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CME: Total Meat Output Jumps Significantly Higher

18 March 2015

US - After two weeks near year ago levels, total meat and poultry output jumped significantly higher last week, gaining 1.7 per cent on the week prior, write Steve Meyer and Len Steiner.

Total output amounted to 1.709 billion pounds, 5.6 percent more than last year.  Note that our weekly calculation includes last week’s USDA estimates for beef and pork output and the prior week’s totals for chicken and turkey since those data run one week in arrears relative to the red meats.  

Total meat and poultry production has been larger than one year ago in nine of the 2015’s ten weeks to date.  Separate charts for beef, pork and chicken appear on page 2.  

Some highlights for the individual species are:

  • FI cattle slaughter numbered 524,000 head last week, 2.4 per cent lower than the prior week and 8.7 per cent lower than one year ago.  Weights continued to offset part of the decline in numbers with average dressed weights estimated to be 819 pounds.  That was one pound lower than the prior week but 24 pounds (3 per cent ) higher than a year ago.   The combination of slaughter and weights put estimated beef production at 428.2 million pounds, down 2.5 per cent from the previous week and 5.9 per cent lower than one year ago.  Year to date beef output is now 4.6 per cent smaller than last year.

  • The week’s average Choice cutout value fell a short 1 per cent to $246.69.   That is still 2.4 per cent higher than one year ago.  The Select cutout averaged $245.12 last week, just $0.67/cwt lower than last week and still 3.5 per cent higher than one year ago.  These cutouts have remained strong in the face of much lower priced competition from pork and relatively lower priced chicken — suggesting beef demand remains strong.  

  • Fed cattle prices remained well above year ago levels.   Live cattle (5 market average) traded at $160.78 for the week, down fractionally from the week before but still 7.2 per cent higher than last year.  Dressed prices were slightly higher for the week and nearly 8 per cent higher than last year.    

  • Pork production continued to charge FAR, FAR AHEAD or last year’s pace. Last week’s year on year gain was completely driven by slaughter   which, at 2.227 million head was up slightly from the week before and 10 per cent larger than one year ago!  In a year of large slaughter increases, that is the largest one yet.  The size of the year on year gain is significantly impacted by the fact that one year ago last week was when we first saw the impact of producers’ delaying marketings to a) take advantage of rapidly rising prices and b) attempt to backfill PEDv losses by producing more pork per head.   

  • The average slaughter weight for all hogs was steady with the previous week and just 1 pound higher than last year.  A more important measure of hog weight — in our opinion — is the average weight of barrows and gilts reported under the mandatory price reporting (MPR) system.   That system covers packers that handle about 95 per cent of the total supply of these “top” market hogs.  The figure excludes the influence of cull breeding stock and “off” hogs (ie. pigs that, for whatever reason, do not perform well and are slaughtered at less than optimal weights).  The MPR barrow and gilt weight thus reflects the supply position of the most important subset of U.S. market hogs.  Those weights have been falling rapidly and did so again last week, dropping 0.5 pound to 212.6.   That is 3.8 pounds lower than the first full week of this year.  The decline represents a huge effort to get more current in marketings and the lower weights will now begin to represent a significant year on year REDUCTION in pork supplies since they will be compared to year ago weights which were rising due to the aforementioned delays in marketings.  

  • The average weekly pork cutout value declined once again with last week’s figure down $1/cwt at $68.15.   This marks the seventh straight week in which the average cutout value has been  lower and last week’s value is over $51/cwt (43 per cent ) lower than one year ago.   

  • Hog prices continued to struggle with national carcass weight prices falling by roughly 2.5 per cent .  The national base price averaged $66.80 while the national net price (which includes merit?based premiums) averaged $68.74 for the week.  Those are both just over 35 per cent lower than one year ago. To get a complete picture of the impact of these lower prices:  An average hog was worth $227.03 one year ago.  Last week it was worth $147.79 — nearly $80 less!

  • After two weeks of year on year lower output, chicken production surged higher last week, gaining 6 per cent week on week and 11.5 per cent versus one year ago.   Bird weights continue to be the big driver of the surge in chicken output with the average of 4.56 pounds adding 8.3 per cent to output relative to last year!  Egg sets and chick placements are still larger than one year ago suggesting more increases are on the way.

  • Our computed broiler cutout value gained over $1/cwt. last week to reach $74.21.   That value has held up remarkably well in the face of higher broiler production but will almost certainly begin to lag year ago levels soon.  That, of course, is more due to last year’s surge in chicken values which road the coattails of pork prices to their own record highs.

Further Reading

You can view the full report by clicking here.


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