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Assortment of raw beef and pork pieces on wooden table

FEEDSTUFFS MEAT PRICE OUTLOOK: July 11, 2017

Pork cutout shows signs of losing momentum.

Beef: The record-large feedlot placements from March through May are expected to ease into the summer months but should remain above a year-ago levels. June placements may retreat below the double-digit increases observed across six of the last seven months as the once favorable "swap" -- or the difference between current fed cattle prices and projected breakevens on new placements at the time of sale -- has turned negative, with forward breakevens estimated near $115-120/cwt. in the September through November time frame, where the corresponding futures contracts are implying a cattle market in the $112-114 area. Fed cattle prices declined $20 from the first week of June through the first week of July as the highly anticipated larger supplies of market-ready cattle have provided ample inventories to packers who are expanding slaughter schedules -- counter-seasonally -- from spring into summer.

Pork: The pork cutout, on average, was higher this week again -- one week after traditional seasonal peaks -- but It did show signs of losing momentum on further price increases. It has remained higher on the aggressive price of the bellies, which may be near their seasonal highs. Other primals, aside from the bellies, are expected to move lower as soon as this week, with bellies possibly moving lower in the next three weeks. Seasonal highs could be here on the cutout and only slowly moving lower until the bellies finally break from their highs. When the bellies do finally break, expect the price erosion in the cutout to be strong during August, especially as supplies of live animals increase starting possibly the third week of July.

Poultry: With the broiler cutout reaching near decade highs throughout May and June, it is worth taking a slightly deeper look into the risk to the outlook of sustained growth going forward. Retailers have been heavily promoting boneless breast meat this spring, but there continues to be a strong surge in foodservice use and an expansion of chicken-centric restaurants. Line-run breasts performed alright last fall and into the winter months and are expected to trade at a 10% premium during the third quarter, resulting in an 8% overall improvement to line-run breast prices this year. This, combined with what is quickly turning out be a minimum of a 7.1% increase in wing values and an 18% increase in the market value of leg quarters overall this year, is contributing to an outlook of a strong and steady annual rally in the value of the broiler cutout.

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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