Grilling up supply/demand info

Grilling up supply/demand info

Start to summer grilling season should bring answers to traders' questions about meat and poultry supply and demand.

CONSUMERS will fire up the grill for the official kickoff of the summer grilling season over Memorial Day weekend.

The seasonal test of demand for meat and poultry has arrived, and traders will be anxious to learn which meat or poultry items consumers actually will choose this summer as retail meat prices surge.

Normally, wholesale beef values peak in the weeks prior to the Memorial Day weekend, while cattle availability normally increases. As a result, the combination of improving cattle supplies and consumer demand usually puts packer margins in the black, Steve Meyer and Len Steiner said in the "Daily Livestock Report."

However, this year has been everything but normal. The year began with a deficiency of market-ready cattle.

Wholesale beef prices have been instable but currently are sliding down from their record highs at the beginning of the year — although they are still approximately 17% above last year. In April, retail Choice beef reached a fresh peak of $5.87/lb., 15 cents higher than March and 64 cents higher than a year ago.

It is reasonable to accept that consumers will probably pay the premium for beef at the beginning of summer, particularly after the harsh winter, but sustaining demand for high beef prices at the meat counter through August seems to be the question of the day.

Moreover, the U.S. Department of Agriculture's "Cattle on Feed" report released May 16 showed that cattle on feed in U.S. feedlots with a capacity of 1,000 head or more on May 1 totaled 10.64 million head, down 1% from a year ago, while the inventory of cattle that have been fed for more than 120 days declined 8% from 2013 (Table).

This will make 21consecutive months that the cattle-on-feed number is below the previous year's level, said Ron Plain, University of Missouri economist and author of the weekly cattle outlook.

Moreover, April placements of cattle into feedlots declined 4.9% from 2013 to 1.6 million head. The lower placements make the report slightly bullish, Plain explained.

Meyer and Steiner added, "Placement weights were lower than last year, with the distribution of those weights suggesting that feeders were 'dipping deeper' into the feeder cattle supply."

The April placement weight averaged 724 lb., which was 4.5 lb., or 0.6%, lower than last year but 4.1 lb. higher than the five-year average for April. At the same time, placements weighing under 600 lb. increased 4.1% from last year, while the number of animals weighing over 700 lb. dropped 7.8%.

USDA said marketings of fed cattle during April reached 1.78 million head, down 2.1% from last year. This is the lowest April marketings number for the month since 1996.

Heading into the summer months, feeder supplies are already restrained, and the quest to maintain feedlot inventory will trek onward.

Currently, feeder prices are at a premium compared to fed cattle prices and probably have reached their peak. As the southwestern drought strengthens and spreads, there could be early marketings of calves, and ranchers may release some heifers that were being held for replacement.

For packers, margins are in the red at this point. Interestingly, slaughter numbers have declined as packers filled orders for the holiday weekend, Meyer said. After the Memorial Day business comes to a close, packers may not be as motivated to chase down cattle.

 

Feedlot inventory

 

2012

2013

2014

2014 as %

Category

-Million head-

of 2013

April 1 inventory

11.861

11.172

10.873

100

April marketings

1.816

1.892

1.636

95

April placements

1.847

1.869

1.778

98

May 1 inventory

11.571

11.070

10.648

99

Source: U.S. Department of Agriculture.

 

Livestock slaughter

According to the USDA "Livestock Slaughter" report, January to April 2014 red meat production, at 15.7 billion lb., was down 3% from last year (Figure 1).

For April, beef production was down 4% from 2013 to 2.04 billion lb. Cattle slaughter totaled 2.59 million head, a 5% decline from the previous year, but the average liveweight of 1,306 lb. was a 10 lb. increase from a year ago.

Pork production in April was at 1.91 billion lb., down 2% from a year ago. Hog slaughter totaled 8.85 million head, a 5% drop from April 2013, and the liveweight averaged 287 lb., up 10 lb. on the year.

Grilling up supply/demand info

Cold storage

In order to stock up for the grilling season, the amount of red meat and poultry in freezers in April increased from the previous month but was down from year-ago levels.

The total amount of beef in freezers in April was down 1% from March but dropped 21% from 2013 levels. On the other hand, frozen pork supplies actually were up 1% from the previous month but declined 17% from last year. Stocks of pork bellies were up 4% from last month and increased 47% from 2013 (Figure 2).

At the end of April, total frozen poultry supplies had climbed 3% from March but had dropped 16% from a year ago. For chicken, total stocks were down 2% from March and down 15% from 2013. The total amount of turkey in freezers was up 12% from March but down 18% from the previous year.

Grilling up supply/demand info

Volume:86 Issue:21

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