2018 Meat, Poultry Production Seen Higher

Red meat and poultry production is likely to increase in 2018, along with pork packer capacity and all packer margins, although prices will depend on product demand, said a well-known market analyst Wednesday.

John Nalivka, president and owner of Sterling Marketing Inc., said in a webinar sponsored by the North American Meat Institute that he expected continued profits for most producers along with low feed costs to result in more meat and poultry production in 2018.

Also, Nalivka said he expected new hog processor capacity to be a driver to hog industry expansion.  The extra capacity will pull hogs through the production pipeline, although pork processors likely will have growing trouble finding labor to fill the plants.

But despite the labor issues, packer-processor margins likely will be positive next year, he said.  Margins have grown significantly as packers have increased production of consumer-driven, value-added products that are marketed directly to retail and foodservice businesses.

However, all of the expected cattle and hog growth increasingly will be dependent on product demand, Nalivka said.  Exports will be key to the demand equation, and to a large part, export demand will depend on the successful conclusion of major trade agreements.

 

FAVORABLE FACTORS

 

In his comments, Nalivka pointed out that corn prices were coming down from August 2012 highs and looked as though they would remain relatively stable through 2018.  They weren’t likely to get below the January 1990-October 2006 average of $2.28 or above the October 2006-November 2017 average of $4.64.

Much of US export demand will depend on the value of the US dollar, he said.  A graph of the US dollar index showed that the greenback had jumped to a new level, holding most of the gains made in a 2014-2015 rally.

All things being equal, a stronger US currency is anathema to US exports, but a 2017 slide to the lower ranges of what appears to be a new normal appears to be allowing good export demand.

 

CATTLE AND HOG INVENTORIES SEEN HIGHER

 

Nalivka said he saw US cattle inventories beginning to grow next year after a 3% increase this year.  Good profits at the producer level along with low feed costs and adequate to ample forage availability will drive further herd growth.

He expected the Jan. 1, 2019 US herd count to be up only about 0.2% followed by a 1.9% decline in the 2020 inventory report.

However, the hog herd was not expected to show the cattle producer any mercy.  The hogs and pigs inventory on Dec. 1 would be up 2.7%, following on a 3.8% year-over-year increase of 3.8% on Dec, 1, 2016.

 

PER CAPITA MEAT SUPPLIES SEEN UP

 

All that will result in rising per capita red meat and poultry supplies through 2018, Nalivka said.

After a 7% increase in per capita supplies this year, he expected to see a 10% increase in 2018.  This would push per capita stocks above the 2007 record.

 

CATTLE, BEEF RECAP

 

Scattered trade came Tuesday in Nebraska at $117.50 to $118.50 per cwt on a live basis, down $1.50 to $3 from last week with more Wednesday at $118 and at $188 on a dressed basis, down $1 to $2.

No trading took place on the Livestock Exchange video auction Wednesday.

The USDA’s choice cutout Wednesday was down $2.68 per cwt at $206.40, while select was off $2.52 at $184.11.  The choice/select spread narrowed to $22.29 from $22.45 with 128 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Tuesday was $156.11 per cwt, down $0.19.  This compares with Wednesday’s Jan settlement at $146.02 per cwt, down $1.80.