CHICAGO, Ill. – American cattle futures prices fell to a two-year low last week and hog prices neared two-year lows as each market succumbed to several bearish factors including a sharp drop in beef sales to top buyer Japan and a surprising abundance of pork.
Livestock analysts said the market could drop even more because beef demand is weak at a time when production is high.
American beef sales have been hurt by a drop in restaurant dining because of the slowing United States economy and the Sept. 11 attacks, analysts said. In addition, U.S. beef exports to Japan are down sharply after a single case of mad cow disease there severely cut Japanese consumption of all beef.
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“The Japanese market has completely fallen apart and that has absolutely killed the U.S. cattle market,” said Ann Barnhardt, livestock analyst with HedgersEdge.com LLC.
On Nov. 8, the U.S. Meat Export Federation said U.S. beef exports to Japan could soon drop by half and it could take two to three years before that market fully recovers.
The next day the U.S. Department of Agriculture cut this year’s beef export estimate by 50 million pounds because of the slowdown in exports to Asia, which includes Japan.
“Reduced export prospects for beef imply larger domestic supplies at a time when a weaker economy is expected to slow demand for beef and pork,” the department said.
Also weighing on cattle prices has been an abundance of extremely heavy cattle. Feedlot cattle supplies have been so large recently that beef packers could not take them all. As a result many cattle spent extra time in feedlots gaining weight, analysts said.
“There is just too much supply at the front end of the market,” said Chuck Levitt, analyst with Alaron Trading Corp., of the beef market.
The USDA estimated the average weight of cattle slaughtered last week at 1,253 lb., up 19 lb. from a year ago.
The USDA said the heavier cattle prompted it to increase its beef production estimate for this year by 30 million lb. to 26.2 billion lb.
In key cash cattle markets in the central and southern U.S. Plains, slaughter steers and heifers traded $2 US per hundredweight lower at $63.
“It sounds to me like we are going to have to test the 1998 cash lows at $58,” said Barnhardt.
Hog futures prices were pressured down last week because of an increase in pork production and declining demand.
There was a big jump in hog weights as mild fall weather combined with a slowdown in hog marketings while producers were harvesting corn and soybeans. This has pushed pork production higher, analysts said.
“The hogs are the heaviest weights on record. So not only are we slaughtering two percent more hogs than last year this week, we also are adding one to two percent to the tonnage just because of the larger weight,” said Levitt.
On Nov. 9, the USDA raised this year’s pork production estimate by 187 million lb. to 19.026 billion lb.
