Financial markets were pressured early this week by Russia amassing troops near the Ukraine border. This was coupled with anxiousness surrounding the U.S. economy. That volatility spilled into the agriculture futures markets.
While Live Cattle futures were pressured early in the week, Lean Hog futures found support with speculators gambling that beef demand will weaken and benefit retail pork sales.
Agriculture markets were also dealing with new USDA reports and news of poor crop weather regions of South America. There is optimism that weekly harvest numbers have bottomed as the latest COVID-19 variant cases may have already peaked among America’s workforce.
Recent Cattle on Feed report bullish
Released on January 21, 2022, the Cattle on Feed report was bullish, with data outside trade estimate ranges.
The number of cattle on January 1, 2022 was 100.6 percent compared to 2021, nearly one percent higher than expected. The largest surprise was the 6.5 percent increase in cattle moved into feedlots during December compared to 2020. Fed cattle marketed in December was only slightly higher than the previous year.
Calves continue to head directly to feedlots due to lack of wheat pasture. This will increase fed cattle supply the first half of 2022. Conversely, there will be fewer heavy feeders and yearlings available this spring. Heifers made up 38.8 percent of cattle placed in December, indicating a lower than average number being kept for replacement.
The estimated slaughter of 636,000 last week was 18,000 head higher than the previous week and 26,000 head lower than the same week in 2021. The latest USDA Livestock Slaughter report showed record high beef production in December. Beef harvest by number of head was 3.2 percent above 2020 with the average weight of cattle .05 percent lower.
Beef cow harvest for 2021 was nine percent higher than 2020, another sign feeder cattle will be in tighter supply. Dairy cow harvest was one percent higher than 2020.
Hog harvest up
The estimated harvest of 2.44 million hogs last week was 74,000 head higher than the previous week and 278,000 lower than the same week last year. The December USDA Livestock Slaughter report showed 2021 pork production 2.2 percent below 2020 by pounds and 1.9 percent lower when measured by head harvested.
Sows harvested ran six percent below 2020 levels. Pork export sales were strong according to the latest weekly report at 49,100 metric tons (mt). Lead buyers were Mexico at 17,300 mt and China at 16,900 mt. The pork cutout value continues its march higher, posting at $94.60 Wednesday afternoon. Hams have been a strong contributing factor, gaining $10.17 from the day before.
Mexico demand for U.S. raised hams is one reason for the recent strength.