REPORT

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BEEF Cash cattle traded at $120 last week, up $1 from the previous week. Market-ready cattle available this week are slightly higher, but we will continue to be in the tightest fed cattle supplies of the year. Even so, cash cattle are trading slightly lower. Steer and heifer slaughter for January was 4.8% higher when 1%-2% was expected. February and March fed slaughter is expected to be 5%-6% higher year-over-year. Board (futures) economics continue to dictate active marketings with feeders pulling ahead market-ready animals. Total slaughter last week was 577K head, down 16K head from the previous week, but 30K head higher year-over-year. However, feed kills remained the same week over week. Placements this last fall suggest larger fed supplies starting late March/early April with fed slaughter levels expected to be 4% higher than last year, increasing 5%-7% moving into June. With the greater supply during the most lackluster demand period of the year, packers were forced to discount many cuts to alleviate inventories. With packers firmly entrenched in the red, further reductions in kill are anticipated, but it has yet to really be seen if they can remain disciplined. Carcass weights continue to drop…22 lbs lower since the beginning of January. That is curbing overall beef production. Weights will continue to decline seasonally into the spring and are expected to range below last year’s levels. With more heifers in the slaughter mix, weighted product availability is expected to increase slightly into the spring. Overall Box Situation Spot market box volumes are running slightly higher than last week, with most of the increases being in the Rib and Loin sections along with Briskets at the expense of the End Cuts. Select and ungraded product continue to be in short supply due to continued excellent cattle grading. Choice pricing to Select on several items such as Briskets, Teres Majors muscle, Chuck Rolls, Peeled Knuckles, and Insides are all inverted not due to increased demand, but simply lack of supply with pricing determined on what the market will bear. This is expected to continue into spring and afford the opportunity to Sub Choice for lesser grades at a lower cost. GRINDS 81/19 FINE GRIND: Knuckles were discounted to move inventories. There is slight upside potential in March with inventories in better position, but the market is expected to drift off into May. ROUNDS PEELED KNUCKLES: All grades of Peeled Knuckles moved lower on a lack of demand from both the primary and grind processing sectors. They are expected to remain weak into April. INSIDE ROUNDS: Insides were discounted to move inventories. However, there were large forward orders shipping for retail features, which is expected to support this market with modest advances into and through most of March. BOTTOM ROUND FLATS: Bottom Round Flats continue to be weak with only a slight possibility of a limited rebound in March. EYE OF ROUNDS: Eyes of Rounds moved lower and are subject to more downside risk moving into spring. LOINS STRIPS: Large volumes of Choice Strip Loins sold last week at a discount. Select pricing was supported by good cattle grading. Seasonal lows most likely have occurred with moderate advances expected through mid- to late May. TOP BUTTS: Top Butts continue to find support from good spot demand; Select more so due to grading. There is little risk to the downside. Modest increases are expected into late May. TENDERLOINS: Tenders traded steady last week with large volumes of Choice on spot and forward orders. Downside is now limited. Modest advance are expected from now till May. RIBS RIBEYES: Light Ribs reported lower. More product was available due to falling carcass weights and dull demand. There is some downside risk moving into March, but it is now considered limited. Modest advances are expected into May. Heavy Ribs continued to be discounted to move inventories. Some downside risk remains, but limited. Modest to moderate gains are anticipated moving into late May. CHUCKS CHUCK ROLLS: All grades of Chuck Rolls moved lower on good spot demand at a lower cost. They are expected to hold their value for the next several weeks and trade mostly sideways before drifting lower from early May into summer. TERES MAJORS: Teres Majors continue to move higher on good demand from all sectors and seasonally small slaughter levels. There is some downside risk, but Teres Majors are expected to rise modestly into late May. BRISKETS: Briskets were discounted last week to move inventories. With packers in better inventory positions, and large forward orders posted as well, the market is expected to be supported with slight gains moving into April. THIN MEATS BALL TIPS: Ball Tips were mixed last week on decent volume. They are finding support on good interest, and are expected to advance modestly into mid- to late April. FLAP MEAT: Flap declined much greater than expected, but was needed to move inventory. There is more upside potential than down, and they are expected to drift higher into March with more seasonal advances peaking in April. FLANK: All grades of Flank moved higher on good demand. Flank is expected to move moderately higher, peaking in late May. SKIRT STEAK: Outside Skirt moved slightly higher last week but jumped considerably this week. Seasonal lows are at hand with modest advances expected into April, and more moderate increases expected moving into mid- to late May. 2

