplies remain ample as USDA slaughter data shows 14.759 mln head of cattle processed this year through Jun 16, up +3.1% y/y. Also, the USDA reported U.S> May beef production rose +6.6% y/y to 2.31 bln lbs. In addition, the May 22 USDA Cold Storage report showed beef in cold storage in Apr rose +1.6% m/m and +2.9% y/y to 471.545 mln lbs. 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. Foreign demand for U.S. beef was robust through April with U.S. Jan-Apr beef exports up +13.2% y/y at 983.716 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 May 25 USDA Cattle on Feed report was mixed as it showed cattle on feed as of May 1 rose +5.1% y/y to 11.558 million head, below expectations of +5.2 y/y, but still the second-highest May 1 inventory since data began in 1996. Cattle placements in feedlots during Apr fell -8.3% y/y to 1.695 million head, a smaller decline than expectations of a -9.6% y/y. Also, cattle marketed for slaughter in Apr rose +5.9% y/y to 1.803 mln head, above expectations of +4.0% y/y.

July hog prices on Thursday closed higher on improved domestic pork demand after wholesale pork prices rose to a 9-1/2 month high Wednesday. Jul hogs Wednesday had fallen to a 1-week low on concern Chinese demand for U.S. pork will decline after China vowed to retaliate "forcefully" against U.S. threats for tariffs on another $200 billion of Chinese imports. Jul hogs on Monday rallied to a 10-month nearest-futures high on bullish factors that included (1) the recent heat wave in the Great Plains led to lighter hog weights which may curb future pork supplies after the USDA reported the average hog carcass weight on Monday fell to 208.05 lbs, a 9-1/2 month low, and (2) strength in the cash market after cash hog prices surged to a 10-month high Tuesday. 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. Supplies are ample as USDA slaughter data shows 56.151 mln hogs processed this year through Jun 16, up +2.8% y/y. Also, the USDA reported U.S> May pork production rose +3.7% y/y to 2.17 bln lbs. In addition, the May 22 USDA Cold Storage report was negative as it showed overall pork supplies in Apr rose +5.0% m/m and rose +8.7% y/y to 641.407 mln lbs. Foreign demand for U.S. pork is solid with U.S. Jan-Apr pork exports up +8.9% y/y at 2.064 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).