US meat composite prices respond to market turns

 

 

Composite wholesale pork prices plummeted this week, dropping US$9.39 per hundredweight since peaking January 20 at US$78.63, a move many market analysts are blaming on a simple turn of fortune.

 

Prior to peaking on January 20, the composite product value of the hog carcass had risen for 15-straight trading days, going from a low of US$67.58 to the January 20 high, for a gain of US$11.05.

 

Many market analysts said last week as the carcass value began to turn away from the midweek high that the market had risen too far too fast. When any market rises that quickly, it is usually on shaky ground and traders can expect prices to drop.

 

In this case, they dropped faster than they went up, which also is not unusual, the analysts said. A price move that took 15 days to build has nearly unravelled in about half of that.

 

Livestock market analyst Elaine Johnson said the latest decline in pork values also came after pork prices reached former areas of resistance among buyers. She was not surprised to see that buyers were pulling away.

 

But while the prices reached unacceptable levels January 20, the run-up from December lows was not all that unusual, Johnson said. A look at product performance charts from previous years shows a trend toward rising pork product values into about mid-January and then a general pullback into April.

 

Beef prices also saw a decline this week, although it was not as steep as the one for pork. The US Department of Agriculture's choice composite beef carcass value on Thursday was US$140.05 per hundredweight, down from the nearby peak of US$146.55 on January 19, for a decline of US$6.50.

 

Market analysts said the decline was on schedule with previous years. Once slaughter gets back to normal levels following back-to-back holiday interruptions, prices tend to falter.

 

Johnson said beef prices normally "chop around" in February, get a false start in March and then begin a seasonal rise in April. She does not see any reason to think there will be any change to the pattern this year.

 

Jerry Welch, market analyst and broker, said in his weekly column that February is one of the most bearish months of the year for agricultural markets. This is so well known it is called the February Break.

 

The February Break can arrive early and or stay late, he said. This week's sell-off in stocks and commodities was nothing more than the February Break arriving a week early, Welch said.

 

This week's cattle slaughter was estimated at 625,000 head, down from 665,000 a week ago and 633,000 a year ago. Year-to-date cattle slaughter is down 0.8% from a year ago.

 

The week's hog-slaughter estimate was 2.142 million head, compared with 2.182 million a week ago and 2.250 million a year ago. For the year, hog slaughter is off 10.2%.

 

The US Department of Agriculture estimated total beef, pork and lamb production for the week at 925.2 million pounds. Last week's output was 962.5 million pounds, and the year-ago figure was 962.6 million pounds. Year-to-date combined meat output is down 6.2%.

 

Broiler/fryer slaughter for the week was estimated at 154.866 million head, down from 163.958 million a week ago but up from 148.579 million a year ago.