Meats

Livestock prices on Friday settle mixed: Jun cattle -0.050 (-0.05%), Jun hogs +0.400 (+0.52%). June cattle prices on Friday closed lower on signs of ample supplies. 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. On the positive side, trade tensions eased between the U.S. and China after Chinese President Xi Jinping pledged to increase Chinese imports, and beef packer profit margins rose to a 4-1/2 month high Thursday, which may boost packer demand for cattle. 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 Friday posted a 3-week high and closed higher on cash market strength and reduced trade concerns. The cash market has firmed over the past week as cash hog prices rose to a 2-week high Thursday and Chinese President Xi Jinping on Tuesday promised to open Chinese markets, which eased U.S. and China trade concerns. Demand concerns remain, however, after wholesale pork prices fell to a 3-year low Wednesday. Also, pork packer profit margins dropped to a 3-week low, which may curb packer demand for hogs. 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).