Sharp Drop in Beef Prices
The sharp drop in beef prices with uncertain demand and an adequate supply are factors which could pressure the cash and futures market, and this could keep some selling pressure into the holiday season. The beef market typically finds strong demand for holiday parties and family get-togethers at this time of the year. Demand for higher priced beef cuts into the holiday season could plummet this year as pandemic cases continue to rise and consumers adjust holiday plans. February cattle closed sharply lower on the session yesterday and the selling pushed the market down to the lowest level since November 20th. The USDA boxed beef cutout was down $1.48 at mid-session yesterday and closed $4.22 lower at $230.80. This was down from $243.68 the previous week and was the lowest the cutout had been since November 16. No trade was reported in cash live cattle as of Monday afternoon.
The 5-area weighted steer price last week was 109.75, down from 110.27 the previous week and 118.92 a year ago. The USDA estimated cattle slaughter came in at 119,000 head yesterday. This was unchanged from last week but down from 121,000 a year ago. The estimated average dressed cattle weight last week was 841 pounds, down from 842 pounds the previous week but up from 830 pounds a year ago. Estimated US beef production last week was 559.8 million pounds, up from 473.9 million the previous week but down from 564.8 million a year ago. Friday’s Commitments of Traders report showed managed money traders were still net long 39,813 contracts.
The market remains in a short-term downtrend and if consumers take a more stay-at-home attitude into the holidays, there could be too much meat to absorb on the US market. China has been an aggressive buyer of pork on the world market over the past year, and if this slows into 2021, the domestic market will need to absorb a significant increase in supply. The monthly data on exports of US pork has been disappointing. US pork exports for October totaled 589.1 million pounds, up 13.1% from a year ago. While this marks an improvement over the past few months, exports are well below their peak of 701.6 million from March. US exports to China reached a total of 135.6 million pounds in October, down from a record 253.3 million in May. February hogs closed sharply lower yesterday and near the lows of the day with an inside trading session.
The market remains nervous that if ham prices have peaked for the year, that pork product values could drift lower and push cash markets even lower. Traders are also fearful that if exports slowdown that there will be an excess supply of pork on the market as weights remain well above normal. The CME Lean Hog Index as of December 3 was 66.26 down from 66.55 the previous session and down from 67.15 the previous week. The USDA pork cutout, released after the close yesterday, came in at $76.76, up 12 cents from Friday but down from $78.85 the previous week. The USDA estimated hog slaughter came in at 497,000 head yesterday. This was unchanged from last week but up from 493,000 a year ago at this time.
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