Meat prices seen moderating in the new year

by Ron Sterk
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Protein supplies — red meat, poultry and eggs — are forecast higher and average prices lower in 2016 as cattle and hog herds expand, feed costs remain low and laying flocks recover from the worst outbreak of avian influenza in U.S. history.

In its December Livestock, Dairy and Poultry Outlook, the U.S. Department of Agriculture forecast 2016 price declines when compared to 2015 prices for cattle 8%, hogs 4%, broilers 5%, turkeys 3% and eggs 11%. Turkey and egg prices are expected to decline as supplies are expected to rebound as flocks are repopulated following severe losses from A.I. in 2015, while most price pressure on red meat is seen as the result of regular and cyclical market fundamentals of lower-priced feed and herd rebuilding, especially for beef.

In its December Cattle on Feed report, the U.S.D.A. said the number of cattle placed in feedlots of 1,000 or more head in November were down 11% from the same month in 2014 and the lowest in records back to 1996. At the same time, cattle marketed in November were up 4% from November 2014, and cattle on feed Dec. 1, 2015, were down slightly from a year earlier. November beef production was up 5% from November 2014 but was down 3% for the year-to-date, the U.S.D.A. said in its December Livestock Slaughter report. In contrast, Nov. 30, 2015, frozen beef stocks were up 27% from a year earlier.

The U.S.D.A. forecast 2016 beef production at 24,680 million lbs, up 4.3% from 2015 and the first increase since 2010. The increase in beef production is a combination of feeding cattle to heavier weights due to low feed prices and results of beef herd rebuilding after reductions due to high feed prices and drought that began in 2008 and continued through 2013. The total U.S. cattle herd (beef and dairy) on Jan. 1, 2014, was the smallest since 1952. Cattle numbers increased 1.4% as of Jan. 1, 2015, and are expected to show additional growth in the U.S.D.A.’s annual Cattle report on Jan. 29.

The U.S.D.A. cutout value for a choice 600- to 900-lb beef carcass has declined about 25% since peaking at a record high $264.74 a cwt in May 2015. Prices for choice steers on a live basis averaged $154.56 a cwt in 2014, up 23% from 2013, but dropped 4% to $148.07 a cwt in 2015 and were forecast to fall another 8% in 2016.

Various raw meats
Meat supplies seen higher, prices lower in 2016.

In contrast to cattle, the total U.S. all hog and pig inventory on Dec. 1, 2015, was up 1% from a year earlier and the highest Dec. 1 inventory since estimates began in 1988, the U.S.D.A. said in its latest Quarterly Hogs and Pigs report. November pork production was up 10% from a year earlier with January-November output up 8% from the same period in 2014. Total frozen pork stocks on Nov. 30 were up 14% from a year earlier and were record high, the U.S.D.A. said.

Pork production in 2016 was forecast at 24,925 million lbs, up 1.6% from 2015 and the second consecutive annual increase. Pork production jumped 7.4% in 2015 as the hog herd recovered faster than expected from losses caused by porcine epidemic diarrhea (PEDv) in 2013-14.

The U.S.D.A. cutout value for a lean hog carcass at the end of 2015 was about $68 a cwt, down 50% from a peak of $136.78 a cwt in July 2014, when the impact of PEDv was at its peak. Pork carcass prices averaged $76.03 a cwt in 2014, tumbled 34% in 2015 and were forecast to fall another 4% this year.

Except for a dip in 2012, broiler production has risen annually since 2009 and was forecast to increase another 1.8% in 2016 to 40,900 million lbs. Turkey production in 2016 was forecast at 6,010 million lbs, second only to 6,246 million lbs in 2008 and up 7.5% from 2015, when production was reduced in part by losses from A.I. Frozen chicken stocks on Nov. 30 were up 27% from a year earlier and were record high for November.

High freezer stocks of beef, pork and chicken also may contribute some price pressure, and in the case of beef likely indicates consumer resistance to high retail prices, the U.S.D.A. noted. Freezer stocks typically grow when processors are unable to move their products either domestically or for export.

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