The Beef and Pork Supply Situation: What’s Ahead?
Market participants seem to be more focused on the day-to-day trading in the spot meat/livestock markets, and the short-term impact from weather events, Steiner Consulting says in the Daily Livestock Report.
Last week, cattle and hog slaughter were lower than expected as processing plants curtailed production mid‐week. The resulting shortfall in supply propped up wholesale prices. The market will pay close attention how the cutout trades following an expected improvement in slaughter this week, Steiner Consulting said.
Total hog slaughter last week was 2.375 million head, 95,000 head less than expectations when the week started. Slaughter on Wednesday and Thursday came in at 409,000 and 371,000 head, respectively. Although some of this was made up on Saturday, slaughter was still 5.2% smaller than the previous week.
“The shortfall had some impact on the cutout and it is possible we will see Monday affected as well. The pork cutout was predictably higher on Thursday but then slipped a bit on Friday, somewhat of a surprise considering the decline in production. This is a reminder that pork demand is at a different spot today than a year ago,” Steiner Consulting said.
Wholesale pork demand – the demand from processors, foodservice buyers, retail buyers and export traders – will ultimately reflect the final consumer. But Steiner Consulting points out that in the near term, it also reflects the wholesale buyers’ concerns about the future, pushback from other buyers downstream, labor issues and inventory position.
“The latest USDA ‘Cold Storage’ report was a good reminder that pork supplies in cold storage have returned to a more normal level for this time of year. Total supply of pork at the end of January was 19% higher than a year ago,” the report notes.
Inventories aren’t as heavy for some items like hams. For others, such as bellies, inventory remains burdensome, up 57% from last year and 44% higher than the five-year average, Steiner Consulting points out.
“Hog slaughter will be lower in the coming weeks/months but high cost of feed continues to incentivize producers to bring hogs to market earlier rather than later. There will come a time when we hit an inflection point,” Steiner Consulting says.
But when that happens will be the big guessing game for April and June futures.
Meanwhile, fed cattle slaughter last week was estimated at 480,000 head, 4.6% lower than the previous year and down 83,000 head or 5.4% in the last three weeks, the report says.
Fed cattle weights for the week ending Feb. 11 were 18 pounds or 2% lower than the previous year and Steiner Consulting suspects that trend to continue in the second half of February.
“No surprise then that beef production in the last three weeks has dropped about 7.5%. On feed numbers told us that fed slaughter will continue to track below year ago levels in Q2 and beyond. Cow slaughter has declined sharply as well. USDA currently thinks Q2 beef production will be down 6.7%. If current trends continue, they may not be that far off the mark,” Steiner Consulting says.
