Wholesale prices for broiler parts over the last several months have been “moving in different directions,” analysts from USDA’s Economic Research Service (ERS) said in the “Livestock, Dairy, and Poultry Outlook” report issued last week. For example, the price of boneless-skinless breast meat in the Northeast market, at $1.31 per pound in May this year, was 21 percent lower than in May 2010. On the other hand, prices have risen for a number of leg meat products.  Prices for leg quarters averaged 49.6 cents per pound in May, up 30 percent from a year earlier.  Boneless-skinless thigh meat prices in May also were higher than the previous year, increasing 43 percent to $1.35 per pound.  The May price for boneless-skinless thigh meat was 3.7 cents per pound higher than for boneless-skinless breast meat.  This situation, ERS explained, is a significant change from 2010 when boneless-skinless breast meat averaged $1.65 per pound, 71 cents per pound higher than boneless-skinless thigh meat, which averaged $0.94 per pound, ERS reported.

Regarding the beef situation, ERS explained that the drought conditions in Mexico have increased the incentive for many producers to export cattle to the United States. The principal forage-producing states of Mexico are facing extreme drought conditions that could endanger animals, particularly if critical rainfall is not received in June and July–the rainy season for major cattle and forage-producing states in Mexico. Given feeder cattle demand in the United States, these lightweight cattle have largely been placed atypically directly into feedlots during the past few months. Normally, the cattle would have grazed forage in the United States before being placed into feedlots. Large portions of Texas and New Mexico, however, are also experiencing drought conditions. Monthly cattle imports from Mexico through April were 28 percent higher than levels a year earlier.  These higher imports have been maintained in recent weeks, as weekly AMS data reports through the first week of June also show cattle imports from Mexico 27 percent higher year-over-year. Weather conditions in Mexico in the summer months will determine the degree of seasonal spike in cattle imports this fall.

At the same time, monthly Canadian cattle imports into the United States through April were 38 percent below levels a year earlier. Weekly AMS reports show year-over-year Canadian cattle imports declining further into June–nearly 40 percent lower. Thus far in the year, the U.S.-Canadian slaughter cattle price differential has remained well below levels posted in the last three years.  In April, this differential only began to cross into the range posted in 2009; since May, the differential has averaged $3.80 per hundredweight lower than 2010 levels.

Pork production, like all of U.S. animal agriculture, is being impacted by significantly higher feed costs.  Continued tight feed supplies are expected  by ERS to put upward pressure on feed prices through the 2011-12 crop year.  Hog producers may see their profitability slip because of high corn and soybean meal prices. It is expected that these high costs likely will encourage producers to remain as current as possible in marketing their animals to limit the time on feed. As a result,  ERS has reduced its average hog weights for 2011 and 2012 from its forecast last month.

Given the reduction in hog weights, the forecast for pork production was reduced slightly by ERS for both 2011 and 2012. Commercial pork production estimates for 2011 were reduced by 10 million pounds from May to 22.615 billion pounds, and the forecast for 2012 was lowered by 40 million pounds to 22.91 billion pounds, ERS reported.

 

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