Seasonally large slaughter hog supplies weighing on hog prices, along with robust pork demand pushing up product prices, yielded the widest processor spreads of the year in November, according to the monthly Livestock, Dairy, and Poultry Outlook from the Economic Research Service.
November gross processor spreads averaged about $68 per hog, almost 79% more than the $38 spread of November 2018, the ERS said. While processors paid slightly higher prices, on average, for hogs, the live equivalent price of 51% to 52% hogs averaged $42.33 per cwt, 0.33% more than last year, hog prices trended lower through the month.
STRONG DEMAND
What caused the spread to open up in November was strong pork demand, the ERS said. Demand for hams in particular was reported, hams for export and domestic holiday tables, plus likely for-export picnics.
Those cuts together contributed more than $11 of the $13 difference between the value of wholesale carcasses last month and November of 2018.
Gross pork processor spreads headed lower in November but likely will remain above a year ago for the balance of the year, the ERS said. The National Base Lean hog price for the first week in December averaged about 5% more than 2018, while the wholesale pork cutout value in the first week of December averaged 14% above 2018.
Large supplies of increasingly competitive pork were expected to draw export interest from Asia, which, in turn, were expected to support the pork price component of processor spreads, the ERS said.
CHINA EXPORTS STAND OUT
US pork exports in November were 521 million pounds, almost 4% more than November of last year, the ERS said. Shipments to China/Hong Kong, at 101 million pounds, more than tripled those of a year earlier and stood out because while second in October volume to Mexico at 119 million pounds, shipments to Mexico were off by almost 22%.
Fourth-quarter US pork export forecasts and those for 2020 were premised on the assumption that Asian supplies, whose herds are afflicted by African Swine Fever, will continue to face significant deficits making it imperative to import pork, the ERS said.
Currently, a competitive edge remains for US pork even after accounting for Chinese retaliatory tariffs and transportation costs, the ERS said.
Fourth-quarter US pork exports were expected to be 1.800 billion pounds, somewhat less than November’s forecast but about 17% more than the same period of a year ago, the ERS said. The forecast was trimmed because of lower-than-expected shipments to Mexico and to several Asian countries in October.
The 2020 export forecast was lowered to 7.1 billion pounds on a slower rate of increase of shipments to Asia and a continued slower-than-expected recovery of shipments to Mexico.
CATTLE, BEEF RECAP
Cash cattle trading was reported last week at $120 to $121 per cwt on a live basis, with a few up to $122.50 late, mostly up $0.50 to $2 from the previous week. Dressed-basis trading was seen at $192 per cwt, up $2 to $4.
The USDA choice cutout Friday was up $0.71 per cwt at $209.70, while select was up $0.04 at $201.03. The choice/select spread was up $0.67 at $8.67 from $8.00 with 85 loads of fabricated product sold into the spot market.
No live cattle contracts were tendered for delivery on Friday, but two steer contracts were retendered for delivery at 1, and two were reclaimed at 1.
The CME Feeder Cattle index for the seven days ended Thursday was $146.29 per cwt, up $0.54 from the previous day. This compares with Friday’s Jan contract settlement of $144.27, down $0.45.