Beef, Poultry & Pork Market Update

Beef:

The CME February cattle contract was down by 2 percent week-over-week to $200.60/cwt, with most other contracts also lower by about 2 percent as speculators and fund managers captured some profits. In contrast, spot/cash cattle prices increased by 4.5 percent to $210/cwt. Steer carcass weights climbed another pound to 1,447 lbs., now 61 lbs. heavier than last year. The weekly harvest was 600K, flat week-over-week but down 5 percent compared to last year. Beef production remained steady at 526 million pounds.

February typically sees lower beef demand across retail and foodservice, and this trend is reflected in the current market. Both choice and select beef cutout values decreased by 1 percent, reaching $323.98/cwt and $314.77/cwt, respectively. The bone-in export rib was down 1 percent to $9.03/lb, and the boneless ribeye was lower by 1 percent to $9.84/lb. The rib segment is now down over 40 percent, but prices are expected to trend higher in March leading to the spring grilling season.

The loin complex was higher last week, with choice shortloins trading up 5 percent to $7.30/lb, choice striploins up 3 percent to $9.45/lb, and choice top sirloins up 10 percent to $4.63/lb. Processors and retailers are building inventory positions in the loin subprimals as they prepare for the spring grilling season. Over 670,000 lbs. of choice shortloins traded out-front near the $7.00/lb range, suggesting shortloins will trade higher in the coming months. However, choice tenderloins are expected to move lower after Valentine’s Day.

End cuts, including chucks and rounds, were lower across the segments. Chuck rolls were down 5 percent to $4.52/lb, and shoulder clods were lower by 1 percent to $3.80/lb. Inside rounds were down 2 percent to $3.76/lb, and bottom round flats decreased by 4 percent to $3.85/lb. Over 645,000 lbs. of choice chuck rolls traded out-front at $4.53/lb, which should support higher prices from these levels.

The ground beef and trim segments were lower last week. Ground beef 81% was down to $3.38/lb. In the trim segment, the price of 50% trim was flat at $1.14/lb, while 90% lean trim was down 11 percent to $3.31/lb. Coarse grinds continued to see prices decline for 73%, 81%, and 93% as they retreat from recent record highs.

Market participants remained largely on the sidelines, with demand rated as moderate to fair as we transitioned away from Superbowl-related purchasing. Ribs are experiencing a slight upturn in demand from their recent decline, holding steady in tone. Some participants are buying now in anticipation of the warmer grilling months, as prices for these items are typically at their seasonal lows during this time. Loins held steady, with demand rated as moderate. Most items in the complex maintained their values, with Select bone-in 1x1 strips being the outlier moving higher. End cuts held steady with a slightly weaker bias, as Choice inside rounds, Select gooseneck rounds, and Select chuck rolls saw prices skew lower. The remainder of the round and chuck complexes maintained steady values.

Monday’s estimated cattle slaughter came in at 100,000 head, which is 15,000 head under the same time last week. Additionally, shortages from packers are higher than normal, which could impact supply and pricing in the coming weeks.

Looking ahead, heading into February, which is historically a slow period for beef sales, the cutout should trend lower.

Poultry:

The USDA reported a young chicken harvest of 159.6 million head, which was sharply lower by 10 percent week-over-week and is now flat year-over-year. The individual bird harvest weight decreased to 6.55 lbs per bird, slightly higher compared to last year when they weighed 6.48 lbs. With the decrease in harvest, overall production was 794 million pounds, down by 12.9 percent compared to last week. Weekly hatchability decreased again to just 77 percent, well below seasonal averages. Retail chicken promotions decreased by 10 percent last week, and wholesale chicken prices were mixed compared to the previous week.

Breaking down the segment, the National Composite whole birds and WOGs were down $0.03 week-over-week to $1.30/lb. In the foodservice WOGs, the high volume 2.5# to 3.5# WOGs were down $0.03 to $1.30/lb. The 2.5dn WOGs were flat at $1.42/lb, and the 3.5up WOGs were down by $0.08 to $1.06/lb. In the white meat segment, boneless/skinless breasts were up $0.03 to $1.51/lb, but tenderloins were down $0.02 to $1.71/lb. Retail promotions were mixed for the white meat segment, with breast advertisements higher but tenderloin ads sharply lower last week. Chicken wings were up just $0.01 to $1.91/lb, and drumsticks were higher by $0.02 to $0.52/lb. Boneless/skinless thigh meat was flat at $1.33/lb, while bone-in thighs were down $0.01 to $0.92/lb.

In the turkey segment, boneless breast prices were up 3 percent last week and higher by 21 percent month-over-month. The USDA's large eggshell index was flat week-over-week but still higher by 170 percent year-over-year. Looking ahead, retail chicken promotions typically increase in February as grocers shift promotional efforts away from other proteins. This increased demand should drive wholesale chicken prices higher.

Transactional data regarding WOGs is slow to surface this morning, but limited input at the end of last week suggested that supplies were less abundant heading into this week than they were previously. The breasts and front halves markets are quiet. Jumbo and medium boneless breast meat offerings are described as very tight, and limited sales suggest continued upward momentum. The select market appears more stable than the medium or jumbo markets. Spot offerings of tenders are reported to be found without too much trouble. The wing lines are generally quiet following the game on Sunday. Some participants note that they're not receiving their full volumes of production, but slower demand is helping to balance the market out for the time being.

