FEEDSTUFFS MEAT PRICE OUTLOOK: Oct. 2, 2018

Beef: The Choice/Select cutout spread remains wide relative to last year but is historically more average by longer-run comparisons. This year, Choice beef production continues to be limited by sharply lower Choice grading percentages. The national Choice grading percentage has been in line with 2016 since midsummer but is roughly 3-4% lower than last year. Bear in mind that last year’s Choice-grading carcasses likely were inflated by camera grading issues. Prime percentages have continued to run at record levels -- up 25% year over year -- across the past six weeks, averaging 7.5% Prime. A majority of the increase likely can be attributed to a change in the methodology behind determining age for carcasses, with chine bone ossification no longer the only avenue for age verification. The Choice/Select spread is expected to continue moving mostly sideways to higher into early October before widening into the $15-20 area later in the fall. However, it is not expected to reach levels seen last year when cameras were recalibrated and Choice grading declined abruptly. The Prime spreads may remain depressed, likely narrowing further as Choice production declines more so into the fall.

Pork: The U.S. Department of Agriculture released its “Quarterly Hogs & Pigs” report last week, revealing producer-surveyed numbers regarding the size of the U.S. hog herd. These survey results will give the industry guidance on the current state of the hog herd as well as expectations for future quarters. In line with the forecasts as well as industry expectations, the inventory for Sept. 1 totaled 75.486 million hogs, up 2.97% from the prior year. This is the largest U.S. inventory size in history and a record over any previous quarter. It exceeded the prior year by 2.2 million hogs and the prior quarter by almost 2.4 million hogs. The June-to-August pig crop, which is pigs saved over the course of this summer, was 34.159 million, also the largest in U.S. history and over any prior quarter. These animals will be available for harvest starting in December, which will result in the largest throughput of hogs during a winter quarter in U.S. history.

Poultry: The USDA latest “Cold Storage” report showed ending stocks of chicken for August at just under 927.6 million lb. Total August ending stocks of chicken were record large for any month. They were also 18.6% larger than the same month reported a year earlier, or 145.6 million lb. on a nominal basis. Total chicken inventories rose by 51 million lb. during July, representing the largest single monthly rise since October 2017. At 44% of the total chicken in cold storage, the “other” category was a main contributor. Other chicken was up nearly 29% from a year earlier at 406 lb. Growth in this category was not largely consistent with most others reported at the end of August. The other bulk categories include breast meat, which held relatively constant from the end of July, at 174.7 million lb., up just 4.7 million from the end of July but down from 181.5 million lb. at the end of June. Breast meat stocks are expected to continue to rise this fall, potentially reaching 203 million lb. by the end of December due to the current weak pricing environment.

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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