Agribusiness Weekly Update: Pork prices fall amid excess supply

Beef
Beef packers were losing an average $55 per head processed this week, up from a $25 per head deficit last week, according to Hedgers Edge. One of the biggest concerns facing the beef industry in the next two years is demand. If demand were strong enough, the margin squeeze felt by feedlots (and packers) could be eliminated, said Darrell Peel, livestock marketing specialist at Oklahoma State University. The next two years will put beef demand in relatively uncharted waters,but it seems likely that beef demand will continue to limit retail and wholesale beef prices relative to the input price squeeze that feedlots, as well as packers, will continue to face.

Hogs & Pork
Hog processing margins narrowed to $2 per head on Wednesday (Oct. 31), down from $6.50 per head last week, according to Hedgers Edge. The USDA said last week the Sept. 30 pork inventories were 630.7 million pounds, up 8% from August and up 28% from last year. The retail pork price in September was $3.50 a pound, compared with $3.52 in August and $3.56 a year earlier.

Chicken
Chicken processors continue to wrestle with high grain costs keeping operating margins near flat levels in spite of higher wholesale prices. Georgia Dock pricing increased 20 cents a pound for breast meat in the third quarter, from a year ago. Wings rose 96 cents and stands at an historic high $1.83 per pound. Prices are still 10-to 12-cents a pound below where they should be for processors to hit normal operating margins given the higher grain costs. Analysts see production will be down roughly 2.5% in the first half of 2013. Chicken sitting in cold storage is well within comfortable levels at 652 million pounds or approximately one week's worth of industry production.

Table Eggs
Large egg prices in Arkansas ranged from $1.25 to $1.34 last week, up 5 cents from last year. Shell egg inventory fell 8.1% from a year ago with 1.167 million (30 dozen cases) processed, according to the USDA report on Oct. 29.

Grains
The December corn futures closed Tuesday (Oct. 30) at $7.41 per bushel up nearly 5 cents, according to the Arkansas Farm Bureau. March corn settled at $7.44, up a nickel. Corn closed higher with gains of 4 to 5 cents across the board. December futures are holding within a fairly narrow trading range between $7.32 and $7.75. A close outside those parameters would suggest additional movement in the direction of the breakout. Demand concerns continue to limit upside movement, according to the Arkansas Farm Bureau.

November soybeans traded 6.5 cents higher to close Tuesday (Oct. 30) at $15.33. January beans also traded up to close at $15.37. Soybeans mounted a little rebound as bargain hunters sought to reestablish positions. Double digit gains were trimmed late in the session as reports of rain in Argentina and southern Brazil raised concerns about the potential size of the South American crop. Reports suggest additional acreage may be planted to both corn and soybeans. However, heavy rains in some areas may cause abandonment. It may be January before a good estimate of this crop can be made, according to Arkansas Farm Bureau.
  
Dairy
The October Class IV milk futures settled Tuesday (Oct.30) at $18.55 per hundredweight. The cost of production in September totaled $19.92 per hundredweight, up sharply from $15.09 in January of this year, according to USDA. Nonfat Dry Milk Grade A standard averaged $1.47 per pound for the week ending Oct. 20. The price per pound increased 1.3 cents from the previous week.

Ethanol
Cash ethanol prices are trading at $2.40 per gallon this week, down from $2.76 per gallon a year ago, according to USDA. Ethanol was priced at a $1.13 per gallon discount to gasoline as of Oct. 30, according to AAA.