Market Update From the West Coast Meatheads
August 19, 2016
Live cattle and feeder cattle futures markets have broken downtrends that have existed since late winter. The feeder cattle futures market has traded strongly above the 100-day moving average for the last five trading days.
Yet cattle producers remain on edge as the cash market remains more sluggish, and futures prices are technically approaching overbought territory after the recent two-week rally.
Live sales registered at $118 on a live basis and $186 to $188, dressed. Trade volumes were moderate and the industry continued to sell fed cattle in a timely fashion. Supplies will decline as September advances, so trade volume may begin to slow past mid-September.
Values for loins have traded steady to lower over the past couple of weeks, with a lack of leadership from any of the individual cuts that are necessary to move prices higher.
While PSMO’s never went to the lower levels that were forecast this summer, they have been slow to advance as well. Other cuts are in ample supply and in a seasonally slow demand period.
Moving forward, look for the loin primal to advance but nearly all of the higher prices will be due to tenderloins moving higher going into the holidays, while other cuts trade sideways or modestly lower.
The rib complex has rallied 10 percent from the July lows. Expect boneless and export ribs to move higher into early next week before breaking into late September, perhaps revisiting the July lows.
Packers are more willing to discuss deliveries for the holiday season. Weakness in deferred live cattle futures relative to the fed cattle cash market forecast suggests there is an opportunity to inquire about second-half 2016 pricing.
Buyers simply need to remain persistent and realize middle meats will carry a larger percentage of the cut-out value into year-end.
Ample production levels continue, while demand/usage remains soft. This creates lower values in the live hog and pork complex. Live hogs in the terminal markets were selling from $47 to $50/ cwt.
Federally inspected (FI) harvest levels were 2.236 million head last week. Production levels were up two percent compared to the prior week and up one percent compared to a year ago. FI harvest weights are at 278 lbs., steady with a year ago.
Harvest levels are forecast to be near 2.3 million head this week. The pork cutout was lower on the week. Butts, bellies, loins and ribs were softer, trimmings mixed, while the hams were stronger.
This past week, drums and wings found some upward price movement, while whole birds and other parts saw no change in daily quotes. Turkey exports have had challenges this year, especially in the first quarter.
The trend may be changing as exports in June represented the third month in a row of year-over-year growth. In June, turkey exports were 47.4 million pounds, up 6.4 million pounds or 15.3 percent versus June 2015.
Second quarter turkey exports were up 17.3 million pounds, or 14 percent. Year-to-date, turkey exports are still down 21.9 million pounds, or 7.9 percent. Given the current trend,
we are still optimistic turkey exports can see year-over-year growth of 12 percent by the time we get to the end of the year.
Boneless skinless chicken breasts, leg meat, thighs and jumbo wings traded higher this past week, while other items were steady to flat, but sellers seemed to have no problem keeping inventories current.
Broiler export volumes continue to disappoint. With increased year-over-year production, this should cause concern into the end of the year. However, broiler exports should have no problem exceeding last year’s dismal third quarter numbers.
June broiler exports were down 54.8 million pounds or 9.1 percent below June 2015. Year-to-date, broiler exports are down 185 million pounds or 5.1 percent. The challenge remains for broiler exports to meet and maybe exceed last year’s number by one percent.