Increases in available supply of the major proteins reflects healthy growth and stabilization in production, although prices are expected to take a related dive later this year, the USDA said in its monthly Livestock, Dairy and Poultry Outlook report.
Beef: Data from the June Cattle on Feed report indicate that feedlot operators are keeping fewer animals behind, and those that are going to market have lighter average carcass weights. Cattle dressed weights slipped below year-prior levels in early April through early July. Cattle dressed weights are expected to increase seasonally over the next two quarters, but are likely to remain below year-prior levels, USDA said.
Meanwhile, the price spread between Select and Choice graded meats reached a record high in June, although it narrowed again in July, part of a seasonal cycle. With the increase in supply across the spectrum, it is thought that consumer demand for Choice middle meats over the grilling season is fueling higher prices at the higher end, and that the trend will be more obvious in the fall when the Choice/Select spread would be expected to once again widen.
Weakening in the value of the dollar is propelling exports higher — the forecast for 2016 is 9 percent higher than in 2015 — while curbing imports. Higher shipments in May were seen especially to Japan (up 29 percent), Mexico (up 39 percent) and South Korea (up 61 percent).
Pork: Pork production has been largely unchanged, but lower input costs and demand have kept profits in the black, USDA reported.
Slaughter numbers are up slightly compared with 2015, but weights are down by about 1 percent, balancing the equation. USDA reported “[t]here is anecdotal evidence that producers are dropping ractopamine from hog rations at the behest of some packers to enhance eligibility for product-export to China,” contributing to lower slaughter weights. Increased demand is supporting prices, much of it from overseas.
Meanwhile, however, the Outlook report references June’s Quarter Hogs and Pigs report, noting that the size of the spring pig crop is large, and will result in a 3 percent increase in pork production. That, combined with a 4 percent increase in beef production and 3 percent more broiler meat, USDA said, is expected to put downward pressure on prices.
In fact, the agency said it expected 3Q live equivalent 51-52 percent lean hogs are expected to average from $53 to $55 cw. For 4Q, those prices are expected to drop to an average of $41 to $45 cw, about 4 percent below year-ago levels and “likely below break-even levels for most U.S. hog operations,” the report said.