February 23, 2009

US wholesale pork prices in mid February have held near the year-to-date average but have fallen further behind a year ago.

 

For the first seven weeks of 2009, the US Department of Agriculture's pork carcass composite value has averaged US$57.49 per hundredweight. That was down US$0.99 from the same period in 2008. In the latest two weeks, though, the difference from a year ago has widened to $4.26.

 

Market analysts and meat brokers said two factors may be primarily responsible for the recent widening of the spread between 2009 and 2008 pork prices.

 

Glenn Grimes, agricultural economist at the University of Missouri, said pork exports may hold the key for what was happening a year ago. "About this time last year, there were rumours that Smithfield Foods had sold a large amount of pork to China," he said.

 

In addition, the US dollar was weakening against most other currencies, and international sales of most commodities including pork were booming. It was also about this time a year ago when a severe shortage of shipping containers was occurring, further indicating a massive outflow of US agricultural products, analysts and brokers said. (Dow Jones Newswires first reported the container shortage on March 13, 2008.)

 

US Meat Export Federation data showed total pork exports in February last year were up nearly 56 percent from the previous year. In January and February in 2008, sales were up 41 percent. Export sales continued to surge above the previous year until late 2008 and finished the year up 57 percent from 2007 by volume with a 55 percent increase in value. Pork exports in 2008 set a new record for the 17th consecutive year.

 

The US dollar has strengthened considerably against most currencies from this time a year ago. Comparing the exchange rates Friday to Feb. 28, 2008 shows a decline of 36 percent in the value of the Mexican peso to the dollar and the Canadian dollar down 28 percent against the US dollar. The Japanese yen, however, is worth more against the dollar than it was a year ago.

 

Wholesale pork prices have been nearly flat during the past seven weeks. After rebounding in early January from a 5 3/4-year low hit Dec. 30, the pork cutout has held within a narrow range most days. The average for the carcass composite value in the latest two weeks is US$57.94, little changed from the year-to-date arithmetic mean of US$57.49.

 

Analysts and brokers said the economic crisis has resulted in slowed sales of some meat and poultry products, especially the higher priced cuts. Consumers are stretching their food dollars by purchasing less meat overall or by selecting lower priced items. Some also may be digging into their freezers for items stored away earlier.

 

Some meat brokers and analysts predict that the economic crisis could temper the normal spring rally in wholesale meat prices by limiting the advances on some cuts. The lower priced items in each of the three main protein groups - beef, pork and chicken - may see better-than-average movement, and prices for those cuts might advance at normal to above normal rates, they said.

 

Last week's cattle slaughter was estimated at 615,000 head, compared with 614,000 a week ago and 621,000 a year ago.

 

The previous week's hog slaughter estimate was 2.214 million head, compared with 2.236 million a week ago and 2.205 million a year ago.

 

The USDA estimated total beef, pork and lamb production for the week at 940.1 million pounds. Last week's output was 942.8 million pounds, and the year-ago figure was 934.5 million pounds.

 

Broiler/fryer slaughter for the week was estimated at 155.498 million head, compared with 154.549 million a week ago and 166.700 million a year ago.