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Dailyfutures.com
Live cattle, Lean hogs, and Lumber Markets
Live cattle
Chart Comment
Cattle showed some strength in the final few days of 2009 when prices closed above the 100-day average. So far, the strength continues while prices stay above 88.50 (updated 2-4).
Key Events - Live cattle
2010
1-29 - January 1st cattle on feed down .9% from a year ago and the lowest in seven years, but a little more than expected.
1-22 - USDA: Jan. 1 cattle on feed -2.0% from a year ago, less than expected.
1-15 - USMEF: November total beef exports +4% from a year ago.
2009
12-18 - USDA: Dec. 1 cattle on feed -.6% from a year ago, less than expected.
12-11 - USMEF: October beef exports -4% v. year ago.
11-20 - USDA: Nov. 1 cattle on feed +.6% from a year ago.
11-16 - USMEF: September beef exports -22% v. year ago.
10-30 - R-CALF USA sends letter to White House, describes "acute crisis" in the cattle industry.
10-16 - USDA: Oct. 1 cattle on feed +.6% from a year ago, a little more than expected.
10-12 - USMEF: August beef exports -26% v. year ago.
9-18 - USDA: Sept. 1 cattle on feed -1.2% v. yr ago, more than expected.
9-11 - USMEF: July beef exports -13% from a year ago.
8-21 - USDA: August 1st cattle on feed down 2.3% from a year ago, more than expected, but still the lowest in six years.
8-13 - USMEF: U.S. beef exports up 3% in June v. year ago.
7-24 - USDA: July 1st cattle inventory down 1.45% from a year ago, the lowest in 36 years..
7-24 - July 1st cattle on feed down 5.3% from a year ago, less than expected, and the lowest in ten years.
7-13 - USMEF: U.S. beef exports down 5% in May v. year ago.
6-19 - June 1st cattle on feed are down 3.8% from a year ago, less than expected.
6-12 - USMEF: U.S. beef exports up 1% in April.
5-22 - May 1st cattle on feed are down 2.8% from a year ago and a little more than expected.
2003
12-24 - Mad cow disease in the U.S.
5-20 - Mad cow disease confirmed in Canada.
Fundamental Notes -
The USDA's Livestock Outlook on December 17, 2009 said it well: "In 2009, economic recession, high unemployment, and abundant supplies of pork and poultry adversely affected demand for beef. As a result, demand was insufficient to maintain cattle and beef prices throughout 2009, which led to sluggish feedlot marketings, heavy dressed weights, and ample beef supplies, despite relatively low cattle inventories."
On January 12, 2009, the USDA said that they expect beef production to be down 2% in 2010 and choice steers to average 89.5 cents per pound. On January 15, 2009, the U.S. Meat Export Federation said that total beef exports in the first eleven months of 2009 were down 10% from a year ago after posting a 28% gain for all of 2008.
The January 1st cattle on-feed inventory was 11.009 million head, down 2.0% from a year ago and less than expected. December placements were down 6% and marketings were up 3.5% from a year ago. As of July 1, 2009, the U.S. cattle and calf inventory totaled 101.8 million head, down 1.45% from a year ago and the lowest in 36 years.
Notable Quote:
"There has been substantial press about the July 1 cattle inventory probably being the smallest since 1959 and the calf crop in 2009 being the smallest since 1950..."
"These are interesting statistics but being the smallest calf crop in 50 years is not very important when we are getting about 2.4 times as much beef and veal produced per calf than in the early 50's."
Cattle Outlook - Glenn Grimes & Ron Plain, University of Missouri. August 7, 2009.
| U.S. Beef Market Statistics (in billion pounds) | |||||||||
| Calendar Year | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Production | 27.09 | 26.24 | 24.55 | 24.68 | 26.15 | 26.42 | 26.56 | 25.95e | 25.48e |
Lean hogs
Chart Comment
Hog prices had a strong rebound from their "swine flu" lows in August, thanks to inventory reductions by producers and better pork demand. Prices fell from their one-year high at 74 cents and are currently just below the 100-day average. A close above 68 cents would be constructive (updated 2-4).
Key Events - Lean hogs
2010
1-22 - USDA: Frozen pork in storage down 15% on Dec. 31 from a year ago, less than expected.
1-15 - USMEF: November total pork exports down .2% from a year ago.