Trim meat supplies are at least adequate for needs, but low-volume sales continue to indicate a steady market. Input regarding chunk meat is thin. Legs, leg quarters, and drumsticks appear to retain a market standing best described as “irregularly steady,” largely influenced by issues with export eligibility. Thigh offerings are readily uncovered. Meanwhile, thigh meat and leg meat supplies are very tight, and the thigh meat line starts the morning with a full steady rating.

Pork:

CME hog futures and cash lean hogs were higher across the board last week. The CME February future, the nearest contract on the board, was up 2.8 percent to $86.65/cwt, and the other contracts were all higher by 1-2 percent. Spot/cash hogs increased by 2.4 percent to $84.10/cwt. The hog harvest was up 3.9 percent week-over-week to 2.57 million head, but this was still 4.7 percent lower compared to last year. Overall pork production was 562.9 million pounds. The pork cutout rose by 1 percent to $95.64/cwt, with most primals higher last week, except for the butt and rib primals, which trended slightly lower.

Breaking down the primals and subprimals, the loin primal was up 2 percent week-over-week. The price of boneless pork loins decreased by $0.04 to $1.37/lb, while loin/baby back ribs increased by $0.03 to $2.52/lb, and tenderloins rose by $0.03 to $1.81/lb. The pork butt primal was down 1 percent to $105.17/cwt, with the subprimal bone-in pork flat at $1.14/lb and boneless pork butt down $0.01 to $1.36/lb. The rib primal also decreased by 1 percent to $150.26/cwt, with medium spareribs remaining flat at $1.62/lb. The ham primal finished up 2 percent at $79.14/cwt. The belly primal continued its upward trend, rising another 2 percent to $157.32/cwt, and has increased by 10 percent over the past two weeks. The subprimal derind 13/17 belly was higher by $0.13 to $1.93/lb.

The trim segment was mixed, with 42% trim higher by $0.09 to $0.53/lb and 72% trim lower by just $0.01 to $0.73/lb. Looking ahead, based on last week's trend, pork prices are expected to keep rising. With the harvest slightly higher last week, the pork industry remains strong as processors and exporters work to restock freezers, which are at very low levels. As they continue to rebuild supplies, pork prices should continue trending higher.

According to Expana’s Newswire, cash hog prices on Monday are expected to be mostly steady. As of Friday afternoon, the cash market has risen 3.9 percent year-to-date, according to the USDA's national weighted average quotes. Market participants are closely watching cutout values during what is typically a sluggish month for meat demand.

Friday’s National Daily Direct Hogs ranged from $78.50 to $88.00, with a weighted average of $82.53 and a 5-day rolling average of $85.62. The live price was not reported due to confidentiality, with a 5-day rolling average of $61.84. Monday’s hog slaughter is projected to be 485,000 head.

Cutout values reached $95.20 per cwt on Friday, February 7th, according to the Urner Barry by Expana Pork Carcass Cutout Value Report. This represented a 2.3 percent increase since the beginning of last week and a 5.3 percent increase since January 6th. Some participants are bracing for the possibility of winter weather conditions throughout the week that could present logistical challenges for harvest and production activities.

In the green meat complex, bone-in hams are called steady to higher, as Easter sourcing activities continue alongside a marginal rebound of Mexican export opportunities. Meanwhile, boneless hams are unchanged, despite narratives of ample supply dynamics and reduced interest from retail persisting. Bellies are considered fully steady, as limited frozen stocks continue to affect fresh values on the spot market. In trim, 42s and 72s start the day steady to higher, as historically high leaner boneless beef prices exacerbated an already tight supply scenario during the week. In the fresh pork complex, bone-in loins get a mixed call, with buying interest varying by cutting style. Boneless loins are considered unsettled by market participants, with some select cuts in the complex continuing to receive moderate export interest. In the butt segment, bone-in as well as boneless butts are called about steady to lower amid fully adequate supply dynamics reported. In the rib sector, spareribs, St. Louis ribs, and back ribs are all unchanged at inception.

Bacon:

The belly markets experienced moderate to significant strength, with the complex exceeding forecast and potentially peaking out for the winter season this week:

The belly markets found continued strength this week, above forecast as the USDA PRIMAL increases by >10 points, and the USDA 9/13 DERIND increased by >15 points. This strength exceeds expectations but was not surprising as consistent demand and tightening supplies continue to be a driver to the complex heading in the 2nd month of the year. The belly market averages this week reported near 145 (USDA PRIMAL) / 185+ (USDA 9/13 DERIND) --- overall change from last week’s markets exceeded 150 (USDA PRIMAL) / 200 (USDA 9/13 DERIND) … up from last week’s averages near 135 (USDA PRIMAL) / 185 (USDA 9/13 DERIND). The previous forecasted seasonal high was for the belly market to test the 150 (USDA PRIMAL) / 190 (USDA 9/13 DERIND) level… now surpassing this level, the market is demonstrating some potential to maintain / add some upward risk in the coming week or two. Look for values to press higher but are unlikely to see large increases in a single week from current levels. Once markets to achieve the peak, the industry does not anticipate an immediate correction or contraction but rather will likely experience short-term mild to moderate downward pressure, followed by a period of limited upward or downward risk as markets are forecasted to align mostly with the 5-year average for much of the remainder of Q1… through the first half of Q2.