Market expectations were for packers to once again pay higher prices for cattle last week, as packer margins remained positive and cattle supplies tight. However, live cattle futures were on the decline throughout the week, as questions began to compound regarding the sustainability of the recent break to the upside. The average boxed beef cutout value exceeded $150/cwt last week; a level which has led to retail buyer resistance in the past. In each of the past five years, the average cutout has approached or exceeded $150/cwt in the 1st quarter. Only in 2007 were prices able to continue their run higher. Packers are likely to run into resistance from retail chain buyers and that may create a downside condition.

Choice grade out for the week ending February 13th reached a new record high of 65.31%. This exceeds the previous record 63.8. Year-to-date, we are producing on average 21 million more pounds of choice beef per week than last year’s record highs. This will likely exert increased pressure on choice middle meats during their ongoing seasonal increase. Logically, with obvious supply side pressure, one might expect to see less of a seasonal increase in middle meat prices. Given today’s parameters, middle meats should probably not exceed prices we saw last year during the coming weeks.

Prices for beef trimmings remain approximately 25¢/lb above a year ago. This is a record high for this time of year. Prices for trimmings are likely to remain elevated compared to past years. The high cost of imported trimmings is main contributor to this result. Despite a 15¢/lb increase in domestic prices over the past month, imported trimmings have increased even more rapidly. This metric is being felt prices for bulk grinds and beef patties.

Veal prices are showing signs of life. Legs and racks are on the move. The prices are varied widely between packers. Depending on whether or not a packer is well-sold sub-primal prices can show significant variance across the board. Veal is still a value compared to past years but it is such a small market that it does not take much to ignite activity.

The lamb market is reacting to the shortage of imported racks and legs. Easter is only 4 weeks off and consequently the demand for leg meat is growing every week.

News broke the other day is morning that Russia was prepared to lift bans on U.S. pork. However, an official time frame still appeared to be undetermined. Over the last two years, Russia has been the 5th largest importer of U.S. pork, with approximately 23% of total U.S. pork exports going to Russia last year. However, volume slowed considerably near the end of last year, which has reportedly continued into this year. In recent years, Russian imports of U.S. pork were largely comprised of picnics, butts, and hams. These items would likely receive the strongest push once Russia begins to import more U.S. pork. This could have a big effect given the strong ham and picnic prices in the current market.

Chicken wings continue to return to more common price levels. Breast meat is quite stable at the moment. Packers are selling just about what they are producing.
 

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