Source: Lisa M. Keefe, MEATINGPLACE, 11/17/16


On the basis of October and early November slaughter data, the forecast for fourth-quarter commercial pork production has been raised by 30 million pounds to just under 6.7 billion pounds, a record level that is 3 percent higher than a year ago, according to USDA’s Economic Research Service’s “Livestock, Dairy and Poultry Outlook” report.

In 2016, weekly hog slaughter has been running generally above 2015 levels, with several recent weeks in excess of 2.5 million head. Estimated weekly slaughter for the week ending October 22 was 2.533 million head, the highest weekly slaughter since the series began in 1955.

Furthermore, preliminary slaughter data for the weeks thus far in November point to slaughter at or near 2.5 million head per week.

The fourth quarter of the calendar year is typically the one in which pork production achieves its maximum. In fact, fourth-quarter hog slaughter usually accounts for more than a quarter of annual slaughter.

Hog prices, then, will continue to reflect very large supplies of slaughter-ready animals. Average fourth-quarter live equivalent prices for 51-52 percent lean animals are expected to average $34-$36 per cwt, almost 22 percent below a year ago. At these price levels, it is unlikely that a large number U.S. hog producers are covering feed costs. Packer spreads remain very wide, even as wholesale values decline seasonally, meaning that hog prices are falling faster than pork prices. Consumers, however, are expected to benefit, to a limited degree, from large fourth-quarter hog supplies. The ERS Composite Retail Pork Value averaged $3.79 in September, down 5 percent from 2015, and is expected to average in the mid-$3.50s per pound during the fourth quarter.

U.S. pork exports in both September and third-quarter 2016 were year-over-year higher. September exports of 416 million pounds — 3 percent higher than a year ago — contributed to a strong third-quarter total of 1.236 billion pounds, 5 percent above the same period a year ago. Whether exports remain strong in 2017 and beyond is unclear, and much depends on whether a Trump Administration tries to make good on its campaign promises to shake up the U.S. trade picture.

Beef
October cattle prices were lower relative to September and last year. Weekly average fed cattle prices declined during the month, averaging about $100 per cwt compared to $131 in 2015. Prices in early November have averaged above $100, but still down significantly from a year ago.

Given the higher 2017 beef production forecast and the large amount of beef currently held in cold storage, prices are likely to remain under pressure. Beef production in 2017 is forecast to be just over 4 percent higher year over year compared to last month. Fed cattle prices for 2017 have been reduced from last month and are forecast to average $102 to $110 per cwt.

Lower cattle prices have begun to spill over into the retail price market. The retail Choice beef price in September, 2016 was $5.87 per pound, about 1 percent lower than August and 6 percent lower than 2015.

Beef imports also were down in the third quarter of 2016, 16 percent lower than the same period last year. Imports for the fourth quarter were revised downward 10 million pounds from last month’s forecast to 635 million pounds.

Third-quarter 2016 exports came in at 659 million pounds, up 22 percent from last year, and beef exports are generally running higher in 2016. However, September export data and reported October export sales were weaker than expected, and as a result, slight downward revisions of 10 million pounds in exports to 645 million pounds were made to fourth-quarter 2016.

Broilers
Third-quarter 2016 production was slightly lower than expected, in part because average slaughter weights remained beneath year-earlier levels in September. Exports in September, however, were the highest since March 2015. Exports to Cuba were the second-highest on record, eclipsed only by shipments in January 2008, and have been trending generally upward since April.1
The fourth-quarter forecast for total broiler exports was raised 40 million pounds, and the 2017 export forecast was raised 30 million pounds. The forecast for 2016 year-ending stocks was lowered 40 million pounds as the higher export forecast was expected to dampen the seasonal increase in broiler stocks in cold storage.

Weekly prices for whole broilers (national composite) have remained below year-earlier levels since mid-September. The fourth-quarter forecast was reduced to 72-74 cents per pound, and the 2017 forecast was lowered to 77-84 cents per pound as large supplies of meat were expected to contribute to downward pressure on broiler prices.

These lower prices would likely impact 2017 producer profitability, and the 2017 production forecast was lowered 100 million pounds.

Turkeys
Preliminary weekly production of turkey for the four weeks through October 29 was below year-earlier levels, and the fourth-quarter forecast was reduced 30 million pounds. Whole hen prices have remained relatively strong but have shown a smaller-than-typical seasonal increase in recent weeks.

The fourth-quarter forecast for frozen hen prices was lowered slightly to 118-122 cents per pound. While hen stocks in cold storage as of September 30 were down from a year earlier, stocks of toms were at the highest September level since 2013. Turkey exports in September were strong compared to 2015 when trade was affected by Highly Pathogenic Avian Influenza, but remained well below September levels during 2012-2014.

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