Snow raises angst

Snow raises angst

- Cold, wet spring stalls planting, creating worries about corn crop. - Chickens grown to increasingly heavier weights. - Beef price s

AN extraordinarily heavy May snowstorm closed highways across the Midwest last week, and, for livestock and poultry producers who desperately need a record grain harvest this fall, created a new panic: Will 97.282 million acres get planted to corn, as the U.S. Department of Agriculture estimated in March, and if so, will it provide the expected yield?

There is reason for the anxiety.

USDA's planting progress report last week revealed that farmers have planted only 5% of those acres, which compares with a normal 31% at this time of year and 53% last year and is tied for the record-low planting progress in 1985.

The heart of the Corn belt — Indiana, Illinois and Iowa — was especially far behind.

Allendale Inc., in a morning note, suggested that this could force USDA to decrease acreage and yield expectations in its supply and demand report this week, which could mean higher-than-expected corn costs in the 2013-14 feeding year.

This would be bad news for chicken and hog producers who are expanding their flocks and herds to increase production this year and are banking on record acreage and yields and lower feed costs to do so, the company advised.

Furthermore, observers said the 97.282 million expected acreage is 5.4 million acres more than was planted in 2011, about 2.5 million acres of which will be in North and South Dakota, where planting progress was zero last week.

However, observers also took a deep breath and noted that farmers, operating today's tractors and pulling today's planters, can get ground planted quickly once it dries out.

Even in a worst-case scenario — the additional ground in the Dakotas does not get planted — a normal, trend-line yield still will bring in a corn harvest this fall that's considerably larger than year ago, Feedstuffs sources said, noting that the key will be yield, not acreage.

 

Market roundup

The chicken markets were steady last week as demand for menu promotions in the fast-food sector and for tray pack sales in the retail sector cleaned up both dark meat and white meat, sources said.

Chickens were $1.06-1.10 and 98 cents to $1.05/lb. in the eastern and midwestern regions last Thursday, unchanged from the week before and 29.3% higher than the year before.

Breasts were $1.13-1.19/lb., 3-5 cents higher than the week before and 28.9% more than the year before, and breast meat was $1.81-1.82/lb., 7-8 cents more than the week before and 32.5% over the year before.

The importance of chicken breasts and breast meat is clearly demonstrated in the shift toward heavier and larger birds, with lighter-weight chicken production decreasing in recent years and heavier-weight production increasing, according to USDA (Figure and Table 1).

The heaviest-weight birds (6.26 lb.-plus) are marketed deboned to further processors and retailers for breast meat and individually quick-frozen products to meet increasing consumer demand for convenience, USDA said.

Commenting on this trend, Steve Meyer and Len Steiner, in an edition of their "Daily Livestock Report" last week, said it's "pretty remarkable" that the two heaviest-weight categories have increased from 33.1% of production in the first four months of last year to 37.9% this year, given record-high costs for feed and the fact that bigger and older chickens do not convert feed as efficiently as lighter and younger birds.

However, Meyer and Steiner said growing birds to heavier weights means chicken companies can spread their fixed costs — breeder flocks, hatcheries, growouts, plants and labor — over more and more pounds. Increasingly, chicken producers are marketing pounds of product, not birds, they said.

The cold storage report demonstrates the success of this strategy, with breasts and breast meat in warehouses at the end of March less than year ago (Table 2), sources said. Unfortunately, storage for leg quarters and wings points to weakness in the export markets and wing demand, sources noted.

Elsewhere in the poultry sector, the egg markets began regrouping last week after a plunge of more than 50 cents from an Easter peak as prices slid so low that they generated retailer interest in promotions, sources said.

Eggs increased 7-10 cents to $1.04-1.08 and 94-96 cents/doz. for large-sized eggs delivered to eastern and midwestern store doors last Thursday, 29.3% higher than year ago.

Producers held production with confidence, anticipating additional demand and higher prices this week, sources said.

The turkey markets were unchanged to up 1 cent at an average offer last Thursday of 95 cents to $1.01/lb. for hens and 92 cents to $1.01/lb. for retail-sized toms, 9.7% and 11.9% lower than year ago. Fresh tom breast meat was unchanged at $1.55/lb., 16.2% under year ago.

Turkey stocks indicated the extent to which the industry ended last year with excess production, as well as normal storage buildup at this time of year for demand for fall, sources said.

In the livestock markets last week, cattle traded last Wednesday at $128.50-130.50/cwt. on the northern Plains and $128.00/cwt. elsewhere, mostly unchanged from the week before and 7.2% higher than the year before.

