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FEEDSTUFFS MEAT PRICE OUTLOOK: August 8, 2017

More rapid pork cutout losses expected in near term.

Beef: The latest “Cattle on Feed” (COF) report confirmed the effects of aggressive marketings seen over the past four months, with the implied COF for 120 days or more dropping below 30% and culminating in the smallest number of COF for 12 or more days since 2004. In addition to carcass weights, which have been slowly edging higher throughout the summer, COF for 120 days or more is a good indicator of overall front-end currentness and can help determine the number of available cattle to be marketed over the next 30-45 days. With the state of front-end supplies relatively “current,” cash cattle appear to have built up modest support in the mid-$113-115/cwt. area heading towards late August before they ease into fall lows that are expected to be near $107-110/cwt. by mid-October to November as additional supplies of cattle come to market.

Pork: The cutout lost value this week, on par with last week's loss. The price forecast is for continual easing into the middle of September, with more rapid losses in the near term, followed by more modest easing as August transitions into September. The level of loss over the next two or three weeks will depend on how fast and hard bellies fall in price. It is the time of year when bellies come off their seasonal highs, and they are expected to do so, as demonstrated by this week's price weakness in the bellies. The rate of descent on the cutout for the next three weeks likely will mirror the rate of descent of bellies. The cutout is still above prior-year levels by more than 12%, and that spread is not expected to close.

Poultry: Turkey hatchery production slowed through April and May, with April showing the first year-over-year decline since the end of December 2015. However, with 28.6 million eggs in incubators on April 1, the month still bested the five-year average of 28.60. It was assumed that the easing off evident in hatchery reports would continue in response to the languishing cutout, but eggs in incubators crept up again on July 1 in advance of preparations for improved back-to-school and holiday demand for turkey meat. Eggs in incubators on July 1 totaled 29.97 million, up just 0.2% from July 2016 but still the most eggs in incubators reported for July 1 since 2009. The expectation is for hatchery operations to continue on a somewhat level path through the remainder of the third quarter before declining seasonally in the October-to-December time frame but ultimately providing the industry with 1.6% more eggs for 2017 than were available in the previous marketing year and for gains to be relatively flat throughout 2018.

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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