Cattle:

Border With Mexico Still Closed: USDA's undersecretary announced $165 million had been allocated to help fight New World screwworm from entering the US. $110 was allocated last year. The official also noted to resume shipments, Mexico must set up USDA-approved holding pens where inspectors will check and treat Mexican cattle for screwworm before they cross the border. "USDA will start inspecting Mexico's pens soon…We could have some (imports) certainly before the holidays". More would be coming in during January. This provides a little clarity for a story that the trade expected to disappear quickly. We import 4% of our live cattle slaughter from Mexico. 2% comes from Canada. Weekly import totals of lightweight Mexican feeder cattle are about 30,000 head.

Wholesale Beef Did Not See the Seasonal Break: Wholesale beef prices did not take the normal post-Thanksgiving dip this year. Over 20 days, including today's morning quote of +0.66 for choice, beef has rallied +12.56. Beef is still in an uptrend.

Cash Cattle Higher: This week's trades in the South have run $191 and $192. That is up $1 from the prior week. Nebraska has been on fire with early-week $193 live trades turning into $195 and $196 by the end. Dressed trades, started at $300, ended the week at $304 and $305. Last week's live based trades were $190/$191, dressed $296/$297. Futures started the week implying that cash cattle would drop to $186/$187 this month. They are implying $192/$193.

Cattle Slaughter Levels: Over the prior six weeks the general cattle kill, feedlot + cow/bull, was -2.3% from last year. With higher weights beef production was only -0.9%. USDA estimated this week at 609,000 head. This was a little light as one plant was down today. This kill will run about -5.9% from last year. Cattle weights have trimmed down sharply in recent weeks, from +3.4% year over year to only +1.1%. For the latest week there was a light increase to +1.4%.

COF Next Friday: In general, each September - August 12 month period of placements in these years of declining supply should run -1% to -3%. We make this point to remind you last month's Cattle on Feed report, which showed October placements +5.3% year over year, is an anomaly. With that in mind we estimate November placements, discussed on the coming 12/20 USDA report, may show a -6.6% year over year drop. These numbers impact May - September fed cattle numbers. April - November placements, what determines fed cattle slaughter from now through all of Q2, would run -0.8%. We see November marketings, fed cattle leaving the feedlot, at -1.3% from last year. That was due to a net drop in calendar days this year vs. last. December 1 On Feed total may slip to -0.5% year over year.

USDA 2024 Beef: USDA currently sees 2024 beef production at 27.035 billion lbs., +0.3% from last year. For this Q4 we are currently in they are at +1.8% year/year. That Q4 estimate is too large.

USDA 2025 Beef: USDA's current balance sheet shows adjustments assuming a closed border with Mexico. When it is re-opened they will reverse much of these changes. USDA has 2025 beef production at 25.665 billion lbs., -5.1% from 2024. They lowered this production number by a large -615 million lbs. from November's report. The prior month they were at -2.8%. By quarter they are at +1.0% for Q1, -1.7% for Q2, -6.3% for Q3 and a large -12.8% for Q4. Again, this is an artificial balance sheet. With the hole in supply they lightly offset it with -105 million for exports and +195 for imports. Beef left for the US consumer, the supply metric that determines cattle and beef prices, would fall from 58.2 lbs, per capita to 57.6. This is a -3.5% hit from 2024. This would be the lowest supply offering since 2018, seven years.

Tariff Talk: President Trump announced on social media that on his January 20 inauguration he would, “… sign necessary documents to charge Mexico and Canada a 25% tariff on all products coming into the United States.” He noted this would remain in place until the two countries clamp down on hard drugs entering the US as well as illegal immigration. He also separately noted the US will be charging China an additional 10% tariff, above any additional tariffs, on all of their many products coming into the US.

US Live Cattle Imports: The US imported 2.0 million head of live cattle last year. This was 6% of our annual kill. Of this group 63% came from Canada, 8% from Mexico and zero from China.

US Beef Imports: The US is a net importer of beef based on quantity. It is a light net exporter based on value. We brought in 3.7 billion lbs. of foreign beef last year. 27% comes from Canada, 17% from Mexico and zero from Canada.

