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

CATTLE—Apr live cattle prices climbed to a 16-month high. Bullish factors include (1) current cold, wet weather that muddies feedlots and curbs cattle weight gains, and (2) the Jan 29 cattle inventory report that showed the US cattle herd as of Jan 1 at 93.7 mln head, a 51-yr low. Bearish factors include (1) demand concerns after US Feb consumer confidence fell to a 10-month low, and (2) low feed costs that may prompt an increase in cattle herds. Large specs as of Mar 2 added to a record large long position of 86,320. The Cattle on Feed report (Feb 19) was neutral as cattle on feed Feb 1 were 98% of the year-earlier level, while cattle placed on feed in Jan rose to 99% of the year-earlier level vs Dec’s 93%. The Jan Cold Storage report (Feb 22) was bullish with beef supplies in cold storage falling -6.2% y/y vs -7.0% y/y in Dec.

HOGS—Apr lean hog prices fell back from their recent 1-1/2 yr nearest-futures high. Bullish factors include (1) the USDA’s Mar 10 cut in its pork production estimate for this year to 22.45 bln lbs, -0.4% from its Feb estimate, and (2) the cut by US hog producers in their breeding herds to a 33-yr low of 5.85 mln sows. Bearish factors include (1) weak demand with US pork exports in 2009 down -12% y/y, and (2) concern that retail demand will weaken due to rising prices. Large specs as of Mar 2 increased their large long position to 29,368. The Jan Cold Storage report (Feb 22) was bullish with supplies in cold storage falling -18.3% y/y vs -22.4% y/y in Dec. The quarterly Hogs & Pigs report (Dec 30) was bullish with a -2.0% y/y decline in the US hog inventory to 65.8 million hogs and a -3.5% y/y drop in the US hog-breeding herd as of Dec 1.

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