August 22, 2017
Beef: Total beef production grading Choice or better (Ch+) has escalated sharply into midsummer. For the week ending Aug. 5, Ch+ beef production was up nearly 12% from last year (or 36 million lb.) and up 7% year to date. Increases in cattle grading Ch+, coupled with seasonally lower interest in beef throughout the "dog days of summer," have pressured the Choice/Select spread towards the low $2 area, notching the narrowest weekly average spread for any summer month (June to September) since 2005. While Ch+ beef production is at an all-time high, weekly average steer and heifer slaughter continues to run 5-7% larger than a year ago, holding in the 500,000- to 510,000-head area. Steer and heifer slaughter is expected to reach the 515,000- to 525,000-head area through the back half of August and into September. This week’s harvest, estimated at 634,000 head, was in line with the low end of expectations. Weekly slaughter schedules are expected to remain in the 635,000- to 640,000-head range throughout the remainder of the summer before easing into the 630,000- to 635,000-head area in the fourth quarter.
Pork: The pork cutout moved lower -- on pace with normal seasonal declines -- losing almost 3%, on average, this week. This similar 3% price reduction is expected next week as well, as the belly continues to break on pace with nearly twice that rate of decline. The cutout is expected to keep its current pace for the next three or four weeks and will likely slow in descent only at the time the belly slows. By the end of August, the cutout will likely be above the prior year by roughly 12%. Unlike 2016, however, the cutout is not projected to move seasonally higher in September or October, with little upward price risk expected, although the decrease may slow after bellies normalize in price.
Poultry: Broiler dark meat has been a mixed bag over the last couple of weeks. While domestic markets have been working higher for disjointed items and boneless/skinless thigh meat, the limited calls for leg quarters have kept a lid on those prices. Wholesale prices for leg quarters averaged 43 cents/lb. this week, which was almost even with last week and roughly 10 cents higher than during the same week a year ago. Leg quarter values are expected to stay relatively neutral through the end of August and then drift lower out into the fall months. Recent news that China’s commerce ministry has launched an antidumping investigation into poultry imports from Brazil could mean good news for U.S. broiler meat exporters looking to regain direct access to China’s markets, especially in front of reports that China’s domestic broiler processors and farmers are in the middle of recovery efforts from one of the nation’s worst bird flu outbreaks in years. At this point, however, that conclusion is probably a bit too premature.
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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