Livestock Market Volatility: A Week of Mixed Sentiment and Uncertainty

Strategic Insights -

The U.S. livestock market experienced a week of significant fluctuations, with prices for cattle and hogs experiencing sharp declines due to concerns about softening cash values, wholesale pork demand worries, and the impact of mad-cow disease surveillance testing program scaling down. The Chicago Mercantile Exchange (CME) hogs closed lower on the softening cash values, while pork bellies also finished lower due to spillover lean hog pressure and discounted fresh belly prices.

Key Takeaways:

  • The U.S. Department of Agriculture (USDA) announced its intention to scale down its mad-cow disease surveillance testing program by as early as late August to 40,000 cattle per year, citing "no scientific justification" for continuing the enhanced level of testing.
  • Chicago Mercantile Exchange live cattle and lean hog futures confidence readings remained negative for a third consecutive week, with analysts and traders expressing bearish sentiments.
  • The average of livestock market analysts' projections for pork belly stocks held in U.S. cold storage warehouses as of June 30 is 49.7 million pounds, significantly lower than the May amount and June year-ago figure.
  • Live hog shipments into the U.S. from Canada through the first 28 months of this year are up 8.4% from the same period last year but about 2.4% below the record pace of 2004.
  • Brazil's new Agriculture Minister, Luis Carlos Guedes Pinto, hinted that Russia might remove its meat ban on Santa Catarina state after a visit by Russian authorities to Brazil this month.
  • Hot, humid weather conditions across the U.S. are taking their toll on the nation's cattle, especially those in the Plains states' feedlots, with anecdotal reports of increased death and performance losses.
  • A Canadian cattle official stated that recent demands by a U.S. cattle producing group should not affect changes to a proposed U.S. rule on whether to accept Canadian cattle over 30 months of age.

Statistics:

  • CME hogs closed lower on softening cash values, settling 40 points lower at 67.40 cents a pound.
  • Aug settled 72 points lower at 59.20 cents a pound.
  • Oct ended 120 points lower at 95.50 cents a pound.
  • July closed 82 points lower at 92.67 cents.
  • The lean hog response was very negative, with bears outnumbering bulls by ten, while hog bearish feelings were an extremely emotional negative twenty-four.
  • The average of livestock market analysts' projections for pork belly stocks held in U.S. cold storage warehouses as of June 30 is 49.7 million pounds.

Sources:

  • Dow Jones Commodities News via Comtex, Jul 20, 2006
  • Dow Jones, Jul 20, 2006
  • USDA, Jul 20, 2006
  • Chicago Mercantile Exchange, Jul 20, 2006
  • Dow Jones Newswires, Jul 20, 2006
  • Valor Economica newspaper, Jul 20, 2006