CME: Hog, Cattle Futures Start Week on High Note
US - Cattle and hog futures started the week on a high note as optimism in outside markets spilled over and lifted values across the board, write Steve Meyer and Len Steiner.And while livestock futures have been caught in a bit of a rut
recently, we thought it would be important to again highlight how
tight beef and pork supplies are expected to be not just this
year but in 2011 as well. USDA recently updated its supply and
demand estimates and the attached charts at the bottom of the page show the estimated per
capita disappearance numbers for beef and pork. While there is a tendency
to look at disappearance as a measure of demand, it really is
just another way to look at the supply, calculated on a per capita basis
to eliminate the effect of population growth.
The June WASDE report
estimated that per capita beef disappearance in 2010 is now expected
to be 58.9 lb./person (retail wt.), 0.7 per cent lower than the
May estimate. If the current 2010 beef disappearance estimate materializes,
it would represent a 3.7 per cent decline from year ago levels
and it would be 9.8 per cent lower than what it was before the recession
(2007). US per capita beef disappearance in 2011 is expected to
continue to decline and at 58.3 lb./person, it is expected to be 1 per cent lower
than the 2010 estimate and 10.7 per cent lower than in 2007. The decline in
beef disappearance numbers reflects expectations for much smaller
beef production levels this year and next.
USDA lowered the beef production
estimate for 2010 by 185 million pounds in June. Beef production
in 2010 is expected to be 25.608 billion pounds, 460 million
pounds or 1.8 per cent lower than in 2009. Beef production in 2011 will be
even smaller, a direct result of a shrinking beef cow herd and the
smallest calf crop in over 50 years. USDA currently estimates US beef
production in 2011 to be 25.217 billion pounds, 851 million pounds or
3.3 per cent lower than what it was in 2009.
While beef per capita disappearance has been declining for
the last three years, the decline in US domestic pork supplies has been
both immediate and significant. USDA lowered its latest pork disappearance
numbers for 2010 by 0.4 per cent and the 2010 estimate represents a whopping 6.6 per cent decline from 2009 levels.
Current pork prices may have caught many by surprise but they reflect the fact that domestic end users suddenly face a significantly
smaller supply available at the same time that domestic demand has been recovering. Per capita pork disappearance is
expected to improve somewhat in 2011 but it will still remain notably lower than the levels seen in the past decade. Pork production
in 2011 is currently expected to increase by 2.6 per cent but a large part of that increase will be offset by ever increasing exports,
expected to reach 4.6 billion pounds in 2011 and account for a fifth of all US pork output.