Beef demand started picking up for expectations of better grilling weather — despite the snowstorm — and for Memorial Day weekend later this month and Father's Day weekend in June, sources said. Indeed, the Choice cutout increased $9.04 last week to $200.58/cwt., establishing a new record high, 40 cents more than the previous high in October 2003.

Analysts said consumers are adjusting to increased payroll taxes and have a pent-up desire for beef, but at the same time, chicken and pork supplies are abundant and competitively priced, which could limit any springtime run for cattle and beef.

Beef stocks remained in a good position at the end of March, sources said.

Hogs traded agonizingly close to breakeven last week, increasing $4.90-8.82 cents to $84.08-87.08/cwt. on a lean carcass basis last Thursday. Prices were equivalent to a $63-66 cash hog market, just under costs of production and 12.4% higher than year ago.

Analysts said the short-term fundamentals for hogs and pork are good, with farmers trying to get into their fields and lots of fieldwork ahead when they do, with seasonal demand for pork picking up and with attractive prices for pork relative to beef.

However, analysts said the long-term outlook includes increasing pork production, poor to very poor exports (historically) and stronger poultry production.

The export situation is reflected in ham stocks, which are well above year ago, likely because of decreased exports to Mexico, sources said.

In the dairy markets, butter decreased 0.5 cent to $1.6850/lb. last Thursday, and barrel cheese and block cheese increased 1.0 cent and 4.5 cents to $1.70 and $1.9050/lb. Butter, barrels and blocks were 25.3%, 15.6% and 24.1% higher than year ago.

Analysts said fluid milk sales continued to decrease largely due to decreasing cereal sales, with 30% of milk consumed at home on cereal. Analysts said this means more milk is going into butter and cheese production, but milk production is down throughout the world, creating good demand for U.S. dairy products.

Snow raises angst

 

1. Change in chicken weight categories (%)

Category

2010

2011

2012

2013

4.25 lb. and under

25.3

23.7

24.0

25.8

4.26-6.25 lb.

49.1

44.8

42.9

36.3

6.26-7.75 lb.

12.9

16.7

18.1

20.1

7.76 lb.-plus

12.7

14.7

15.0

17.8

Source: U.S. Department of Agriculture.

 

2. Cold storage report, March 31 (selected stocks)

 

March 31,

Feb. 28,

March 31,

%

%

 

2012

2013

2013

month

year

Category

-Million lb.-

before

before

Dairy products

 

 

 

 

 

Butter

208.253

238.342

254.801

106.9

122.4

Cheese products

 

 

 

 

 

American

651.005

661.019

680.222

102.9

104.5

Swiss

28.872

30.130

30.503

101.2

105.6

Other

365.596

377.607

391.393

103.7

107.1

Total cheese

1,045.473

1,068.756

1,102.118

103.1

105.4

Egg products

33.669

28.620

26.997

94.3

80.2

Meat products

 

 

 

 

 

Beef products

503.170

489.978

513.243

104.7

102.0

Pork products

 

 

 

 

 

Bellies

66.031

42.976

51.491

119.8

78.0

Hams

80.087

110.763

94.967

85.7

118.6

Loins

43.782

42.347

44.342

104.7

101.3

Ribs

101.893

119.439

121.283

101.5

119.0

Trimmings

68.147

64.372

66.127

102.7

97.0

Total pork

610.318

633.399

648.789

102.4

106.3

Lamb, mutton

21.846

19.833

17.692

89.2

81.0

Veal

4.500

4.858

5.782

119.0

128.5

Total meat

1,139.834

1,148.068

1,185.506

103.3

104.0

Poultry products

 

 

 

 

 

Chicken products

 

 

 

 

 

Whole chickens

16.642

16.409

14.880

90.7

89.4

Breasts, breast meat

123.259

128.153

122.828

95.8

99.7

Leg quarters

72.400

111.805

99.565

89.1

137.5

Wings

33.183

63.305

74.922

118.4

225.8

Total chicken

574.455

641.308

617.886

96.3

107.6

Turkey products

 

 

 

 

 

Hen turkeys

86.829

88.093

93.004

105.6

107.1

Tom turkeys

71.457

82.841

97.117

117.2

135.9

Whole turkeys

158.286

170.934

190.121

111.2

120.1

Breasts

64.523

66.655

69.779

104.7

108.1

Total turkey

375.268

394.755

401.600

101.7

107.0

Ducks

2.546

1.482

1.492

100.7

58.6

Total poultry

952.269

1,037.545

1,020.978

98.4

119.8

Total meat, poultry

2,092.103

2,185.613

2,206.484

101.0

105.5

Source: National Agricultural Statistics Service.

 

Volume:85 Issue:18

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