Demand Keeping Up with Red Meat Production

Posted on 12/22/2017 12:41 PM

Cattle on Feed Report: Bearish
Traders missed the mark on USDA’s Cattle on Feed Report, especially placements. Instead of the 5.7% rise the average pre-report indicated, placements surged 13.9% last month. That pushed the Dec. 1 feedlot inventory up 8.1% from year-ago compared to expectations for a 6.7% increase. At 11.516 million head, the Dec. 1 feedlot inventory came in 156,000 head greater than the average pre-report estimate implied.

Cattle on Feed Report

USDA

Avg. trade estimate

Range

 

% of year-ago

On Feed

108

106.7

105.6-107.4

Placements

114

105.7

99.2-111.0

Marketings

103

103.0

101.6-103.5


Poor pasture conditions in the Southern Plains likely triggered the much-bigger-than-expected placements figure during November. That was reflected by the biggest gains in the lighter weight categories of placements. Lightweight placements (under 600 lbs.) were up 29.8% and 6-weight placements were up 11.2%. The placement of 7- and 8-weight calves were up “only” 7.1% and 6.9%, respectively, last month.

The report data weighed heavily on deferred live cattle futures. But with traders getting a chance to trade the data for just over an hour ahead of the long holiday weekend, the report should be mostly factored into the market. That doesn’t mean there won’t be followthrough selling when traders return on Tuesday, but any selling wouldn’t be exclusively from the report data.

Hogs & Pigs Report: Producers not tapping the brakes as much as expected
USDA’s Hogs & Pigs Report showed the U.S. hog herd expanded 2.4% at 73.2 million head as of Dec. 1, just slightly greater than anticipated. The market hog inventory at 67.1 million head rose 2.5% and the breeding herd at 6.2 million head increased 1.1%, also both slightly more than expected.

Market hog numbers signal slaughter rates will run roughly 2% to 3% above year-ago through the first half of 2018.

The fall pig crop at 33.4 million head rose 3.2% compared to expectations for a 2% increase. That was driven by farrowings topping expectations and a continued rise in pigs per litter.

Farrowing intentions for winter and spring both topped expectations. Given ongoing gains in the number of pigs per litter, the winter and spring pig crops are likely to run 3% to 4% above year-ago,  signaling expansion plans are a little greater than traders anticipated.

Hogs & Pigs Report

USDA

Avg. trade estimate

Range

 

% of year-ago

All Hogs & Pigs

102

102.0

101.3-102.6

Kept for breeding

101

100.7

100.0-101.6

Kept for marketing

102

102.1

101.3-102.8

Sept-.Nov. pig crop

103

102.0

101.5-103.0

Sept-Nov. pigs per litter

101

101.0

100.5-102.0

Sept.-Nov. farrowings

102

101.0

100.6-101.3

Dec.-Feb. farrowing intentions

103

101.1

99.5-101.8

March-May farrowing intentions

102

101.2

100.0-102.1

Hogs under 50 lbs.

103

102.0

101.2-102.5

Hogs 50 to 119 lbs.

102

101.9

101.0-102.8

Hogs 120 to 179 lbs.

102

102.2

101.5-103.0

Hogs 180 and over

102

102.4

100.0-104.3

 

Despite the slightly negative data, hog futures rallied sharply after the report. Hog futures may face profit-taking next Tuesday, but the report data shouldn’t greatly impact price action.

Cold Storage Report: Beef, pork stocks lower than expected
USDA’s Cold Storage Report signals red meat demand remains strong, as beef and pork stocks came in well below expected levels.

Beef stocks in storage at the end of November totaled 486.954 million lbs., nearly 26 million lbs. lower than the average pre-report estimate. Beef stocks declined 20.1 million lbs. (4.0%) during November and were 44 million lbs. (8.3%) under year-ago.

Pork stocks at 504.975 million lbs. were roughly 45 million lbs. less than expected. Pork stocks dropped 93.4 million lbs. (15.6%) during November and were 13.8 million lbs. (2.7%) under last year.

Total poultry stocks at 1.190 billion lbs. declined 149.1 million lbs. (11.1%) during November but were 156.1 million lbs. (15.1%) above year-ago.

 

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