PORK Weekly hog slaughter last week reported a kill of 2.327 MM hogs, up almost 7% over a year ago. This week’s slaughter is forecast higher at 2.36 MM hogs, up counterseasonally, signifying an underlying tone of strong wholesale pork demand. As we move toward March, slaughter levels should gradually decrease as packers react to weaker demand. On the hog front, interior cash hog prices continue to increase, as packers are paying higher money to accommodate seasonally strong wholesale pork demand from a tighter supply of hogs. Due to the strength of the rising interior markets, the futures market is also increasing on the basis of a continued positive hog outlook. On the meat side, the pork cutout continues to increase due to increases in product values. The increasing cutout would normally drive up packer margins, but any gains are being eroded by the rising cost of hogs. Last week, the final export numbers for 2016 were released, indicating an extremely strong year for U.S. pork exports at 5.23 billion pounds, just shy of the 5.37 billion pound record. Total U.S. exports were 25% of domestic production, with Mexico being the largest importer of U.S. pork. LOINS After trading down for three consecutive weeks, Bone-in Loins became enough of a value to find support and bottom out last week, resulting in a flat trade for the week. The forecast for Bone-in Loin pricing is to slowly increase through the end of March, as spring retail demand kicks in. Boneless Loins have been on a nearly identical path to their Bone-in counterparts. Boneless fell slightly last week, but are forecast to slowly move higher for the next six weeks as retail spring demand is expected to kick in on the entire Loin complex. TENDERS Pork Tenderloins prices were up slightly last week due to stronger demand. Demand is expected to be strong for the balance of the month due consumers’ trading up to more expensive Pork cuts due to tax returns and also Valentine’s Day. Once March rolls around, typically tenderloin prices will slowly decrease until April when summer demand kicks back in. BUTTS Pork Butts started their seasonal move upward last week, trading up moderately, with supply very tight for the next few weeks as export bookings for March are being allocated. In addition, Pork Butts are being featured at retail in March, and cold storage continues to pressure the fresh market as freezer stocks are replenished. Consider Pork Butts to trade higher each consecutive week through May. RIBS Rib prices continue to trade higher, with Back Ribs moving up steadily and Spareribs increasing marginally. Packers are officially in high gear for Rib production, allocating a majority of their fresh Rib capacity to large retail frozen Rib packages for summer months. Thus, fresh availability is squeezed and buyers will need to pay higher money for their needs. In addition, smaller sized Ribs including both Back Ribs and St. Louis Ribs, are extremely tight in the primary market. BACON/BELLIES While Belly prices continued to move higher last week, trading up $0.09/lb, all signs are pointing that this market should peak any day now. Load counts have decreased and prices have toggled within a narrow range for the last seven days, which further suggest a slowdown in Belly demand. Analysts are hinting that wholesale prices got too high for retail, and so they are backing off on demand, both on feature activity and price increases, which should help drive the market lower. The big question is: How fast will the market fall? Analysts are forecasting a gradual decline instead of a free fall as basis demand is still very strong from other channels, including foodservice and cold storage. HAMS Ham prices increased slightly last week. For the next 30-days, expect Hams to slightly increase due to modest support for Easter Ham bookings as well as steady demand from export and cold storage buyers. TRIM Pork Trimmings were active last week, with 42% Trimming trading up due to their seasonal increase in demand from Hot Dog and Sausage makers. Now is the time when processors start buying Trim for their freezers in anticipation of ramped up summer production. Lean 72% Trimming continued their move down last week, trading down in what could be their bottom. Just like the 42s, expect lean Trimming to kick into gear any day now as processors ramp up for summer. PICNICS Boneless Picnic prices traded flat last week, but will soon begin their seasonal move upward as Sausage makers ramp up for summer production. In addition, the Boneless Picnic will see increased demand over the next 30 days as some processors utilize Picnics for Easter Hams, which are sold into the retail market. 3