Meats Outlook - An Excerpt from CRB'S Futures Market Service

CATTLE—Dec live cattle prices pushed up to a 5-week high. Bullish factors include (1) the rally in the S&P 500 Index to a 1-yr high, which fueled optimism that beef demand will improve, and (2) speculation that the weak dollar will boost prospects for US beef exports. Bearish factors include (1) the +0.6% rise in the overall US feedlot herd as of Oct 1 from a year earlier, the first increase in 19 months as cheaper feed prices prompt expansion of herds, and (2) weak foreign beef demand after US Aug beef exports fell -24% y/y. Large specs as of Oct 13 held a very small short position of 22. The Cattle on Feed report (Oct 16) was bearish as cattle on feed Oct 1 rose to 102% of the year-earlier level, while cattle placed on feed in Sep rose to 106% of the year-earlier level vs Aug’s 104%. The Sep Cold Storage report (Oct 22) was bullish with beef supplies in cold storage falling -4.5% y/y vs -4.8% y/y in Aug.

HOGS—Dec lean hog prices corrected up to a 2-month high from the Aug 6-1/2 yr low. Bullish factors include (1) the +8% rise in wholesale pork prices since Oct 7, and (2) the -3.1% reduction in US hog breeding herds by US hog producers to 5.874 mln sows, the lowest since 1973. Bearish factors include (1) the surge in US pork production in Aug to 1.868 bln lbs, a record for the month, and (2) weak foreign demand (US pork exports from Jan-Aug down -19% y/y). Large specs as of Oct 13 cut their moderate short position to 14,577. The Sep Cold Storage report (Oct 22) was bearish with supplies in cold storage rising +1.1% y/y vs +5.5% y/y in Aug. The quarterly Hogs & Pigs report (Sep 25) was bullish with a -2.3% y/y decline in the US hog inventory to 66.6 million hogs as of Sep 1.

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