US wholesale pork prices rise

 

 

This weeks North American market update column reports that after last week's surprise run-up in US wholesale meat prices, markets have been near a plateau this week - though pork was exceptional and kept rampaging upward.

 

Pork carcass cut-out value rose a further 4c/lb this week (to 75.4c - highest in past 2 years, except for briefly touching 78.6c/lb in week ended January 20 this year). The increase was driven in large part by export trade and good domestic demand for bellies/bacon, ham, and trimmings - latter caused by a recent steep run-up in sow prices, as kills have ebbed.

 

However, overall, national daily hog slaughter has stayed high (near 430,000 head daily, except for a dip to 415,000 head last Friday). This pork price increase is a welcome prelude to the annual national Pork Forum being held this week in Kansas City, convened jointly by National Pork Producers Council (NPPC) and National Pork Board, but with their business affairs conducted separately.

 

US wholesale beef prices were basically steady this week, and fed steer values stayed near their recent highs, ranging 89-91c/lb (live basis). Choice-grade carcass cut-out value is quoted today at 150.4c/lb (up 0.5c from week ago) and leaner Select-grade is quoted at 149.0c/lb (down 0.6c), with the spread still very narrow at 1.46c.

 

Daily fed cattle kills have been in a range of 93-97,000 head (down from what used to be a norm near 100,000 head in earlier days) and beef packers have had variable profit margins in operating below maximum slaughter capacity.

 

Average slaughter margin last week was reportedly near US$18 per head, compared with near US$6 in prior week. It was notable that futures contract prices for both live cattle and feeder calves rose by 1 to 3c/lb (live) during the past week, while corn and soybean futures prices (reflecting feed costs) stayed exactly steady.

 

Cow beef prices eased this week - canner cutter carcass value is quoted today at 122.5c/lb (down 1.3c from week ago) and fresh 90CL boneless cowbeef is steady at 156-157c/lb,with a weak under tone. US national cow slaughter has remained slightly above average in a daily range of 25-27,000 head.

 

Imported frozen 90CL cowbeef is nominally quoted near 163c/lb (down 2 to 3c), but trade is virtually at a standstill, after last week's frenzied activity by some traders seeking to cover forward delivery commitments - in face of extreme supply tightness in Australia.

 

Australia, where amazing widespread floods have inundated much of the eastern half, and cattle are being retained on ranches to take advantage of anticipated pasture abundance in near future - leaving packers very short on slaughter needs. Several Australian beef packers have recently closed or suspended operations, and more are expected to do so in the short term ahead. Beef offers from New Zealand are also very tight.

 

On a different note, chicken leg quarter demand has also been quieter, as traders await news of whether a new Russia-US trade deal will keep the door open for big US sales (optimism is growing in these top level negotiations - and also for a new pork trade deal with Russia). Leg quarter wholesale price fell last week toward 30c/lb amid some supply back-up, but now is near mid-30s, with hopes of improvement.

 

In the meantime, the basic breast meat wholesale price is in a range of 125-140c/lb, with retail demand stimulated by promotion "specials" as low as 148c/lb (in 10-lb bags). These were clearly loss leader tactics, and appreciated by many cash-strapped US consumers who keep struggling to make ends meet with national unemployment still hovering near 10% (much higher rate, if drop-outs are counted).

 

Added to this constraint, there are also many Americans buying less red meat in the current Lent period, which extends up to Sunday, April 4. It is noticeable that retail store ad flyers this year are featuring less meat specials on their cover pages - indicating that meat purchases may now have less priority on the shopping lists of US consumers - a challenge that the US meat industries need to address seriously.