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Assortment of raw beef and pork pieces on wooden table

FEEDSTUFFS MEAT PRICE OUTLOOK: May 30, 2017

Chicken wing availability troublesome lately.

Beef: This week’s limited production schedule and sluggish beef movement, along with a strong basis, continued to weigh on cattle prices last week as they slipped to $132/cwt., off about $2 from the prior week and about $13 below the seasonal peak in early May. Despite slowing spot sales, still-strong interest in the middle meats and limited supplies of fat trim tempered the weakness in cutout values, although the blended cutout slipped toward $238/cwt. at last week’s end, off about $5 from the mid-month peak. The surge in beef prices has rationed buyer interest, with both spot sales and out-front commitments eroding sharply. The sharply higher spot prices and widening premiums to competing pork and chicken items may take a toll on summer merchandising plans, further exacerbating the risk of significant post-holiday beef price weakness. Following record-large feedlot placements in March, feedlot inventories continued to expand during April, with near-record placements that were up 11% from last year, while the May 1 feedlot count rose to 102% of last year.

Pork: Packers are not in the business of harvesting animals simply to store product in hopes of its future use. Levels in cold storage are low — and for good reason. The industry is relying on enough fresh product for continuity of supply purposes. Total cold storage for April was down from the prior year by slightly more than 10%, and while not a record low in total volume, it is nearly a record low as a percent of total production. In fact, this past December through March actually set record lows in cold storage as a percent of total production. Stocks are forecasted to follow a seasonal pattern from here, which puts April as the peak month, followed by declining stocks into July. This suggests the possibility of record lows for every month of 2017.

Poultry: Availability of chicken wings has been troublesome lately, which is a statement not often made in May. The proclivity of wings' price tendency to fall after March Madness, combined with the abundant supply promised by surging egg sets through the first three months of the year, precluded indolence with respect to projections during this time frame. Many analysts anticipated that the depletion of inventories would begin to subside following the end of March. However, wings continued to carry a premium through April and again into May, which suggests that wing inventories had been depleted and stocks were not building as they normally begin to in March. Indeed, according to the most recent U.S. Department of Agriculture “Cold Storage” report released last week, chicken wings continue to be popular, and consumption remains strong. Given the substantial increase in demand, the question is: Will this growth rate be manageable into the 2017-18 wing season?

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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