Beef: Following the late-spring surge on cutout values, retailers stepped back from aggressive beef features from midsummer onward -- a pattern that has persisted since then, with feature rates through the October-November time frame running nearly 4% below a year ago but closer to 2% below the five-year average. Currently, retailers are in the midst of aggressive holiday beef promotions, with ribs (particularly bone-in rib roasts), tenderloins, and an assortment of round roasts likely to be the main beef features in this year's markets. Packers have had to maintain aggressive slaughter schedules to keep production of key feature items high enough to supply previously made forward commitments. Last week's slaughter schedule came in at an estimated 649,000 head -- 5.4% larger than a year ago -- as packers appear to be "killing for the ribs,” but the carcass is made up of more than just ribs and tenders.
Pork: The cutout moved higher last week -- a week earlier than the normal seasonal increase in price. The strength came on the belly as well as loins moving higher the prior week. The cutout value is at a healthy premium over last year -- a price that was not expected, given the supposed available fresh supplies. The 13% premium over last year is even higher than the current five-year average value, which includes last year's lows at this time, suggesting that demand is either very strong or product clearance through the export market is higher than expected. Weekly export numbers are helping keep product moving, but demand is more of the driver currently. Expect the cutout to move slightly higher the next two weeks but then experience weakness during the last two weeks of the calendar year, followed by support and further strength. Any weakness at the end of the year may be only slight, and the cutout could stay above the $80 level.
Poultry: Broiler slaughter during October averaged about a 2.8% increase from the same period last year. In addition to the slaughter rates, average broiler live weights at slaughter were very much in line with Informa Economics IEG’s expectations, which came in at 6.23 lb. per bird. Given this information, it may have been somewhat surprising to observers that broiler production during October -- according to the latest monthly U.S. Department of Agriculture’s “Poultry Slaughter” report -- showed an 8.5% increase compared to the prior year’s total of 3.708 billion lb. on a ready-to-cook (RTC) weight basis. The main discrepancy is that the top-line number assumes net processing days during the month; however, October 2017 contained one additional processing day versus October 2016. After accounting for the additional processing day in 2017, RTC production still showed a 3.6% increase compared to a year earlier, which was more than a marginal increase from expectations when considering the weekly totals.
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.