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FEEDSTUFFS MEAT PRICE OUTLOOK: October 10, 2017

Pork industry readies for largest harvest yet.

Beef: Females in the cattle slaughter mix have been running well above a year ago, averaging 8% over last year through the first half of 2017. However, they have escalated to nearly 15% over the prior year from July into mid-September and are approaching longer-term historic averages for female slaughter. Given the larger cattle availability, coupled with an anticipated seasonal rise in the female slaughter amount, the increase in females should not be perceived as an indication of herd liquidation but, rather, a demonstration of the magnitude of herd expansion that has been noted over the past three years. However, the increase does suggest that a slowdown in herd expansion plans is underway. Following the 648,000-head slaughter for the week of Sept. 29, last week opened up with a plant under maintenance, posting just a 106,000-head Monday harvest and dropping the week's total to an estimated 632,000 head. While last week's harvest was in line with expectations, it does suggest a lackluster approach to increasing slaughter volumes amid larger cattle availabilities and profitable packer margins. Harvest levels are expected to remain in the upper 630,000s to lower 640,000s through the balance of October and into early November before easing into the low 630,000-head area.

Pork: The U.S. Department of Agriculture’s pig crop report showed that the number of hogs was 2.46% above last year. Market hogs increased by 2.57%, while this past summer's farrowings increased by 1.5%. The estimated fourth-quarter hog harvest is set to be record large, with an increase over last year of close to 4.5%. Including imported hogs, more than 33 million hogs will be harvested, which is an increase of 1.5 million. The industry has never put this many hogs through the system, and whether the new packing plants are ready to handle them or not, hogs will be ready and available, subject to demand only for price. One way or another, the hogs will get processed.

Poultry: It was assumed this summer that the wholesale market for wings would either overprice itself if values continued at record levels or that demand would overpower the age-old adage that high prices are killed by higher prices. Wholesale wing prices, according to USDA, averaged $2.10/lb. during August, which was an all-time-high for the month. Tighter supplies during September brought about a $2.13/lb. average. Analysts assumed, at that point, that the fall highs were nearly in, especially considering the transition of featuring plans by national foodservice outlets to rely more on boneless wing items in response to record-high prices as well as the production growth slated for the fourth quarter. With additional reports of discounting again this week, it should be noted that spot market reports of $2.15/lb. or higher have likely transitioned buyers to more heavily focus on further-processed breast meat and tender items to fulfill finger food promotion needs in the near term.

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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