August 27, 2007

 

US cash cattle prices climb while hogs drop in volatile week
 

 

US fed cattle prices climbed US$2.50 to US$3.00/hundredweight on a live basis this week as packers were more aggressive buyers, while the direct hog markets saw a late-week decline and are expected to slide further next week.

 

Market analysts said the near-term supply outlooks for cattle and hogs are contributing to the opposing directions prices are taking.

 

The number of cattle on feed as of Aug 1 was down nearly 5 percent from a year ago, according to the latest cattle on feed report released Aug 17. Placements of younger cattle into the feed yards in July were 17 percent below a year ago, and the smaller supply expectations helped move cash prices and futures up this week.

 

Most-active October live cattle prices climbed to nearly a three-week high Friday (Aug 24) and gained 235 points, or 2.5 percent, on the week.

 

Meanwhile, hog supplies are in the midst of a seasonal expansion after slaughters hit new records in July and through the first three weeks of August.

 

Cash hog prices during the final week of August have declined from the previous week in each of the past 10 years, according to Bob Brown, a private analyst who tracks the weekly changes. Prices have not fared much better for producers during the first week of September as they fell in nine of the past 10 years.

 

The US Department of Agriculture reported its national weighted average hog price for negotiated sales Friday afternoon at US$64.49/hundredweight, down US$2.19, or 3.3 percent, for the week.

 

Many of the pork plants are reportedly nearly full already for next week, leading to predictions that cash hog prices could slide by US$3 to US$5 prior to the Labour Day holiday on Sep 3.

 

Despite the weak cash outlook, lean hog futures at the Chicago Mercantile Exchange advanced sharply Friday and hit 1 1/2-week highs in the October and December contracts. The gains were sparked by an announcement from Smithfield Foods that it has reached an agreement with "a major Chinese trading company" for 60 million pounds of Paylean (ractopamine)-free pork for delivery by the end of the year.

 

China has not yet approved ractopamine in hog production, but the product has been approved for use in the US since 1999. It is a feed additive that contributes to the growth of lean muscle and less fat in the carcass.

 

Market analysts and traders said while some people remain cautious about whether the Chinese firm will follow through on the deal, the futures market viewed the news as supportive and climbed by more than 3 percent Friday in the remaining 2007 contracts.

 

 

Cattle/hog slaughters
 

US cattle slaughter for the week was estimated at 683,000 head, compared with 667,000 a week ago and 690,000 a year ago. Year-to-date slaughter stands at 22.025 million head, up 1.3 percent from a year ago.

 

Hog slaughter this week was estimated at 2.065 million head, up from last week's 1.989 million and 2.9 percent larger than the year-ago figure of 2.006 million. Year-to-date hog slaughter is 67.297 million head, up 2.4 percent from a year ago.

 

 

Total meat production
 

The USDA estimated total beef, pork and lamb production for the week at 947.7 million pounds. Last week's output was 919.3 million pounds, while the year-ago output was 939.3 million pounds. Year-to-date combined meat output is 30.589 billion pounds, up 1.2 percent from last year.

 

Broiler/fryer slaughter for the week was estimated at 166.972 million head, compared with 165.682 million a week ago and 166.432 million a year ago.