Pivotal moment for hogs, cattle

Pivotal moment for hogs, cattle

Latest USDA reports fuel movement in hog and cattle markets.

OVERALL, the livestock markets were mixed across all sectors last week as the cattle and hog markets were repositioning in the wake of or anticipation for U.S. Department of Agriculture reports.

Unprecedented movements in cattle and hog futures left all market spectators wondering at what point the market will reverse course.


Hogs and pigs

The highly anticipated "Quarterly Hogs & Pigs" report, which was released last Friday after this issue went to press, will provide real data on actual losses due to porcine epidemic diarrhea virus (PEDV) and the impact of the disease on pork supplies.

Last week, Rabobank released a report projecting that pork production for 2014 will decline 6-7% because of PEDV, while trade floor talk and soaring futures prices over the past few weeks seem to indicate an even greater reduction.

Moreover, "Daily Livestock Report" authors Steve Meyer and Len Steiner said a poll of market analysts conducted by Urner Barry found that analyst estimates of summer and fall pork supplies are smaller than futures are currently pricing.

Since the PEDV mortality rate is highest for suckling pigs and lower for weaned pigs, losses will not be reflected in slaughter totals until six months from now. Therefore, the hogs and pigs report numbers for the pig crop will reveal whether the market overestimated or underestimated the PEDV losses and the toll those losses will take on future pork supplies.

In the Urner Barry poll, analysts' estimates for the size of the pig crop from December to February — the pigs that were born and survived during the height of PEDV outbreaks thus far — ranged from -9.2% to 1.4% of 2013 levels.

Also, the number of pigs weighing less than 50 lb. and those weighing 50-119 lb. will show PEDV losses. The mean prediction of analysts polled was lower than last year's numbers by 6.5% for pigs less than 50 lb. and 5.8% for pigs 50-119 lb.

Another important number to watch is the breeding herd inventory, which will indicate hog supplies 11 months from now. Analysts project that the breeding stock will be down 0.6% from the previous year.

In addition, sow slaughter is currently at low levels. Pork producers are seeing value in retaining immune sows, and fewer gilts are available to keep in some operations. In addition, the rebreeding process on PEDV-infected farms has been hindered, which could negatively affect spring and summer farrowing intentions.

A common opinion shared by livestock market economists is that the numbers in the USDA "Quarterly Hogs & Pigs" report will not meet future trade expectations, and, thus, the report will not be bullish enough to support the current hog market.

Furthermore, Meyer and Steiner warned that depending on how individual producers filled out the USDA survey, "the extent of the death losses may not be completely reflected in pig numbers."


Feedlot report

Fed cattle inventories are growing but still remain at a low level, according to the monthly USDA "Cattle on Feed" report that was released March 21.

The report showed 10.79 million head of cattle in U.S. feedlots with a capacity of 1,000 head or more as of March 1. Additionally, cattle marketed in February totaled 1.549 million head, while placements into feedlots totaled 1.650 million head (Table).

Although market analysts anticipated a year-over-year increase in February placements, the actual increase of 14.7% from the previous year exceeded the average pre-report estimate of 9.7%.

According to Meyer and Steiner, the placement increase was driven by strong summer futures prices, lower costs of gain and poor winter wheat grazing conditions in dry areas. Over the past three months, total placements were up approximately 500,000 head from 2013 levels, which will push summer fed cattle supplies higher.

As a result of extremely tight supplies, February marketings were at their lowest level since the data were first collected in 1996, according to John Michael Riley, Mississippi State University Extension economist.

Still, higher placements over the past few months should push summer cattle marketings higher than last year, but not to historical levels.

At the end of the day, higher placements now will mean lower placements in the summer, especially as the U.S. cattle inventory overall stands at a historically low level.


Feedlot inventory, Feb. 1





2014 as


-Million head-

% of 2013

Feb. 1 inventory





Feb. marketings





Feb. placements





March 1 inventory






Cold storage

Other noteworthy information released last week was the "Cold Storage" report, which appeared to be neutral for poultry and optimistic for beef and pork.

At the end of February, total frozen poultry supplies were up 3% from the previous month but down 5% from 2013. Total chicken stocks, at 676.9 million lb., were 3.7% higher than last year. In contrast, total turkey stocks were lower than in 2013, at 313 million lb.

Total frozen beef stocks were 407 million lb. on Feb. 28. Market observers were not surprised that frozen beef inventories were lower than year-ago levels.

According to the monthly "Cold Storage" report, frozen pork supplies in February rose to 653.8 million lb., up 3% from last year.

The "Daily Livestock Report" explained that "the bullish conclusion for pork is based more on the numbers falling short of lofty expectations than on the numbers themselves, as many believed the market was 'stocking up' in anticipation of PEDV-shortened supplies this summer."


Market roundup

Profit-taking in the hog markets continued last week prior to the highly anticipated hogs and pigs report. The large swing from down the limit at the beginning of the week to up the limit at the close last Thursday suggested that traders were determining what position to hold heading into the report. However, the lower hog market trading at the start of last week signaled that the PEDV panic may be coming to an end.

All hog futures contracts through August were up the limit last Thursday after Wednesday's gains made up for the limit down on Tuesday. Lean hog futures settled at $125.475/cwt. for the April contract.

Cash hogs also finished last week on a high note, with packers bidding $123.74/cwt. for the eastern Corn Belt and $129.82/cwt. for the western Corn Belt.

After climbing steadily all week, pork cutout values were down slightly last Thursday, dropping $1.16 to $130.75/lb. Ham prices picked up again last week prior to the Easter buying season, closing Thursday at $113.26/lb.

Cattle futures continued to gain support from surging hog futures. Last week, April fed cattle gained $2.475 to close at $146.475/cwt. on Thursday; likewise, April feeder cattle climbed $3.523 to finish at $178.55/cwt.

Wholesale beef cutout values slipped last Thursday, which will be negative to the cattle markets, especially futures. The Choice beef cutout settled at $239.25/cwt., down 91 cents from the previous week, and the Select cutout was $231.21/cwt., down $2.45.

USDA reported light to inactive trading last week for cash fed cattle. For all feeding regions, the cash trade ranged from $150 to $154/cwt., with the highest bids in the northern Plains.

In the chicken markets, the Georgia dock price was $1.06/lb., matching the record set last June. After gaining at the start of last week, breast meat traded 5.5 cents lower at $1.915/lb.

The market for frozen turkey hens and toms ticked higher last week, at $1.00-1.08/lb. for hens and $1.00-1.07/lb. for toms.

Egg prices gained 12-15 cents last week for all regions. Large eggs were $1.44-1.48/doz. delivered to the Northeast, $1.45-1.48/doz. to the Southeast and $1.39-1.42/doz. to the Midwest.

Volume:86 Issue:13

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