March 12, 2007

 

US pork by-product prices rise on higher grains, biofuel use

 

 

US pork by-product values overall are up nearly 15 percent from a year ago and amount to about US$1.20 more per head on influences from higher grain prices and increased demand for biofuels.

 

Pork by-products include edible variety meats such as livers, hearts and tongues, along with rendered products including grease, lard, meat-and-bone meal and blood meal.

 

The US Department of Agriculture's weekly by-product credit report released March 2 showed a total value of the 18 various products at US$3.42 per hundredweight live basis. Since the live-weight average for all hogs is running about 270 pounds, the by-product credits are worth about US$9.23 per head. At this time a year ago, the by-product value was at US$2.99 per hundredweight, or about US$8.08 per head.

 

The year-on-year gain was US$1.20 per head, with about two-thirds of the increase from higher prices for lard, choice white grease, and dried blood meal.

 

While that may not seem to amount to much, with weekly US hog slaughters averaging about 2.01 million head so far for the year, this US$1.15 per head is worth approximately US$2.3 million more to the industry on a weekly basis. It could amount to over US$100 million more for the year.

 

Any changes in the value of the animals, whether from primal cuts or by-products, can affect demand and the amount that packers are willing to pay for the hogs.

 

"The whole fats complex is doing well," said Tom Cook, president of the National Renderers Association. Cook said factors supporting the fats markets include higher energy costs, tax credits allowed for companies that burn alternative fuels, and increased interest in the biofuels.

 

Cook said that depending on the prices for fats versus other energy sources, some rendering operations and other facilities are burning oils they produce as fuel. Also, the biodiesel industry is growing, and as supplies of some oils become tighter, other users look for alternative oils, he said.

 

Choice white grease prices are up about 6.5 cents per pound, or 50 percent, from a year ago, according to the USDA's tallow, protein and hides reports. Bulk lard prices also are up nearly 50 percent with a gain of about 8 cents from the 16.5 cents per pound reported this week last year.

 

"Incoming tides raise all ships," Cook said about the oils markets overall.

 

Soyoil prices at the Chicago Board of Trade are up nearly 27 percent from a year ago, with the March contract closing at 30.22 cents per pound Friday, versus the lead-month contract on continuation charts a year ago at 23.85 cents.

 

Porcine blood meal prices are up as well, gaining US$75 per tonne, or about 14 percent, from a year ago. The high-protein material is used as an ingredient in livestock and poultry feeds. Higher soymeal prices are helping drive up blood meal values as alternative materials are being sought.

 

Other items contributing to the gains in the overall by-product value are cheek meat, snouts and stomachs. Increased exports of snouts and stomachs along with stronger domestic demand for cheek meat have contributed to the price gains, according to wholesale market sources and brokers.