Beef, Poultry & Pork Market Update

Beef:

The live cattle market and beef cutout experienced declines, a trend that was somewhat anticipated as the market gears up for the spring grilling season, which will heavily feature beef items. But several other factors also added to the subdued atmosphere in the market: negative developments related to the HPAI situation infecting cow herds in two states and late-winter/early-spring storms across the nation. As a result, the CME April live cattle futures and all futures contracts were lower by about 2% last week. The choice and select cutout were both down last week with the choice dropping almost 4% and the select lower by almost 2%. In the round complex, inside rounds were down 9% to $3.17/lb, and the bottom round flat was down 1% to $3.02/lb. The ribs were much lower with the bone-in export rib down 7.9% at $8.22/lb and the boneless ribeye’s also traded lower by 6.6% w/w. However, out- front sales data suggests a big move higher in exports coming next month as packers sold product at the $9.65/lb. Looking ahead, the beef market may be a bit sloppy for the next few weeks as weather is still mixed across the country. But both retail and foodservice business will increase for beef items as we head through April. Look for ribs, loins, and grinds to trade higher, along with flap and skirt meat for Cinco de Mayo.

Poultry:

USDA young chicken harvest was up slightly vs. the prior week at 162 million head or just 0.9% w/w and was still down 1.3% than the prior year when the harvest was 164.2 million head. Chicken parts is where the market saw the most increases as the white meats and wings continue to lead the poultry market. Tenderloins gained another 3.9% to $1.92/lb, and B/S breasts were higher by 2.1% at $1.53/lb. Wings continued higher again up 1.9% w/w to $2.23/lb and saw another increase in promotions in the grocery stores. B/I thighs were up another 2.5% to .85/lb and are now up 22% m/m. Boneless thigh meat was higher by 3.9% to $1.44/lb last week and higher by almost 13.5% m/m. Drumsticks were down 1.7% last week at .43/lb. The large eggshell index was higher almost 13% w/w. Recent reports reveal that production has been halted at one of the nation’s major shell egg producers due to the detection of pathogenic avian influenza (HPAI), leading to the culling of approximately 2 million chickens, including 1.6 million hens and 337,000 pullets. Last year, 58 million birds were culled to limit the spread of the virus.

Pork:

The lean hog futures were all higher by anywhere from 2-3%. The CME April lean hog futures finished up at $88.35/cwt or 2.6% last week. Not surprisingly, the overall pork cutout finished higher at $98.15/cwt or 4.7% w/w as the reduction in harvest and production supported the cutout and most of the primals. Breaking out the primals and subprimals, the loin primal was up again another 1.5% to $95.12/cwt as the subprimal boneless loin and baby back ribs were higher again w/w to $2.40/lb. Since our mid-March update, the back rib is up another 6.6%. And after being flat the prior week, pork butts moved higher by almost 2% w/w as the subprimal B/I pork butt closed up to $1.34/lb or 5% last week. The rib primal took a breather last week, and ended lower by 4.7% to $168.35/cwt. The ham and picnic primals were both up 3% last week, but the biggest increase came from the pork belly, as it was up 18%. And with the decrease in production, the pork trim segment was higher across the complex as 72% trim was up 3% and 42% trim was higher by 14%. Looking ahead, overall harvest should increase now after the holiday, while retail and foodservice demand will improve as we get closer to springtime. Pork exports were down last week, but that was influenced by the shortened harvest schedule and should rebound on a monthly basis supporting the overall cutout.

Bacon:

THE BELLY MARKET WORKS TO ADD ON STRENGTH THROUGH CONTINUED DAY-TO-DAY VOLATILTIY THIS WEEK:

The belly markets this week continued to experience swings / chop – as the complex finds sustained volatility this week… but generally working to develop and add strength across the complex this week as forecasted. Belly markets averaged near the 125 (USDA PRIMAL) / 165 (USDA 9/13 DERIND) level for the week, demonstrating somewhat greater overall strength in the USDA PRIMAL compared to the USDA 9/13 DERIND, with forward indications pointing toward mild continued upward risk for the coming weeks. The 5-year average level for the belly complex at this time is near the 135 (USDA PRIMAL) / 170 (USDA 9/13 DERIND) level… at this time, the forward outlook calls for market to continue to trend at a discount to the 5-year average for another 4-6 weeks, before finding additional risk pushing values up to a premium vs. the historical average… with increasing upward risk potential heading into the summer season where more significant strength is expected. Look for markets to shift to greater levels of strength in the second half of June, with summer highs having the potential to exceed levels experienced last year at the peak in early August. For the short-term outlook, look for more modest / mild strength now through May… with current projections pushing values up to 140 (USDA PRIMAL) / 175 (USDA 9/13 DERIND) heading into the final period in the second quarter.