CME: Beef and Pork Output Still Low

US - Beef and pork output continued to trend below year ago levels for the week ending 13 March, in part due to much lower carcass weights (see table below), according to Steve Meyer and Len Steiner.
calendar icon 15 March 2010
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Below, we have reproduced the chart on pork exports that we initially presented in the Friday letter. The x-axis in the initial chart was not centered correctly and gave the impression that the data ran through the middle on 2009. The data was through January 2010 and the revised chart better shows that.

Hog slaughter was down about 1 per cent for the week thus causing overall pork production to be down 1.7 per cent from the previous year. One item that seems to have recovered in the last few days is the availability of slaughter sows. Weather disruptions caused a shortage of marketable sows in the first half of February but the market has recovered and sow slaughter (albeit with a two week lag) appears to have returned near year ago and five year average levels.

There was some concern that the sharp pullback in sow slaughter (it declined some 15 per cent between 23 January and 13 February) was indicative of a significant shift in producer attitudes about future expansion. Those fears, however, appear to have been a bit premature and much of the reduction was weather / transportation related. While the profitability outlook for US pork producers has improved significantly in recent weeks, plenty of uncertainty remains, especially with regard to US pork exports.

Broiler production for the week ending 6 March (one week lag) was reported to be 889.2 million pounds, 2.3 per cent higher than the previous week and 4.8 per cent higher than the previous year. Preliminary USDA reports are that production for the week ending March 13 (the official data has yet to be released) indicate that production was up as much as 8.1 per cent due to both higher bird weights as well as higher slaughter. The most recent USDA poultry production data does not fit well with the USDA egg set and chick placement surveys. Normally there is a very close correlation between the two data sets and if this relationship is to hold, then broiler slaughter numbers should be smaller in the coming weeks.

Broiler slaughter is currently running at 3.5 - 4.2 per cent over year ago levels while egg sets have been on average just 0.2 per cent over year ago levels during November - February. Has egg set and chick placement data understated the extent of the expansion in broiler production? It is still too early to say. Do higher weights represent a backdoor way for the industry to expand without actually bringing more birds to market? The answer to that question is likely yet, especially given that corn prices are currently running some 10 per cent below year ago levels (see table on page 2) while whole broiler prices are up 6.5 per cent compared to a year ago and chicken breast prices are up some 3.6 per cent.

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