2009
12-30 - USDA: December 1st hogs and pigs were -2.0% from a year ago, slightly more than expected.
12-22 - USDA: Frozen pork in storage down 7% on Nov. 30 from a year ago.
12-11 - USMEF: October pork exports -6% v. year ago.
11-20 - USDA: Frozen pork in storage down 1% on Oct. 31 from a year ago, less than expected.
11-16 - USMEF: September pork exports +3% v. year ago.
10-29 - China agrees to end six-month ban on U.S. pork imports.
10-22 - USDA: Frozen pork in storage up 1% on Sept. 30 from a year ago and a little more than expected.
10-20 - USDA: First U.S. hog confirmed to have H1N1 virus.
10-12 - USMEF: August pork exports -17% v. year ago.
9-25 - USDA: September 1st hogs and pigs were -2.3% from a year ago, less than expected.
9-22 - USDA: Frozen pork in storage +3% on August 30 from a year ago, less than expected.
9-11 - USMEF: July pork exports -13% from a year ago.
9-3 - USMEF survey: 20% of China's consumers believe that eating pork is dangerous due to the H1N1 virus.
8-21 - USDA: Frozen pork in storage +8% v. year ago, less than expected.
8-13 - USMEF: U.S. pork exports down 33% in June v. year ago.
7-22 - USDA: Frozen pork in storage +9% v. year ago, more than expected.
7-13 - USMEF: U.S. pork exports down 34% in May v. year ago.
6-26 - USDA: June 1st hogs and pigs were -2.0% from a year ago, as expected.
6-22 - USDA: Frozen pork in storage up .8% from a year ago, less than expected.
6-12 - USMEF: U.S. pork exports down 19% in April.
6-11 - World Health Organization declares H1N1 outbreak to be a pandemic.
5-22 - April 30th frozen pork supplies down 7% from a year ago, a little more than expected.
5-14 - USMEF: U.S. pork exports down 3% in the first three months of 2009 from a year ago.
5-8 - Mexico's Ag Minister says there is no evidence of disease among Mexico's hog population.
5-4 - First hogs confirmed with H1N1 virus are on a farm in Alberta, Canada. The apparently got it from their owner after he returned from Mexico.
4-28 - Canada's April 1st hog inventory is down 8.6% from a year ago.
4-27 - World Health Organization declares the outbreak of swine flu in Mexico is an international health emergency. CDC immediately says that the flu cannot be caught from eating properly cooked pork, but the public image is already damaged.
4-24 - First mention of swine flu in Texas and California.
1-22 - USDA says: "Recession-squeezed consumer budgets will likely constrain increases in pork and hog prices this year, despite expected reductions in production foreshadowed by the December 1 Quarterly Hogs and Pigs (report)."
Fundamental Notes -
Hog prices were already suffering from the world's economic slowdown when they got hit on April 27, 2009 by the World Health Organization's announcement that an outbreak of swine flu in Mexico had become an international health emergency. It has taken some time, but pork exports showed a positive increase in September from a year ago - is the "swine" flu effect over for hogs?
On January 12, 2009, the USDA said that it expects pork production to be down 2% in 2010 and the price of barrows and gilts to average 46 cents per pound (62 cents lean). On January 15, 2009, the U.S. Meat Export Federation said that pork exports in the first eleven months of 2009 were down 10% from a year ago after posting a 57% increase in 2008.
The December 1st count of all U.S. hogs and pigs was 65.807 million head, down 2% from a year ago. The September to November pig crop was up slightly from a year ago. Frozen pork inventory as of December 31, 2009, totaled 475 million pounds, down 15% from a year ago. Frozen bellies totaled 58 million pounds, up 12% from a year ago.
| U.S. Pork Market Statistics (in billion pounds) | |||||||||
| Calendar Year | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Production | 19.66 | 19.95 | 20.51 | 20.68 | 21.06 | 21.94 | 23.35 | 23.00e | 22.63e |
Lumber
Chart Comment
Housing demand has been slow to recover and it is hard to explain the recent strength in lumber prices. Evidently, supplies are down after so many lumber mills closed last year. There is no denying that prices look strong, so far (updated 2-5).
Key Events - Lumber
2010
1-27 - U.S. new home sales down 7.6% in December, less than expected.
1-20 - U.S. housing starts were down 4.0% in December, but up slightly from a year ago.
