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FEEDSTUFFS MEAT PRICE OUTLOOK: July 3, 2017

Pork cutout price peaks higher than forecasts.

Beef: Profitable feeding margins and favorable swaps on replacement cattle coupled with estimated record high net packer margins continue to encourage an aggressive marketing pace, keeping the fed cattle inventory relatively current. Placements from March through May were record large for the timeframe, averaging nearly 12% larger than a year earlier, and will provide the bulk of the fed cattle supplies throughout the July through September timeframe. Heading deeper into the summer, weekly steer and heifer slaughter is anticipated to reach into the 510,000- to 520,000-head range, averaging 5-7% larger than last year. The larger slaughter volumes are expected to push fed beef supplies up towards the 400-million-pound-per-week range from late summer into the early fall. Projected seasonal and year-over-year increases in fed beef and competing meat supplies may pressure the cutout down towards the $200 area in mid-summer, ahead of a modest rebound into the fall.

Pork: The cutout bested everyone's forecast last week, hitting a high mid-week of over $103/cwt. Seasonally, the price peak typically occurs during that calendar week and is forecast to move lower from there through September. Despite the direction of the bellies the next few weeks, even increases in bellies should not allow the full cutout to move higher after last week, when many of the primals were showing signs of seasonal highs and trending lower thereafter. This puts the probable highs near current levels and the industry could expect modest price softening through the third week of July, with major price corrections possible thereafter and into August. For now, the price risk is not higher.

Poultry: U.S. turkey production alluded to a strong response to market pressures in the May U.S. Department of Agriculture (USDA) “Poultry Slaughter” report, when young turkeys slaughter declined by nearly 11% during April, which was the least amount slaughtered of any single month since February 2015. Observers who attributed this to a signal of contraction were brought back to reality in the most recent “Poultry Slaughter” report, which showed young turkeys slaughtered during May totaled 20.89 million, 4.4% higher than the number of young turkeys slaughtered during May 2016 and the highest May total in nearly a decade. The outlook is for RTC turkey production to fall behind year-ago levels on average through the second and third quarters of 2017, but a strong finish is expected to result in total young turkey production of up just 0.7% from 2016 overall this year.

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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