Beef: Supported by tight front-end supplies of market-ready cattle, the cash trade surged about $5 higher last week to mostly $124-125. Spurred by limited production and higher cattle purchase costs, beef prices escalated as the week progressed, with the blended cutout reaching almost $198/cwt. at week’s end, about $8 above last week’s close. The U.S. Department of Agriculture’s monthly “Cattle on Feed” report confirmed larger feedlot placements in January that were 11% higher than last year, as well as 10% larger marketings and a 1% larger Feb. 1 feedlot count. The larger January feedlot placements follow the large increases in November/December. While still historically large, January placements of cattle weighing more than 800 lb. were slightly below last year, but large increases in the 600-800 lb. category will keep the late-spring and early-summer months well supplied. Weekly volumes are expected to move sharply higher in late April, followed by further increases in late spring and summer, regularly reaching into the 520,000- to 530,000-head range and averaging 5-7% above a year earlier.
Pork: USDA also released its "Cold Storage" report late last Thursday, with the industry anxiously awaiting news of a possible rebound in cold storage levels. The report provided mixed results and certainly showed an increase in total cold storage numbers from December's lows. Stocks may not be at appropriate levels yet to alleviate the pull on fresh product during periods of stronger demand that typically lead to extreme price volatility. January's total in cold storage was 526.7 million lb., up 10% from December but below the five-year average by a similar 10%. By starting the year out at such a relatively low number, the industry needs to decide whether stock building should continue at a stronger pace before summer demand increases.
Poultry: Tenders have been over-performers in the early weeks of 2017. The unseasonably warmer weather may have spurred some additional interest in the front half of the bird, playing to the favor of the integrators. In the late-summer to early-fall period in 2016, buyers were converting marketing plans to account for breast meat quality issues, and it appears that much of that purchasing behavior has emerged again, so current market participants are taking advantage of bearish market conditions that materialized in November and December. While it is not necessarily inconsistent for seasonal demand to pick up early in the first quarter of the year, the swings in the market year to date have been remarkable. After remaining relatively flat in the mid- $130s through much of December and January, market activity has created a runup of nearly 25% of January values. Recent market activity suggests that IEG outlook to follow a path slightly above year ago and peak seasonal demand may actually represent the bottom of the trading range.
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