1-11 - Canada's housing starts +5.9% in December, more than expected.
2009
12-23 - U.S. new home sales -11.3% in November, much weaker than expected.
12-22 - NAR: Existing home sales +7.4% in November, more than expected.
12-16 - U.S. housing starts +8.9% in November and -7.3% from a year ago, as expected.
12-1 - U.S. pending home sales +3.7% in October, the highest level since March of 2006.
11-25 - U.S. new home sales up 6.2% in October, stronger than expected. +5.1% from a year ago.
11-23 - NAR: Existing home sales +10.1% in October to an annual rate of 6.10 million units, much stronger than expected. From a year ago, home sales were up 23.5%. Unsold inventory represents a 7-month supply, the lowest in over two years.
11-18 - U.S. housing starts down 10.6% in September and down 31% from a year ago, much weaker than expected.
11-6 - $8,000 homebuyer tax credit extended from December 1st through June 30, 2010.
11-2 - U.S. pending home sales up 6.1% in September to the highest level since December of 2006.
11-2 - Canada's Mortgage and Housing Corporation said that they expect housing starts to be up 16% in 2010.
10-28 - U.S. new home sales -3.6% in September, weaker than expected.
10-23 - U.S. existing home sales +9.4% in September to the highest level in two years.
10-20 - U.S. housing starts up .5% in September, but down 28.2% from a year ago, weaker than expected.
10-1 - U.S. pending home sales up 6.4% in August and 12.4% from a year ago, stronger than expected and the highest level since March of 2007.
9-29 - S&P 20-city index of home prices up for third consecutive month.
9-25 - U.S. new home sales up .7% in August, the most in 11 months, but less than expected.
9-17 - U.S. housing starts up 1.5% in August, but down 29.6% from a year ago, as expected.
9-3 - Canada's Mortgage and Housing Corp. expect housing starts to be up almost 6% in 2010.
9-1 - U.S. pending home sales index up 3.2% in July, the sixth consecutive month of positive gain and the highest reading in two years.
9-1 - Shanghai adopts new wood building code, will result in more imported lumber from Canada.
8-21 - U.S. existing homes sales up 7.2% in July, better than expected and the most since August of 2007.
8-18 - U.S. housing starts down 1.0% in July, weaker than expected.
8-13 - Weyerhaeuser announces sale of 140,000 acres of timber in northwestern Oregon.
8-4 - U.S. pending home sales index up 3.6% in June, much better than expected.
8-1 - Weyerhaeuser posts loss of $106 million in Q2, the sixth loss in seven quarters.
7-27 - U.S. new home sales up 11.0% in June, much better than expected.
7-23 - U.S. existing home sales up 3.6% in June, better than expected.
7-17 - U.S. housing starts up 3.6% in June, better than expected.
6-24 - U.S. new home sales down .6% in May, much less than expected.
6-23 - U.S. existing home sales up 2.4% in May, less than expected.
6-16 - U.S. housing starts up 17% in May, much stronger than expected.
6-2 - Index of pending home sales increased from 84.6 to 90.3 in April, the biggest monthly gain in over seven years and much stronger than expected.
Fundamental Notes -
Lumber prices have been falling since early 2006 as the U.S. housing market deteriorated. On August 9, 2007, the sub-prime mortgage (and derivatives) problem turned into an international credit crunch and led to worst financial disaster since the Great Depression. Now, everyone is watching for signs of normalcy, but progress has been slow.
In 2009, housing starts were down 39% at 553,800 units. That is a long ways from the 2005 peak of 2.068 million units and even from the annual average of 1.406 million units in the 1960's.
| U.S. Housing Starts (in thousand units) | |||||||||
| Calendar Year | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Production | 1,705 | 1,848 | 1,956 | 2,068 | 1,801 | 1,355 | 905 | 554e | |
Live v. Lean?
Live hog prices are quoted in cents per pound and are the traditional terms used when talking about the actual hog markets. Lean hog prices are also quoted in cents per pound, but refer to the lean hog contract that trades at the Chicago Mercantile Exchange. The change began with the February of 1997 contract and is based on 40,000 pounds of pork which is equivalent to the meat from 220 hogs.
To convert a live hog price to a lean hog price, divide the live hog price by .74. So when the USDA says that the average price for cash hogs should be 45 cents (for example), you will know that this is equivalent to 61 cents on the lean hog futures contract.
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