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Feedstuffs Meat Price Outlook: May 7, 2019

Pork producers slated to make record profit levels for next few months.

Beef: The cash cattle trade again developed early last week, with all regions showing weakness. Live sales in the South were down $3 at mostly $123/cwt., with a few sales reported at $122. Dressed sales in the North dropped by $5 to mostly $200, although there were some sales even lower at $198. There was a counter-seasonal decline in the Choice cutout by $5-6 last week, with weakness evident across all the major primals. Past years that have seen this pattern in early May have also seen rebounds into Memorial Day. Last week's cattle harvest estimate jumped to 670,000 head, the largest since the end of September 2011. Harvest levels should remain strong through May and into June. Beef production was estimated at 538 million lb. for this week, 3.5% larger than a year ago. For the week ending April 20, weekly carcass weights declined from the prior week but moved back in line with year-ago levels.

Pork: Producers have a degree of leverage for this time of year, and that is the relative tightening of hog availability, which is projected to trend lower into the summer. Producers are not likely to pull back on hog valuations, with the hog index forecast on the high side of distribution. In fact, the second quarter is typically the most price-sensitive time for hog valuations, and the last time hog prices were this far above the distribution curve was during the outbreak of porcine epidemic diarrhea virus in 2014. Meanwhile, producers are slated to make record profit levels for the next few months, helping to negate the losses experienced in the first quarter. These profit levels are motivating producers to hold onto sows longer in their breeding herd as well as find ways to maximize production and expansion into next year. Banks are on notice and willing to open up conversations about lending and herd expansion as China battles African swine fever.

Poultry: Support from the back half of the bird has been rather remarkable lately, with leg quarter prices climbing and ending stocks remaining at their lowest point in nearly a decade. During January, U.S. broiler meat exports remained at a steady pace above the year before, up 5.9%. February totals were a bit more sluggish to advance, and total exports were down 0.6% compared with the previous year. Mexico was again the top export destination, taking a total of 106 million lb., a 14% decline from the previous month but up 3.5% compared with a year earlier. Elsewhere, growth continued. The combined markets of Hong Kong, Taiwan and Vietnam have seen strong growth due to the loss of direct access for U.S. broiler meat exporters to China, and the February total was up 19% versus a year earlier to 101 million lb.

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