October 31, 2017
Beef: Despite seasonally larger feedlot placements of heavier cattle throughout late spring to early summer and favorable packer margins, slaughter rates continued to moderate throughout the second half of October. Last week's 617,000-head level was considerably smaller than expectations, with a 103,000-head harvest on Friday accounting for a majority of the disparity in forecasts. Additionally, lighter carcass weights have continued to hamper total beef production, with last week's production dipping below a year ago for the first time since mid-January. Despite the larger placements throughout the early summer months, slaughter rates are expected to hold in the upper 620,000- to lower 630,000-head area, leaving steer and heifer slaughter running in the 500,000- to 505,000-head range, save for upcoming holiday-reduced slaughter schedules. Further modest seasonal easing is expected into early winter towards the 490,000-head level.
Pork: Cold storage for September revealed stocks of 616 million lb., above August levels by 40.6 million lb. This change from August is not a record increase going into September but is the largest absolute addition in the last five years. Major notables in the report were loins, bellies and trim. Bellies in cold storage rotation were not the numbers many in the industry were looking for. Some analysts expected bellies going into rotation at an increasing rate, but numbers revealed otherwise. August levels were 19.21 million lb., and September levels were 20.91 million lb., below the prior year by 4 million lb. (16%). This does not represent an alarming level for September but does set expectations moving forward. If the industry is going to avoid significant price volatility, cold storage programs will need to be at higher levels than the industry accomplished last winter.
Poultry: Broiler live weights began to flatten early in 2017, which was surprising to observers, especially considering that feed costs were expected to be near decade-low levels. However, the industry has managed to keep bird weights from largely advancing this year, and save for the U.S. Department of Agriculture's September "Poultry Slaughter" report released last week showing that broiler live weights averaged 6.25 lb. (a historic high), the annual advance is expected to stay under 0.5% compared to the previous year. This is a rather slow advance, considering that the annual average increase was 1.4% in the 10 years prior to 2016. At times, weights advanced by as much as 2% compared to prior-year levels. The monthly report showing the 6.25 lb. average live weight was surprising, considering that the weekly data averaged just 6.22 lb. Despite the uptick, bird weights are expected to again flatten out over the next three reporting months.
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