An Excerpt from CRB'S Futures Market Service.
LIVE CATTLE
Cattle prices rose to yet another record nearest-futures high of $1.2745 a pound, the highest since cattle futures trading began in 1964. Bullish factors include (1) ever tighter supplies as meatpackers processed 3.6 mln cattle this year thru Feb 11, down -5.4% y/y, (2) strong foreign demand with 2011 U.S. beef exports up +21% y/y, (3) USDA’s Jan 27 bi-annual cattle report showing the US cattle herd on Jan 1 fell 2.1% y/y to 90.77 mln head, the smallest since 1952, (4) slack future supplies as USDA estimates the number of calves born in 2011 will be 35.3 mln, the fewest since 1950, and (5) the Cattle on Feed report that showed a 5.9% y/y decline in feedlot purchases of cattle, the biggest drop in 7 months. A bearish factor was the Dec Cold Storage report that showed a +2.2% m/m and +1.4% y/y increase in Dec beef cold storage stocks.
Fundamental Outlook—Bullish—Cattle prices are firmly bullish as prices post record highs on tight beef supplies. Bullish factors include (1) strong foreign demand with 2011 US beef exports up +21% y/y and (2) slack supplies after the Jan 27 USDA bi-annual cattle report showed the total US cattle herd at a 60-year low.
LEAN HOGS
Hog prices posted a 4-month high. Bullish factors include (1) speculation record-high beef prices will stoke demand for less expensive pork, (2) strong foreign demand with 2011 U.S. pork exports up +21% y/y, and (3) the prospects for increased US pork exports to Japan on nuclear concerns and to South Korea after it extended its tax-free pork imports until Mar 31 due to its 25% cull from foot-and-mouth disease. Bearish factors include (1) increased output with 2011 U.S. pork production up +1.4% y/y to 22.8 billion lbs and USDA projections for 2012 U.S. pork production to rise +1.9% to 23.2 billion lbs, (2) the mild U.S. winter that has led to increased hog weights with the average carcass weight on Jan 13 at 212 lbs, a 10-yr high, and (3) the quarterly Hogs & Pigs report showing a +1.5% y/y gain in the total U.S. hog herd and a rise in pig litters to a record 10.02 pigs in the 3 months ended Nov 30.
Fundamental Outlook—Bullish—Hog prices rose on speculation that high beef prices will boost domestic and foreign demand, which is already strong. The quarterly Hogs & Pigs report (Dec 23) showed a +0.4% increase in the hog-breeding herd to 5.803 mln sows and sows averaged a record 10.02 pigs per litter in the 3-months ended Nov 30.
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