Beef: Tight front-end supplies of market-ready cattle continued to support the cash trade last week, at mostly $125/cwt., fully steady/firm compared to the week prior, while a much firmer undertone developed in the Western Cornbelt late last week. Spurred by limited production and higher cattle purchase costs, beef prices continued to escalate, with the blended cutout reaching near $207/cwt. by week’s end, about $9 above the week before and nearly $19 higher than the mid-February low. Spot beef sales have slowed sharply as prices escalated, perhaps hinting at some inventory accumulation despite limited production volumes. Weekly steer and heifer slaughter has slipped to the 455-460,000 head range, down from an average near 480,000 in January, reflecting the smaller Sep./Oct. feedlot placements, and may hold in that range into early spring. However, larger feedlot placements recently point to seasonal and year-over-year increases in fed cattle supplies heading into the summer months, averaging 5-7% above a year earlier.
Pork: The belly is priced higher than the rib complex; however, ribs are getting stronger each day even as the belly may erode further. As rib prices move upward, it will provide some compensation to the cutout value helping to sustain it above the $80 mark. The cutout is entering a time when there is seasonal risk to the upside. This is driven by not only further strength in the ribs but the seasonal strength in the butts and trimmings as well. The cutout is not forecast to move lower. In fact, it may be at its lowest point right now until the summer is over. Sure, the bellies could drop further, but the combined force of the other primals moving upward currently could keep the cutout value actually moving higher.
Poultry: U.S. broiler meat exports are forecast to rebound 8% overall this year to 7.18 billion pounds. Even with the strong increase in exports anticipated this year, domestic availability of broiler meat is going to be relatively robust. Advancements in output, with production expected to be up over 3%, along with large availability of competing proteins, should continue to keep broiler prices under pressure this year. While Mexico continues to be the largest importer of U.S. broiler meat, their portion has contracted from what was at one time more than 26% annually to just over 21% overall in 2016. Still, as Mexico pulled back on trade restrictions last year, drastic improvements have been shown up. At 122 million pounds, December broiler imports to Mexico were even with the monthly average the previous year. Increased instability triggered by the reopening of NAFTA negotiations does not appear to be favorable; however, recent reports indicate that the modifications to the agreement may turn out to be limited.
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