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February ‘bad time’ for meat businessFebruary ‘bad time’ for meat business

Red meat and poultry prices head lower.

Krissa Welshans 1

February 9, 2018

2 Min Read
February ‘bad time’ for meat business

There's a bit more weakness continuing in cash cattle prices, and margins are continuing to deteriorate on the beef packing side, David Williams, director of global protein at Informa Economics IEG, recently told Feedstuffs.

“We’re starting to see things have a little bit of trouble. We really haven’t seen futures break too much,” he said, adding that they tried to rally all last week but failed multiple times. 

While the cutout has started to drift lower, the declines haven’t been steep, Williams said.

There is a lot of debate in the hog sector right now, he said. February futures contracts expire Feb. 14, and the index is still about $1.50 higher than where contracts have been closing. Williams said he believes futures are pretty well priced, adding, “It might be 30-40 cents too high, but we’re going to settle somewhere in the $72.80-73.00/cwt. range.”

April, on the other hand, has done a nosedive from its highs of $77/cwt. to where it is now, at around $69, he noted.

For the cutout, Williams said bellies have been tanking. Bellies closed at $150.15/cwt. on Feb. 1 but closed at $126.70 just one week later. “The export side is weaker in February, so we’re seeing the cutout really start to tumble,” he explained.

In other words, this month is not a good time to be in the meat business, Williams said.

The same type of news is happening on the poultry side. Large supplies of competing meats are putting more pressure on poultry prices. “Everything is getting cheaper,” he said.

A concern for the poultry industry right now is whether the recent grain rally has staying power, Williams noted, and the industry is “watching things closely.”

The U.S. Department of Agriculture lowered its soybean export figure in the latest “World Agricultural Supply & Demand Estimates” report because exports to China are running behind. Beans rallied as a result, but Williams said it is more of a weather market than anything right now due to the expanding drought in the U.S.

Corn broke the contract high on Feb. 8. Williams projects that corn futures could rise to the $3.46-3.65/bu. range. “I think we’re going to put a lot more weather premium in corn,” he added.

Williams said a 10 cents/bu. rise in corn isn’t going to make or break animal agriculture. However, he noted, “If we rally to $4.30-4.50/bu., then that’s a game changer.”

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