raw meat cuts Photology1971/iStock/Thinkstock
Assortment of raw beef and pork pieces on wooden table

FEEDSTUFFS MEAT PRICE OUTLOOK: April 4, 2017

Sharply lower beef prices and more comfortable live inventories weigh on cash trade.

Sharply lower beef prices and more comfortable live inventories weighed on the cash trade last week, with sales slipping near $128/cwt., down about $2.00/cwt. Some additional weakness was noted on more distant delivery dates. Larger out-front cattle purchases in recent weeks, coupled with prospects for seasonally larger fed cattle supplies in the weeks ahead, may continue to weigh on cash prospects, particularly with the additional selling incentive emanating from the strong basis and steep discounts on late spring and summer futures. The blended cutout spiraled near $212/cwt. at week’s end, about $9 lower than last week and nearly $11 under the mid-month peak. Weaker beef prices and deteriorating operating margins likely tempered late-week production plans, with total slaughter dipping to 593,000 head, well below a recent spike to 613,000 but still far above last year’s 538,000 head. The enthusiasm for U.S. beef exports created by Brazil's meat scandal eroded as several buyers lifted purchase bans.

Pork: The cutout experienced more downward pressure due to weakness in primals earlier than projected. As demand wanes during April, which is well sold, the cutout will have limited opportunity to advance with any degree of strength for the first three weeks. Several primals could soften for the next three weeks straight, which could translate into a cutout that goes nowhere for the next two weeks. The $77 level is fairly priced, given current product requirements. It will be slow to gain momentum in the short term but is more than firmly supported above the $75-plus level. Patience is the key, as May will prove to move the cutout higher as demand picks up, and any increase in hogs won't happen all at once to satisfy the demand pull.

Poultry: Expectations in January put average first-quarter broiler weights near 6.17 lb., which was even with the year-ago level. Since then, a trend has developed in the weekly U.S. Department of Agriculture reports that allude to an expectation of lower overall bird weights in 2017. The weekly reports continue to show evidence that, not only are operators slaughtering more birds that fall into the middle-weight classes – those due for retail, bagging operations or individually quick frozen – but, in addition, average weights in the individual classes continue to favor the low side of the scale. Should this trend towards lower bird weights continue, it would prompt lower annual bird weight expectations and draw down the annual improvements to total ready-to-cook broiler production. Given this action and the steady decline in average broiler weights year to date -- now at 0.5% below last year on the weekly reports -- the forecast for 2017 broiler production has been toned down slightly.

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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