US Live Cattle Exports: The US exported only 290,299 head of cattle last year. This is not an issue to discuss as it represents about 1% of US cattle production.

US Beef Exports: There are no retaliatory tariffs from other countries against the US yet. We are a net importer of processed beef based on quantity. Of last year's 3.0 billion lbs. of US exports 9% went to Canada, 10% to Mexico and 17% to China.

Fed cattle futures were rejected in yesterday's attempt to put in new highs for the uptrend and also to take out the last area of chart resistance. That chart point is the major highs from May, 192.00 on the February. In today's trade the market was successful in a move back to that area.

Feeder cattle futures are still in a clear uptrend. This market has stabilized though for four weeks at the upper end of this uptrend. This week's rebound was unable to test the recent 12/2 highs of 261.20 on the January. Next resistance beyond that is the high from June, 262.27. The resolve of bulls is now being tested. Are upside attempts still being accepted? There are two downside intraday gaps, the 12/5 close of 254.92 and the 11/22 close of 254.30. Of note, open interest is rolling from January to the March…Rich Nelson

Hogs: 

Current pricing remains extraordinary for this relatively normal pork production. The trade has risk-on theme due to tariff concerns, Canadian live hog imports, and PRRS talk out in the country. Even with our setback recently, this is still great pricing for this time of year.

Hog Slaughter Remains Low: Over the prior six weeks the US hog kill was -0.7% from last year. Including weights pork production was-0.6%. This week's run, 2.573 million head, was a bit under expectations. Today's 474,000 head estimated kill was much under the two private estimates of 485,000 and 487,000 (ours). This low kill week was -4.5% from last year.

Weights Remain Low: Weights have trimmed down. They are now -0.5% year over year.

Cash Hogs Stabilize: Including Thursday's -0.10 trade the four days of known cash hog trade are +0.53. The Lean Hog Index is 83.90. Cash hogs remain wildly priced for this relatively normal supply level, now +25% from last year. Cash hogs are nearing their seasonal price low.

December Futures Expire: The noon time end to the December lean hog futures contract was at 83.72.

Wholesale Pork Stabilizing: The end point for the 22 day drop in wholesale pork was Thursday of last week. Including today's morning report of -0.56 current prices are +1.15 from that low.

USDA 2024 Pork: USDA sees the year with 27.823 billion lbs. of pork production. For Q4 they are at +1.3%. We call this a bit controversial as both October and November production was under prior year.

USDA 2025 Pork: USDA sees 2025 at 28.370 billion. This is a bit large at +2.0% from 2024. USDA's view would not give any credence to increased PRRS talk in recent weeks. Their current view for per capita pork supplied, the main metric that determines hog/pork prices, at 50.9 lbs. would be the largest in three years.

The trade is discussing more PRRS findings and suggesting USDA's 2025 pork supply view may be lightly optimistic.

Tariff Talk: President Trump announced on social media that on his January 20 inauguration he would, “… sign necessary documents to charge Mexico and Canada a 25% tariff on all products coming into the United States.” He noted this would remain in place until the two countries clamp down on hard drugs entering the US as well as illegal immigration. He also separately noted the US will be charging China an additional 10% tariff, above any additional tariffs, on all of their many products coming into the US.

US Live Hog Imports: The US imported 6.7 million head of live hogs last year. This was 5% of our annual kill. Almost all of these numbers are from Canada. This is the main factor in today's trade, perceived lowered supply in the US.

US Pork Imports: The US imports only about 4% of our production, 1.1 billion lbs. Of this minimal amount 65% comes from Canada, 8% from Mexico and zero from Canada.

US Live Hog Exports: The US exported a minimal 67,806 head of hogs last year. This is not an issue to discuss as it represents about zero of US hog production.

US Pork Exports: At this time there are no retaliatory tariffs to discuss. If they do come, it would hit US pork negatively. The US is a significant net exporter of pork. 25% of our production is sent to foreign buyers. Of this 8% goes to Canada, 38% to Mexico and 7% to China.

The uptrend for February futures has been broken. This market posted two clear rejections of higher trades in prior weeks. It is now showing acceptance of lower trade. This comes despite the one last upside intraday gap from the 12/3 close, 87.85...Rich Nelson

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