Spring has not sprung yet, but it’s about to. The 8-percent unemployment rate will slow, but not stop, seasonal price increases between now and June. Top butts are already sharply higher, but most other beef cuts will likely see big, $1-to-$2-per-pound increases in April and May.
Choice #174 XT short loins should get above $5 for the USDA weighted average price per pound, while Select short loins will advance to about $4.50. For #180 XT boneless strips, Choice is headed to $6, while Select will jump to $4.75. Fresh 50s beef trimmings are already near a market top in the 90-cent range, but 90-percent lean trimmings could get into the mid-$1.60s.
In pork, ham prices should be near 55 cents per pound for Easter, then go a bit lower in late April and move back to the 60-cent range by summer. Pork bellies should be in the low-80-cent range in April, then in the 90-cent range in May. Boneless skinless chicken breast looks to hit highs in the $1.70s this summer.
Beef — February’s U.S. Department of Agriculture cattle report showed feedlot inventories at 11.29 million head, down 5.7 percent from a year ago. Federally inspected cattle slaughter is expected to be down 2 percent this year and hit a 15-year low of roughly 27 million head. As a result, beef production in 2009 is forecast to be down about 1.7 percent. However, beef output declines will be matched by sharply lower export sales and softer domestic demand.
Coffee — Futures prices slumped below $1.10 in early March. Supporting fundamentals have been overwhelmed by economic and stock market weakness. A bounce-back in the dollar is helping profitability in Brazil and Colombia, which should help boost their export sales. However, production cost increases have outpaced product prices, giving many growers little incentive to expand output. Current levels of world output are sufficient to meet existing demand, but any production problems or an uptick in demand would be very bullish.
Dairy — Domestic demand has been holding up for both cheese and butter, but exports sales have declined. After a record-high year in 2008, cheese exports will be down about 45 percent in 2009 and butter down about 50 percent. Dairy farmers are trimming herds, but so far just not fast enough to support prices. Block and barrel cheese prices got above $1.30 per pound in mid-February before falling back to the $1.20 level in March. Butter prices have recovered a bit, but are still below $1.20. The USDA continues to lower price projections for the year. The 2009 all-milk forecast is now $11.30 per hundredweight, down from an average of $18.34 in 2008; 2009 butter is projected at $1.13 per pound, versus $1.43 in 2008; and the 2009 block cheese forecast at $1.22 is also well below $1.89 for 2008.
Grain — February’s USDA Supply & Demand Report was mildly bullish for grain prices. The USDA raised the projected 2008-09 wheat price by a dime to $6.80 per bushel. But that number is well above futures prices, which hit lows of $4.90 in early March. The 2008-09 USDA corn forecast is unchanged at $3.90, but near futures contracts have averaged below $3.70 for the past four months, so either the USDA will have to lower its forecast or, more likely, corn will have to trade near $4.10 for the balance of the crop year. Corn prices will be subdued due to a sharp decline in animal feed usage. But the road forward will eventually be bullish, and we wouldn’t be surprised if the $3.43 recorded in early March turned out to be the low for the year.
Oil — In soybean oil, the trend is for lower production to be outpaced by weaker demand. Reduced U.S. soybean crush is being offset by higher global vegetable oil supplies and lower domestic usage, especially for biodiesel. Already lower exports will be further reduced as the European Union has announced temporary anti-dumping and anti-subsidy duties for U.S. biodiesel exporters. The USDA increased 2008-09 ending stocks to 2.24 billion pounds, and current supplies are approaching 3 billion pounds, despite sharply lower crush rates. As a result, the USDA reduced its 2008-09 soy-oil forecast to more than 32 cents per pound, down a penny from last month.
Pork — Hog and pork prices likely will reflect declining consumer and export demand. However, exchange rates have remained favorable for export, with Japan, which is our top pork customer, representing 28 percent of all U.S. pork exports. While 2009 pork exports look to decline 14 percent from 2008, they will remain large at 4 billion pounds, accounting for 17 percent of total U.S. production. Hog prices for the year are now forecast to average $47.50, very near the $47.84 average for 2008.
Poultry — In the fourth quarter of 2008, egg sets and chicks placed in the USDA’s 19-state reports have both averaged about 7 percent below a year ago. So far, for the first nine weeks of 2009, egg sets continue to run 6.9 percent below a year ago, while the number of chicks placed has improved just marginally to 5.9 percent below last year. Fourth-quarter 2008 broiler output was 4.5 percent below a year ago, but January output plunged to 11 percent below a year ago. The USDA is still forecasting 2009 output to be down just 1.9 percent from 2008. I expect that number will eventually be revised to at least 3 percent below 2008.