Beef: The U.S. Department of Agriculture's “Livestock Slaughter” report for June was released July 20 and confirmed another month of greater total beef production and disproportionately larger total cattle slaughter volumes. Federally inspected slaughter was up 5.7% year over year, while total beef production was up just 4% from 2016. Lighter carcass weights continue to be the catalyst to reductions in total beef production, coupled with larger exports of fed beef supplies, which are up 15% year to date (or 178.29 million lb.). This has pared total domestic fed beef supplies to just under 3% versus the 2016 level, while total fed beef production is running nearly 4.2% over a year ago through the first half of 2017. The monthly USDA “Cattle on Feed” report came in well over expectations, with placements up 116% and marketings up 104%, leaving an on-feed number 104% larger than a year ago. The largest placement increases came in Texas, Nebraska, Kansas and Colorado, which were up 18%, 16%, 13% and 19%, respectively. Larger supplies of market-ready cattle now extend well into the winter time frame, pressuring fed cattle prices lower into the $104-106/cwt. area, down from initial expectations near $110/cwt.
Pork: Year-over-year pork production increases have been the story for the last 16 months. The U.S. continues to produce and process more hogs and pork than any other time in history, while the industry continues to think that prices will be forced lower as supply economics should be driving it downward. With the rising prices completely taking many by surprise, the rationale invariably leads to a theory of stronger demand. In reality, the situation has a lot to do with near-term supplies that are tighter versus the prior year than three months ago. Third-quarter supplies may be above the prior year by only less than 2%, with the next few weeks being possibly very tight. The production increases are set to continue increasing, but not until after August.
Poultry: There is no doubt, when looking at the production side of the broiler industry, that analysts' expectations have not been met in terms of the advancement of supplies throughout the first six months of 2017. In recent weeks, integrators have been faulting hatchability of leading supply hatchery operations, and for the most part, the notion is conceivable, believable and deemed representative of a real issue that will place the industry at a disadvantage compared to the rather robust hatchability rates the industry has enjoyed in recent years. In view of the relationship between the number of chicks placed into supply flocks as a percent of eggs placed in incubators, the three weeks prior averaged 81.5% during the first quarter and 81.6% during the second quarter. Industry observers are hearing more and more that the issues will be resolved by the fall period. It appears that the top five broiler chick producers are currently advancing placements roughly 2.1% versus a year ago. It is yet to be seen if this trend will continue through the remainder of the summer.
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