FEEDSTUFFS MEAT PRICE OUTLOOK: Sept. 25, 2018

Beef: Weekly feature activity was relatively muted through early September but accelerated in comparison with a year ago by late month. Reports for the last two weeks of the month averaged 12% over the year prior but were just 3% larger than the prior three year's average. Middle meat features (although not typically a late-September feature item) were mixed, with the loins making aggressive gains over a year ago into late month compared with fading rib features. The largest (and most consistently higher) feature has been the round complex, jumping 28% year over year, across the entirety of September and averaging 18% more retail ad space throughout the July-September quarter. Eye of round roasts and steaks as well as bottom round and top round steaks have been the catalysts to the primals’ aggressive features but interest may fade modestly as the aggressive, seasonal rise in round features takes some of the luster away from aggressive increases.

Pork: The cutout saw another week of strong gains due to the tepid harvest level from the hurricane. While the cutout can find some lift this time of year, this was aggressive and is not forecast to be sustainable. Prices averaged above the prior year only as supply averaged 6% below last year for the last two weeks. At this time of year, many are intentionally short product as supplies increase in the fall while seasonal demand wanes. The tightness forced some to pay for product, but it should ease as harvest levels are increasing now daily and will again reach critical mass levels in the next few weeks. This will put a price reset in place, starting as soon as next week and likely continue for the next three weeks. As the cutout eases, some primals will begin finding seasonal strength, which puts retracing back to prior seasonal lows out of the forecast.

Poultry: While the broiler breast meat pricing environment typically deteriorates into the fall, this year’s decline was largely perpetuated by a stronger pork and beef retail and food service presence stemming from increasing production. Informa Economics IEG’s calculated cutout averaged just 73 cents per pound during August, a 23% decline from the year prior, as well as 8.7% under the five-year average. Strain on the cutout came from all three major portions that make up the cutout, but the outcry recently has been with respect to where boneless/skinless breast meat values ended up through August and into September. While this item does not explicitly contribute to the calculated cutout, it should be noted that weaker values contributed to a lower overall broiler pricing environment than the cutout is representing. The outlook for gains to the cutout are coming from stronger, seasonal wing support this fall, but it is not expected to offset the losses incurred by further declines in breast meat and leg quarter values.

For a more detailed look at the weekly forecasts for the various meat sectors and meat cuts, subscribe to the "Meat Price Outlook." Contact Susan Dahlgren at [email protected] for more information.

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