Prices for cattle and hogs have started to turn lower ahead of Christmas and New Year’s, according to David Williams, director of global protein for Informa Economics IEG.
On the beef side, Williams said the cutout is struggling and has begun to break. “The rib and middle meat business is done as we are a week before Christmas. Steakhouses and retailers have all gotten their orders,” he said.
Live cattle futures have broken a little, and cash prices traded at $115/cwt. last week.
Williams said prices could reach $116/cwt., but he does not foresee $117.
According to Williams, weather for cattle feeding has been very good, but some precipitation is expected in the near future, which might cause a bit of a slowdown.
After the first of the year, he expects the cattle market to break, unless something steps in front of the train. “There will be more cattle placed on feed. We’ll need a weather event to give it support. If not, we’re really going to roll back,” he said.
Williams forecasts February live cattle futures to be approximately $111-112/cwt., April to be $108-109 and June to be $100-102.
“Once we get to March 1, the cattle feeder is going to be full. Maybe he’ll jump the gun somewhere in February, but typically, they want to wait to get through the harshest part of winter,” he explained.
On the pork side, weights continue to counter-seasonally move higher, Williams said, adding that cash prices have started to break, going from the low $70s about 8-10 days ago to where they are now, near the upper $60s.
“I think we’ll kind of see a pullback to the low $60s as we get into the end of January," he added. "A lot of this has to do with the belly, lack of ham demand on the commercial side to support the cutout and the need to buy hogs.”
According to Williams, two new pork plants in Michigan and Iowa have maintained operating at an 80% capacity level. “They’re not expanding, even though they can," he said. "There is still another 20% that will probably come sometime in January or February. Right now, they’re just trying to get through the end of the year and be comfortable at the 80% level.”
As such, hog slaughter rates have not increased and are currently holding at around the level of 465,000-466,000 head per day, he added.
Prestage Farms is expected to finish its new plant in May or around then.
As of right now, 3% more hogs are expected in 2018, Williams noted.
In the poultry sector, prices for wings and breast meat are under pressure with so much meat available, according to Williams. “Basically, with chicken being at the lower end of the protein value chain, people are still eating chicken, but they’re not able to handle the extra tonnage,” he explained.
Nonetheless, the chicken industry continues to look at about 3% growth for 2018. “There is still more expansion going on in the U.S.,” Williams said.