Meats

Livestock prices on Tuesday closed lower: Apr live cattle +1.375 (+1.11%), Apr lean hogs +1.675 (+2.43%). Apr cattle prices on Tuesday fell back from a 1-week high and closed lower on packer demand concerns. Apr cattle last Friday posted a 1-week low on concern packer demand for cattle may wane after beef packer profit margins tumbled to their most negative in 11-1/2 months. Apr cattle had risen to a 1-week high on strength in the cash market after cash cattle prices Monday rose to an 8-month high. The USDA projects U.S. 2018 beef exports to climb +5.7% y/y to a record 3.025 bln lbs and projects U.S. 2018 beef production will climb +5.9% y/y to a record 27.792 bln lbs. Apr cattle rose to a 2-month high last Monday on strength in the cash market after cash cattle prices jumped to a 7-1/2 month high. Foreign demand for U.S. beef is robust with U.S. 2017 beef exports up +12% y/y to 2.862 bln lbs.

The Jan 24 USDA Cold Storage report was mixed as it showed beef in cold storage in Dec rose +0.9% m/m and fell -13.8% y/y to 489.543 mln lbs. The Jan 26 USDA Cattle on Feed report was negative as it showed cattle on feed as of Jan 1 rose +8.3% y/y to 11.489 million head, above expectations of +7.7% y/y, and cattle placements in feedlots during Dec unexpectedly rose +0.8% y/y to 1.799 million head, higher than expectations of a -2.4% y/y decline.

Apr lean hog prices on Tuesday closed lower but remained above Monday's 4-month low. Bearish factors included (1) weakness in the cash market after cash hog prices dropped to a 5-week ow, and (2) concern packers will reduce their hog purchases after pork packer profit margins slumped to a new 2-1/2 year low. On the positive side, foreign demand for U.S. pork is strong with U.S. 2017 pork exports up +7.5% y/y at 5.632 bln lbs and the USDA projects that U.S. 2018 pork exports will climb +5.6% y/y to a record 5.9 billion lbs. The USDA also projects U.S. 2017/18 pork production to climb +5.1% y/y to a record 26.901 bln lbs. The Jan 24 USDA Cold Storage report was mixed as it showed overall pork supplies in Dec fell -2.3% m/m and rose +3.2% y/y to 490.782 mln lbs.

The Dec 22 USDA Q4 Hogs & Pigs report was bearish as it showed the U.S. pig herd as of Dec 1 rose +2.4% y/y to 73.23 mln, more than expectations for a +2.3% y/y increase. Also, sows retained for breeding as of Dec 1 rose +1.1% y/y to 6.179 mln, more than expectations for a +0.9% increase, and hogs marketed for slaughter rose +2.5 y/y to 67.051 million, more than expectations of +2.2% y/y and a record high for a Dec 1 (data from 1964). In addition, there was a record 10.74 piglets per litter in Q4.