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FEEDSTUFFS MEAT PRICE OUTLOOK: April 17, 2018

Choice or better beef production holding at record levels.

Beef: While the percentage of cattle grading U.S. Department of Agriculture Choice remains near a year ago, accounting for 71.41% of cattle graded in the March 30 report, the number of cattle falling in the USDA Prime category continue at a record pace. Since early February, USDA's highest carcass grade has accounted for more than 8% of carcasses graded and, when combined with the Choice category, has held this year's Choice or better (Ch+) beef production at record-high levels. Considerably larger Prime production has come at a cost to the cattle feeder; premiums paid on Prime carcasses have declined sharply, down 32% from mid-February to $11.65. Seasonally, cattle grading Ch+ decline into the summer, bottoming by early summer. Choice and Prime cutouts are moving relatively in line with seasonal expectations, but the Prime cutout has declined more aggressively than its Choice counterpart, further narrowing the Prime/Choice spread to just $10.01, marking the narrowest spread on record.

Pork: Iowa-southern Minnesota data released last Wednesday revealed that animal live weights of the prior week trended flat compared to the week before that. Hog live weights are 286.5 lb. for that region, which is considered spot-cash hogs, and were static for the first week after Easter, now 3.2 lb. over last year. The spread over last year is beginning to narrow from a 5 lb. spread a few weeks ago. Normally, hogs have the opportunity to show two weeks of gains moving forward, but that is a result of the Easter holiday being later in the calendar than 2018’s early schedule. Hogs are expected to lose weight as absolute harvest levels are projected to trend lower on a seasonal basis. Live hogs are expected to remain heavier than last year for the remainder of the period, which likely will add to the overall pork production level increases. Carcass weights this week are already showing a decline, down nearly a half-pound from last week's average.

Poultry: The whole bird complex typically rides the tailwind of first-quarter price advances and exhibits neutral pricing tendencies through April. During April 2017, the USDA national composite whole broiler index gained just 2 cents/lb. During the five weeks of May, the same index rose 16.5 cents/lb. For 2018, seasonal advances are expected to be minimized to 6-8 cents during May. From last week’s USDA "Weekly National Whole Broiler/Fryer" report, the national composite weighted average was listed at 108.34, which was down nearly a half-cent from the prior week’s weighted average and up nearly 12 cents from last year. Additional near-term settling is expected before seasonal advances resume. The outlook for whole birds is calling for a little more than 110 cents/lb. as an aggregate national average during peak strength in June.

For a more detailed look at the weekly forecasts for the various meat sectors and meat cuts, subscribe to the "Meat Price Outlook." Contact Susan Dahlgren at [email protected] for more information.

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