Pork production is lower due to PEDv and expansion of poultry production is facing economic challenges with input costs and demand.

March 8, 2014

3 Min Read
Reduced Pork-Poultry Production Helping Beef Prices

“At this point, futures are pricing some very bullish assumptions about the state of U.S. red meat supplies in the spring of 2014, and robust U.S. domestic and export demand,” Len Steiner and Steve Meyer noted in the Daily Livestock Report earlier this week. “One factor that will continue to anchor U.S. live cattle values is the performance of wholesale beef cuts, especially once fed cattle supplies seasonally increase in May and June.”

From a seasonal standpoint, considering five-year indices for the past three months, Steiner and Meyer explain, “The tendency is for prices to be higher in January, as retailers transition away from holiday items, dip in February as cold weather takes its toll, and then move higher in March, April and May as the coming of spring stimulates foodservice demand and backyard grilling comes to life.”
So far, out of the past five years, they say beef price performance this year matches 2010-2011 mostly closely, including the fact that Easter comes late on the calendar.

“What stands out this year is the much more dramatic spikes in beef prices in January, which reflected very current feedlot supplies,” Meyer and Steiner say.

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Moreover, Steiner and Meyer say market performance in 2011 also offers a cautionary note.  

“While normally one would expect the cutout in May to be higher than in April, in 2011 we saw cutout values actually move lower,” Steiner and Meyer say. “Retailers are always looking to maintain good margins in the meat case, and spiking beef prices certainly impact their decisions as to what to feature going into Memorial Day. The problem this year for end users is that, at least based on what futures are offering, pork prices will not be that great of a bargain. Some items could see price appreciation of 40%+. This is the context for the big jump in June cattle futures even as cattle availability should improve and feed costs are moving higher.”

Earlier this week, analysts with the Livestock Marketing Information Center noted, “Projections for both pork and poultry production during the first quarter of 2014 are generally well below those made a few months ago. Pork production is below expectations because disease, specifically Porcine Epidemic Diarrhea virus (PEDv), has trimmed market hog numbers. Chicken producers are expanding, but are faced with some economic headwinds: 1) higher than anticipated soybean meal costs, and 2) softer than anticipated demand for products sold in overseas markets and domestically.”

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