May 11, 2009

US cash hog prices and wholesale pork prices rose sharply from respective four-month lows hit earlier in the week.

Analysts and meat-industry participants said that eased concerns about the AH1N1 influenza among consumers and improved buying interest by packers and grocers ahead of the Memorial Day holiday have resulted in a dramatic turnaround in pork complex prices.

Rich Nelson, director of research at Allendale Inc., said the pork complex had become undervalued fundamentally after prices for hogs and pork fell further early in the week.

On Monday, the US Department of Agriculture reported the pork carcass composite price, commonly known as the cutout, at US$54.67 per hundredweight, the lowest since Dec. 30. Cash hog prices remained under pressure for another day then hit a four-month low for the USDA's national weighted average Tuesday at US$50.84.

From the early-week lows, cash prices for hogs as well as pork and lean hog futures have soared. Friday's pork cutout value was quoted at US$59.30, up US$3.62, or 6.5 percent, for the week. The USDA's cash national weighted average hog quote Friday afternoon was US$55.99, up US$5.15 just since Tuesday.

Nelson said there was likely some pent-up demand for pork that developed when prices fell sharply last week and early this week. The market is now trying to catch up but is still undervalued as it remains more than 20 percent below a year ago, he said. All domestic meat prices are down from this time a year ago, he said.

Some livestock dealers and market managers said some of the hogs that would normally have been slaughtered last week may have been carried over to this week and some from this week will be pushed into next week. Nelson said, however, that if there were any hogs backed up during the past two weeks, the actual number of animals involved may be limited.

Nelson predicted that wholesale pork prices could continue to move up to a target of around US$65.00 for a May high. The top in wholesale prices in May last year was US$82.25 hit on May 18.

While pork prices were on the rise, the wholesale beef markets declined this week. A widened spread between beef and pork contributed to the softening in beef prices, analysts said. Choice beef prices slipped US$3.62, or 2.4 percent, for the week while select fell US$3.33, or 2.3 percent.

Last week's cattle slaughter was estimated at 652,000 head, compared with 665,000 a week ago and 710,000 a year ago. Year-to-date cattle slaughter is down 5.9 percent from a year ago.

The week's hog slaughter estimate was 2.010 million head, compared with 2.047 million a week ago and 2.087 million a year ago. For the year, hog slaughter is off 5.3 percent.

The USDA estimated total beef, pork and lamb production for the week at 918.8 million pounds. Last week's output was 940.5 million pounds, and the year-ago figure was 962.6 million pounds. Year-to-date output is off 4.5%.

Broiler/fryer slaughter for the week was estimated at 158.839 million head, compared with 157.586 million a week ago and 169.819 million a year ago.