January 12, 2009

 

US wholesale pork prices jumped US$4.23 per hundredweight, or 7.7 percent, this week led by a surge in ham values, while the beef complex was slightly higher on late-week gains.

 

Market analysts and brokers said domestic demand for most of the retail pork cuts throughout the week was moderate but not strong enough to readily absorb all of the production on certain cuts. The US Department of Agriculture's primal ham cutout value, however, rallied US$16.50, or 47 percent, in just five days.

 

Increased purchasing for export to Mexico and possibly Russia are said to be a significant factor the price gains on hams. Mexico has proposed a change in its packaging specifications on imported meats from the US that would ban the use of combo bins and require that all products be boxed instead. The effective date of the proposed change is Jan. 30.

 

Industry analysts and meat organizations said the specification change would significantly raise the cost of the product to Mexican meat processors and consumers while also resulting in a potentially sharp decline in the amount of product that will be shipped to Mexico. Most US meat plants are not designed for on-line boxing of hams and other cuts or trimmings used in further processing. Therefore, shortages could result in Mexico if the proposed changes are implemented.

 

Meanwhile, Mexican meat processors were actively buying additional hams this week to build their inventories ahead of the implementation date of the proposed packaging change, which contributed to the run-up in prices, industry participants and analysts said. They also said if US government and meat industry representatives are not able to reach an agreement with Mexican officials on the new packaging requirement before Jan. 30, prices for hams and other cuts used in further processing could rally further in the short-term but then slide as time runs out before the implementation date.

 

In the beef sector, packers again limited their slaughter schedules due to sluggish demand for the product. USDA's weekly total for cattle was down 5.2 percent from a year ago.

 

Retailers and the food service industry have seen a slowdown in sales of some beef cuts due to the economic crisis. Shoppers are trying to stretch their food dollars by purchasing smaller amounts of the more expensive cuts and are trading down in quality to the cheaper items or away from the category to other protein options.

 

The USDA's s choice beef carcass cutout value was up US$2.29 for the week while the select beef quote was US$2.25 higher, each gaining about 1.6 percent.

 

Last week's cattle slaughter was estimated at 601,000 head, compared with 511,000 a week ago and 634,000 a year ago.

 

The week's hog slaughter estimate was 2.386 million head, compared with 1.918 million a week ago and 2.434 million a year ago.

 

The USDA estimated total beef, pork and lamb production for the week at 957.6 million pounds. Last week's holiday-shortened output was 792.6 million pounds, and the year-ago figure was 994.5 million pounds.

 

Broiler/fryer slaughter for the week was estimated at 167.176 million head, compared with 127.532 million a week ago and 168.128 million a year ago.