Beef: Limited front-end supplies of market-ready cattle and mostly steady beef prices again countered the historically strong basis and deep discounts on summer futures contracts, leading to a higher cattle market last week that advanced $2-4/cwt. However, larger out-front cattle purchases in recent weeks, coupled with favorable operating margins, boosted steer and heifer slaughter sharply higher, with total slaughter climbing to 613,000 head, the largest weekly volume since late last fall and far above last year’s 550,000. Beef prices stabilized this week, with the blended cutout closing the week near $220/cwt., about $1 lower than a week earlier but still well more than $30 higher than the mid-February low. The monthly “Cattle on Feed” report confirmed smaller placements in February, at 99% of last year; larger marketings, at 104%, and a March 1 feedlot inventory at 100% of a year earlier. The unfolding meat scandal in Brazil creates additional market uncertainty, but there is little assurance that U.S. beef exports will benefit anytime soon.
Pork: Cold storage numbers reveal larger overall pork inventories than the prior month. The rate of increase from the prior month was exactly on pace with typical behavior for the product set as a whole, but not for each primal. Total pork in cold storage was 572 million lb., compared with 524 million lb. for January. Year-ago stock levels were 629 million lb., almost 10% more than current levels. The gap between this year and the five-year average is rather expansive and is not expected to narrow much in the short term. The industry is banking on larger fresh product quantities to compensate for lower-than-average cold stocks numbers. This strategy may result in a seasonality curve unlike any other for cold storage.
Poultry: Chick placements were strong last week but slightly lower than the prior week, with the report for the week showing 174 million chick placements, 1.8% above last year. Lagged chick placements, as a percentage of egg sets, usually reside in the 81.0-81.5% range this time of year and are used as a measure of integrators' intentions. Citing favorable margin expectations and an improving cutout, this number is in line with expectations at 81.7%. Slaughter continues to favor smaller bird weights in the most recent report, which showed average bird weights at 6.04 lb., bringing the 2017 cumulative average to 6.12 lb. This compares with a cumulative average of 6.16 lb. for the period ending the same week a year earlier. With the premium continues to spread for smaller birds, bird weights are expected to continue trending flat to lower through much of the second and third quarters of 2017. Given this information, expectations are for increased slaughter rates to support improvements in total ready-to-cook production during 2017.
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