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Impacts of weather, dollar, trade driving meat prices

By MATTHEW D. ERNST
Missouri Correspondent

INDIANAPOLIS, Ind. — It’s a good summer to shop for chicken and pork. With a customer loyalty card, Indianapolis-area Kroger customers last week could buy fresh chicken leg quarters for 49 cents per pound and pork spare ribs for $1.77 per pound.
Boneless chicken breasts and boneless center cut pork chops rung up under $3 per pound. The seasonal promotion provides one snapshot of how big-picture issues – from weather and feed prices, to the strong dollar, to global disease impacts – continue to influence retail meat prices.
Drought-breaking rains this year, in most of the Great Plains, are keeping cow-calf producers in expansion mode. Heifers are staying on the ranch and out of the feedlot. And there are fewer cows being culled, contributing to beef herd expansion. Both feeder and finished cattle markets will likely stay up through 2016, and U.S. consumers continue to show a willingness to pay higher prices for the current beef supply.
“Look for (cattle) prices to erode year-on-year, rather than collapse,” advised a July update from the Livestock Marketing Information Center, a Denver, Colo.-based group which cooperates with USDA to provide livestock market information.
Forage availability is another weather-related factor keeping cows and heifers away from slaughter. West of the Rockies, high hay yields in 2014 helped boost forage inventories. This year’s rains in the Plains are sustaining pasture and saving hay stocks for winter.
“The large (hay) stocks should encourage cattle expansion across a broad area as both South Dakota and Texas had large ending stocks” in May 2015, said Matthew Diersen of South Dakota State University.
Meanwhile, pork and poultry producers are bracing for the winter. Highly pathogenic avian influenza (HPAI) could crop up again, as wild birds and waterfowl migrate south for the winter. Porcine epidemic diarrhea virus (PEDv) is also a greater concern in the colder months.
But both pork and chicken inventories should keep prices down heading into winter – and there could be room for U.S. retail pork prices to head lower. That is because the pork wholesale-to-retail spread was up in June, compared to last year, according to the University of Missouri’s Ron Plain. That means retail pork prices could head lower if retailers lower pork prices to move more meat.
Dollar and trade

A strong dollar impacts the amount of U.S. meat foreign buyers are willing to purchase. With the purchasing power of the dollar rising on international exchange rates, meat that might have been exported stays in the United States. That has helped temper producer prices for pork and chicken and made more meat available to U.S. consumers.
A much weaker euro – in comparison to the dollar – means Asian buyers are finding European pork a better buy than U.S. pork. “The tremendous influx of lower-priced European pork has reshaped the competitive landscape in Asia,” said Philip Seng, U.S. Meat Export Federation president and CEO.
“The European industry has aggressively targeted Japan and China, successfully capturing market share.” He said smaller importers in the Pacific Rim, like the Philippines and Australia, have also increased pork imports from Europe.
According to the Federal Reserve Bank of St. Louis, the dollar has increased its exchange rate value by about 14 percent since last August. The St. Louis Fed’s “broad trade weighted dollar index” pegs the dollar at a 10-year high – a situation generally good for U.S. imports but challenging for exports.
The strong dollar is not the only challenge for U.S. meat exports. Russia, China and South Korea have enacted trade bans on U.S. broiler meat. Some trade partners have also banned U.S. turkey.
For broilers, this means more meat is available for both domestic consumption and to countries still importing U.S. poultry. The USDA broiler trade volume forecast is keeping steady for this year. Turkey export volume is forecast down – but because of tight turkey supplies, not trade bans, according to the USDA.
Turkey supplies will take a while to shake off the impact of HPAI, but steady broiler exports means plenty of chicken is still in the domestic supply chain. And while broiler producers are bound by contract, more chicken could mean continued cheaper fresh leg quarters and boneless breasts through Labor Day – and beyond.
7/29/2015