Hog Slaughter Seasonally Strong; Meat Production High

Fall typically is the time of year when weekly hog slaughter rates are the highest and prices are the weakest.  This year is no exception, and the weak hog prices are lending pressure to cattle markets.

Base slaughter hog prices have trended well below last year all year, and they have been below the previous five-year average for most of it.  When viewed on a graph, the pressure of abundant hog supplies on cattle markets becomes clearer.

Last week’s prices were the lowest of the year and were trending lower on a steep slope.  If the market follows the trend of last year, prices could level out into mid-December before falling again just before the Christmas and New Year’s holidays.

Seasonally, though, a decline into late-November would be followed by a short bounce into mid-December.

 

EXTRA HOGS MEAN EXTRA PORK

 

All that extra hog slaughter mean extra pork production as well.  USDA data show that pork production last week totaled 506.9 million pounds, a record that surmounts the previous high of 499.4 million pounds the week before.  However, the record before that was 499.0 million the third week of January.

Estimated US 2015 per capita red meat consumption is up from 2014’s 101.8 pounds at 105.7, but USDA projections out through 2017 indicate expectations of flat demand near this year’s levels.

There are no predictions for US per capita red meat consumption to reach 120 pounds, which is where consumption was for most of the 1990’s and early 2000’s.  The demographics of the market have changed as more millennials seek diets containing less red meat and baby boomers eat less of everything.

 

SEASONAL HAM DEMAND LACKLUSTER

 

Generally, wholesale ham prices will rise from June into August and remain relatively flat for months, bumping higher in mid-November and mid-December.  Last year saw hams peaking in August amid the uncertainty of the Porcine Epidemic Diarrhea virus outbreak, only to fall back by the end of August and spike again in around late September.

This year, ham prices have remained below the 2009-2013 average for most of the year, and with the increasing red meat supplies, they may remain there for the rest of the year.  Unsold hams will remain in cold storage to be pushed again in the spring for the Easter holiday.

 

CASH FED CATTLE MARKETS REMAIN QUIET

 

The USDA reports a couple of sales on a dressed basis at $195 per cwt, which is down $2 to $7 from last week, but early week transactions often are for lower-quality cattle, and there is little interest in most areas.

The snow storm that slapped major cattle-feeding areas Tuesday may keep trading interest at bay for at least another day as producers and buyers assess the situation.

By and large, cattle trade last week was $5 per cwt lower at mostly $129 per cwt on a live basis and $2 to $4 lower on a dressed basis in a range from $197 to $202.

Wholesale beef prices Tuesday were mixed, with the USDA choice cutout at $208.37 per cwt, down $0.67 on the day, and its select cutout at $197.03, up $0.94.

The choice/select spread Tuesday narrowed to $10.44 from $12.05 on Monday, and there were 122 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $176.44 per cwt, down $1.21.  This compares with the Nov settlement Monday of $173.47, up $1.17.