December 26, 2017
Beef: Last week started out fairly aggressive, with daily slaughter levels mostly even with the prior week, but with Christmas falling on a Monday, plants appeared to have pared back Saturday slaughter schedules, tempering last week's total volume to 612,000 head. In addition to the Saturday slowdown, both this week and the first week of 2018 will be one Monday down from Christmas day and New Year's day disruptions. However, year-over-year increases are expected to remain in the 3-5% range. The larger inventories of cattle on feed are expected to keep feeders aggressive selling into the new year, with fed cattle harvests expected to run in the 460,000- to 480,000-head area, or 3-5% over the prior year, throughout the first quarter of the year. Along with larger fed cattle harvests, cow slaughter is expected to remain aggressive, running in the 118,000- to 122,000-head area into the new year, which is 4-5% over the prior year.
Pork: The cutout moved lower again last week, more than seasonally normal and completely opposite last year at this time. The move lower was based on the continuing price corrections of the hams and bellies, as price was coming down from unsustainable highs a few weeks ago. The cutout is now priced below prior year and is likely going to experience one more week of average price softness on bellies and hams. Any additional price concessions next week are likely to be slight, with significant support above $75 probable. After the turn of the calendar year, prepare for increases -- albeit a tempered seasonal move -- for six or seven weeks. The cutout is currently projected to stay below prior-year levels for the next 45 days but could move higher in March. On an average annual basis, the cutout forecast is for a 7% discount in 2018 compared to 2017.
Poultry: With two new big-bird production facilities on line and roughly as many plant upgrades occurring, it was initially expected that 2017 production would exceed 2016 production by nearly 3.9%. However, as bird weights flattened and front-end supply gains delayed due to hatchability issues, year-over year gains are expected to be closer to 2% this year and 3.4% overall next year, with total production of broiler meat in 2018 reaching 42.9 billion lb. overall on a ready-to-cook basis. Breast meat freezer inventories have been historically large since December 2016, and while the focus in 2017 has been on fresh meat, significant opportunities for IQF should arise during the winter months this year and present a strong opportunity for spring feature activity. Despite the instability surrounding North American Free Trade Agreement discussions and the implications for U.S. broiler integrators’ largest trading partner, Mexico, the outlook remains relatively neutral with respect to dark meat prices for 2018.
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