Hogs catch fire

Hogs catch fire

- Hog prices crack $100 and give producers first profits in 12 months. - Feedlot placements turning bullish outlook bearish. - Egg mar

BEEF is like a tide that's lowering all ships as continued limited beef production is offsetting recoveries in chicken and pork production, which is holding back per capita supplies of all meat and poultry.

All livestock and poultry producers started decreasing production in 2008 in response to rapidly increasing and record-high corn costs. The concept was to decrease production enough to decrease supplies enough to increase prices for their animals enough to cover feed costs.

It should be noted that the beef industry also has responded to two years of drought in the Southwest and western U.S., which has held back herd rebuilding and kept the cow herd at a 50-year low.

Chicken and pork producers have now started to increase production — taking the meat case by the Freon — and chicken and pork production in 2013 and 2014 will actually exceed that of 2008, according to U.S. Department of Agriculture estimates last week (Table 1).

However, total meat supplies and total meat and poultry production will remain under 2008 because of the extent to which beef production this year will be 4.2% lower than in 2008 and next year will be nearly 10% lower.

Because of this, per capita consumption (supply) of total meat and total meat and poultry will remain under 2008, according to the estimates.

Although chicken and pork supplies, on a per capita basis, this year and next year will match or nearly match 2008, beef supplies will be almost 10% and 15% smaller this year and next year, and total meat supplies and total meat and poultry supplies will remain well below 2008 (Table 2).

This production and supply situation supports higher prices for livestock and poultry (Table 3) — enough for pork and poultry producers to begin covering costs — and underlies record-high and near-record-high beef, pork and chicken prices in retail stores, according to Feedstuffs sources.

 

Hog markets

The hog markets caught fire last week and increased $7.10-8.43 to $100.35-102.89/cwt. on a lean carcass basis across the Corn Belt last Thursday, 8.3% higher than at this time last year.

Prices were equivalent to a $76-78 live cash hog market, meaning hogs were profitable for the first time in 12 months and more profitable than producers have been for more than 18 months.

Bellies, ham and loins all increased in price last week, and the cutout also cracked $100 and was $100.16/cwt., 9.4% higher than year ago, although the comparison involves two different series since the mandatory price reporting series started in April.

Hogs were supported by limited market-ready supplies — last week's kill was estimated to be the smallest of the year — and strong demand for pork both as an alternative to high-priced beef and for the Fourth of July weekend, which this year will be at least a four-day weekend, sources said.

Futures were also bid considerably higher — the June boards by more than $4.00 and the July and August boards by more than $3.00. The boards were considering the current supply and demand situation, sources said.

The boards were also "jacked up" by talk about exports to China based on expectations for sales because of the deal between China-based Shuanghui International and Smithfield Foods Inc. (Feedstuffs, June 3), sources said.

However, they cautioned that this talk is dangerously premature as the acquisition may not actually go through and the U.S. pork-to-China link has not been defined yet if the deal does go through.

The futures settled last Thursday, as in recent weeks, at levels that would indicate profits through August, losses through the rest of the year and a return to profits early next year through at least next summer.

Sources also warned that pork exports are significantly weaker this year than in 2012 — down 15% in the first quarter and down 11.9% in April — and that pork prices are getting so high that pork is not as competitive next to beef as it was a few weeks ago.

The hog and pork markets cannot sustain current prices without an improvement in exports, and "pork is no longer cheap," Dennis Smith at Archer Financial Services said in a couple of wires.

 

Market roundup

Elsewhere in the livestock and poultry markets last week, cattle again did not trade in sufficient volume to establish prices and, at week-before levels, were $123-124/cwt. on the northern Plains and $122 on the southern Plains last Thursday, 3.8% higher than year ago.

The Choice cutout decreased another $2.00 and has lost almost $11 since hitting a new record high in May. Choice was $200.63/cwt. and Select was 184.37/cwt., 1.2% and 1.3% more than year ago.

Beef tends to decline seasonally from now until mid-August, and packers will be slow to bid on cattle to hold margins, which suggests that demand for cattle will be weak most of the summer, Bob Price at North America Risk Management Services Inc. said in a Monday note.

Then, as demand improves this fall, cattle supplies will increase due to a large number of heavyweight March and April placements, he said, and "a very bullish market" will turn "very bearish."

The feedlot inventory released last Friday was expected show a slowdown in the number of placements but not in the size of placements, which means that fed cattle will continue to be market ready earlier than usual and will weigh on the cattle markets well into the fall, Price said in his pre-report estimates.

The chicken markets were lower and weaker, with breast meat "all over the place," sources said.

