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CME: Little Change in Weekly Hog Slaughter

15 December 2015

US - Cattle slaughter increased last week to 581,000 which was up 3.8 per cent from the previous week, and good news for the industry in terms of becoming more current on marketings, write Steve Meyer and Len Steiner.

Steer dressed weights have slowed. Heifer dressed weights were up 5 pounds, but they tend to lag the system a bit when trends change.

Cattle and beef prices are still struggling and were down across the board for the week. Fed cattle prices were down 4 per cent, compared to the prior week to $118.41 per cwt. on a live basis.

Feeders also struggled last week, Oklahoma yearling prices were down 6 per cent from the previous week to $163.63 per cwt. The Choice Boxed Beef Cutout weekly average was down a dollar week-to-week.

On the hog side, weekly slaughter was about even with the previous week and dressed weights continue to track below year ago. Hog prices were even to slightly down week-to-week, and some strength was found in the pork cutout caused by an increase in ham prices.

While the cattle market is going through a very turbulent time, analysing some of the larger themes at play provides more definition to the landscape the industry will find itself in during 2016 and possibly into 2017.

These larger themes include; respective supply in the pork and broiler industries, exchange rates and the value of the US dollar, and world beef production.

Starting off with pork and broiler supply, both industries have experienced supply increases this year compared to 2014.

On the pork side, commercial production is expected to be up 7 per cent compared to 2014, due to less mortality than expected regarding PEDv loss.

On the broiler side, heavier bird weights combined with an increase in number of birds slaughtered accounts for the estimated 4 per cent supply increase compared to year ago.

At the same time as these supply increases, exports of all protein categories fell off. With regards to pork, the decrease in exports was mostly related to the value of the US dollar and slowing world economies, and a shifting of market share around the world due to the Russian ban on EU pork.

For broilers, several countries banned US broiler meat due to the outbreak of HPAI that was experienced during spring of this year.

In 2015, both chicken and hog producers made significantly less money than 2014. In 2016, LMIC expects a 2 per cent increase in broiler production and less than a 1 per cent increase in pork production, compared to 2015.

In other words, 2016 will not be a repeat of the significant supply increases in both pork and broilers, as was seen in 2015.

With regards to the value of the US dollar, regardless of when interest rates are raised, it is very unlikely the dollar will experience another value increase of the same magnitude seen this year.

On the world beef supply side, the US is poised to regain some market share that was lost to Australia in recent years. The Australian cattle herd has shrunk due to drought, and their beef supply will be reduced in the next year as they move into a herd expansion phase.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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