Beef: From an April low to a June high, the blended cutout increased $40/cwt., or nearly 20%, during a time frame in which a 5-7% increase would be more in line with expectations. Amid escalating cutout values, the U.S. Department of Agriculture’s average composite retail value for May edged higher month to month and posted a fourth consecutive monthly increase. The average retail price for May of $5.60/lb. was only marginally above April but still remained 4% under a year earlier and about 9% below the record July 2015 peak. Throughout April and into May, expectations for retail prices to ease remained, but as cutout values jumped, retailers actively began seeking a different mix of protein features, largely excluding higher-priced beef items. Retail beef prices may continue to edge higher into the summertime before easing by late summer to early fall as larger fed beef supplies come to market following the record-large March feedlot placements and year-over-year increases in April and May. The larger supplies of fed beef imply a cutout near a $180-190/cwt. range by late summer, which may encourage a resurgence of retail feature activity.
Pork: Packer margins after this summer are set to shift in comparison to the directional movement of last year. As cutout values stay within normal parameters, packers could very well erase most of their current margins as they continue to entice producers to sell their hogs in September. Producers will have more options on where to market their hogs, and bidding is expected to keep producers in the black for longer than normal coming out of this summer's seasonal highs. Packers, although not expected to operate in negative territory this fall, could very well end up making only $5 per head versus current level estimates of $25 per head. The effect of this could be the exact opposite of packer margins experienced last fall.
Poultry: In the most recent weekly USDA “Broiler Hatchery” report, the National Agricultural Statistics Service showed a slight upward revision in each of the last five weeks, adding a total of 526,000 extra eggs in the 19-state commercial hatchery program to bring the current totals more in line with Informa Economics IEG projections. The report revealed that eggs set in incubators in the 19-state program for the week ending June 10 totaled 216.8 million eggs. The most recent total and improvement brings the six-week moving average for eggs set in incubators to 215.5 million, which is 2.1% higher than a year ago. These sorts of weekly production numbers have not been reported since March 2008 and fair well for projections of increased slaughter rates leading into the end of summer. Poult placements over the last five weeks were revised upward slightly as well, only not as dramatically as the egg set number. Poult placements totaled 175.7 million during the week ending June 10, up 1.3% from the same week a year earlier, bringing the six-week chick placement average to 1.4% higher than a year ago.
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.