Chickens were down as much as 10 cents to $1.07-1.16 and 95 cents to $1.05/lb. in the eastern and midwestern regions last Thursday but still were 33.5% more than year ago.

Breasts were down 3 cents to $1.24/lb., and breast meat was down 11-14 cents to $1.57-1.83/lb. Sources said demand for breast products was softening following the introduction of new chicken products in quick-service restaurants and promotions in retail stores. (Chicken producer Sanderson Farms Inc. noted that its strong quarter-two results were due largely to new products and promotions.)

Breasts and breast meat still were 44.1% and 33.9% over year ago.

Full wings increased 2-3 cents to $1.34-1.46/lb. but remained 19.1% under year ago.

The egg markets finally stopped the collapse that began last month when prices rose so high that buyers left the market.

Eggs were unchanged at 94-98 cents and 85-87 cents/doz. for large-sized eggs delivered to eastern and midwestern store doors last Thursday and were 8.6% lower than year ago. Eggs were off almost 40 cents from mid-May.

"The bleeding has stopped," and markets should be steady to firm this week, one source said, adding that the lower prices are starting to get retailers' attention.

The turkey markets were unchanged last Thursday at 95 cents to $1.01/lb. for hens and 92 cents to $1.01 for retail-sized toms, 6.7% and 8.0% lower than year ago.

The good news was that fresh tom breast meat finally rose, picking up 3 cents after being unchanged for nine straight weeks, and was $1.58/lb., 14.6% under year ago. Sources said warmer weather is starting to bring out demand for cooked and deli meats.

In the dairy markets, butter was unchanged at $1.54/lb. last Thursday, 5.8% higher than year ago; barrel cheese was up 3 cents to $1.7725/lb., 12.7% higher than year ago, and block cheese was down 1.75 cents to $1.7225/lb., 4.7% more than year ago.

"There is a significant upside to the markets," according to Jerry Dryer, whose reports are available at www.dairymarketanalyst.com.

He noted that supplies are tight outside the U.S., making U.S. butter, cheese and nonfat dry milk powder very competitive in global markets. He added that dairy exports are increasing more than production.

 

1. Dairy, meat and poultry production

 

 

 

Total

 

 

Total

Total meat

 

 

 

Beef

Pork

meat

Chicken

Turkey

poultry

& poultry

Milk

Eggs,

Year

-Billion lb.-

bil. doz.

2008

26.561

23.347

50.225

36.908

6.246

43.712

93.397

190.0

6.403

2012

25.913

23.253

49.439

37.039

5.967

43.523

92.962

200.3

6.722

2013

25.437

23.427

49.131

37.768

5.959

44.241

93.372

201.8

6.805

2014

24.105

24.025

48.389

38.850

6.175

45.560

93.949

204.5

6.940

2013 as % of 2012

98.2

100.7

99.4

102.0

99.9

102.3

100.4

100.7

101.2

2013 as % of 2008

95.8

100.3

97.8

102.3

95.4

101.2

100.0

106.2

106.3

2014 as % of 2013

94.8

102.6

98.5

102.9

103.6

103.0

100.6

101.3

102.0

2014 as % of 2008

90.8

102.9

96.3

105.3

98.9

104.2

100.6

107.6

108.4

Note: Eggs are table eggs as reported by the U.S. Economic Research Service.

 

2. Meat and poultry per capita consumption (supply)

 

 

 

Total

 

 

Total

Total meat

 

 

Beef

Pork

meat

Chicken

Turkey

poultry

& poultry

Eggs,

Year

-Lb.-

number

2008

62.7

49.4

113.5

83.4

17.6

101.0

215.9

248.3

2012

57.4

45.9

104.5

80.4

16.0

97.8

202.2

249.7

2013

57.1

47.0

105.3

81.8

16.4

99.5

204.8

252.0

2014

54.3

47.6

103.0

83.5

16.8

101.6

204.6

254.1

Note: Meat and poultry consumption is retail weight basis.

 

3. Meat, poultry, milk and egg prices

 

Steers

Hogs

Chickens

Turkeys

Milk,

Eggs,

Year

-$/cwt.-

-Cents/lb.-

$/cwt.

$/doz.

2008

92.27

47.84

79.7

87.5

18.29

1.28

2012

122.86

60.88

86.6

105.6

18.53

1.17

2013

127.50

60.00

103.5

100.0

19.80

1.18

2014

133.50

58.00

92.0

98.5

19.45

1.12

Note: Steers are average of all grades. Hogs are liveweight basis. Prices for 2013 and 2014 are at midpoint of ranges.

Source for Tables: USDA "World Agricultural Supply & Demand Estimates."

 

Volume:85 Issue:24

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish