USDA revamps meat 2017 production estimates

The World Agricultural Supply and Demand Estimates from the U.S. Department of Agriculture as of June 9 were down slightly from the previous month.

Global meat production estimates are 100,435 million pounds, down from 100,735 million pounds announced in May. Production forecasts for all major meat proteins were lowered in the recent report.

Beef production is forecast at 26,225 million pounds, down from 26,310 million pounds estimated in May. The primary reason for the lower estimates relates to lighter carcass weights which are expected to more than offset higher slaughter numbers later this year.

“Higher expected placements support a higher 2018 beef forecast,” USDA said.

Cattle prices are higher this year and forecast at $122 – $126 hundredweight in the back half of this year and unchanged next year, according to USDA. Live cattle prices have risen 25% since October. Beef packer margins were compressed in April sending profitability down to near break- even from $65 per head profits in March.

Pork production is forecast at 25,894 million pounds, about 160 million pounds lower than the May forecast. The current pace of second-quarter hog slaughter and lighter carcass weights contributed to the lower forecast. Hog price projections were a bit higher in June between $46-$48 per hundredweight. This compared to the USDA forecast of $44-$46 per in May, according to USDA. The agency is projecting higher hog price strength in the third quarter on robust packer demand.

BMO Capital analyst Kenneth Zaslow recently noted pork packer margin hit a record in April, surpassing the 5-year average for that month by more than seven times. He said those fat margins were not sustainable as hog supplies will be tighter this summer. Zaslow expects the pork margins to be strong for rest of 2017 and into early 2018.

Broiler production for this year was lowered to 41,458 million pounds in June. The reduction of 24 million pounds since May was based on a slower slaughter pace in the second quarter. USDA expects production to remain flat in the back half of this year. This spring chicken margins were 18% better than a year ago. Margins were helped by a 12% increase in chicken prices and 2% decline in feed costs, according to Zaslow.

Turkey production is forecast lower at 6,092 million pounds down from 6,122 million pounds on the current pace of slaughter, and weak demand in the third quarter that is expected to hinder the rate of expansion, USDA said.