Last week’s cattle slaughter was estimated at 608,000 head. This is down 20,000 head from the prior week and down 46,000 head from the equivalent week last year. We expect production levels to continue to remain comparatively small versus a year ago, as packer margins remain poor and beef demand seemingly remains sluggish.

It was not only cash cattle trade volumes that were anemic last week. Comprehensive wholesale beef trade volume was reported at its lowest one week non- holiday shortened level since mid-November and was approximately 11% below levels seen during the equivalent week in 2011. It seems that the recent packer-initiated push attempting to boost prices because of reduced production levels has failed – for now anyway.  However, we suspect that further sustained production cuts will provide a boost for items that have declined to key support levels. This not only includes middle meat items as well, especially ribs.

We are seeing some mitigation of always increasing lamb prices.  A couple of cuts are actually showing declines of a few cents.  Given the state of the lamb industry, we do not expect this to become a significant trend.  There is simply too little livestock available for the demand.  Easter is in early April this year and there is almost no doubt that prices will not decline into that holiday.

 Broiler slaughter has continued to decline sharply versus year prior levels. Year-over-year declines for the first three weeks of January are totaling approximately 10%. It is not simply slaughter that holds bullish implications for pricing. Weights are also below year prior levels, reducing production even further. Logically, one would suspect that decreased slaughter, lower weights, and significant inflation in the competing proteins would be enough to push chicken breast prices significantly higher. However, breast meat prices continue to struggle in achieving any significant gains. In fact, packer market boneless-skinless chicken breast prices have declined in the last couple weeks. Declining chicken breast prices during the month of January are a rarity, particularly during the back half of the month. This year’s decline represents the first such decline during the month of January since 2003. After holding steady during December and into early January, the prevailing thought was that chicken breast prices would increase throughout much of the winter. With current spot market pricing now at their lowest levels since late November, combined with the bullish factors listed above, it is difficult to see how prices can follow a negative trend for much longer. Do not be surprised to see prices begin to rebound within the next couple weeks. When they begin to increase, they may very well do so consistently all the way into their pre-Memorial Day seasonal peaks. By the end of May analysts expect boneless random chicken breast prices to be 15-20¢/lb higher than current pricing. 

 

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