June 8, 2009

Holiday red meat consumption was weak, though chicken sales appeared good late last week.

Many retailers and foodservice channels said they had excess beef and pork inventory on hand, and had to limit new orders. However, packers had plenty of livestock on hand and slaughters were up averaging near 129,000 head of cattle daily (approaching full capacity) and 421-425,000 hogs. Needless to say, wholesale prices have cracked as packers worked to move all this meat.

Choice-grade fed beef carcass cut-out is quoted 142.2c-lb (down 4.6c from week ago); Select-grade lean beef is 135.7c (down 4.2c, with Choice spread now 6.5c); cow carcass cut-out is 110.3c-lb (down a wild 6.8c, with further to go); wholesale price of 90CL boneless cow beef is nominally 140c-lb (down a wild 10c, but anxious sellers seem prepared to go much lower); the pork carcass cut-out is 55.2c-lb (down 4.6c) but live hog price at auction is 39-40c-lb steady with week-ago, but still disastrous for producers many of whom are at 4-day PorkExpo in Iowa last week.

US beef packers (with recent large kills) reportedly had positive slaughter margins last week near US$14 per head (down from US$31 in prior week, but still in the black). Packers currently are buying fed cattle cheaper (near 82-83c-lb live basis, down from 85-86c week-ago), with feedlots suffering more red ink.

These big swings took livestock futures markets in some big tumbles - live cattle down a range of 2.5 to 7c-lb live; feeder calf futures down 6 to 14c-lb live; & hogs down about 8 to 12c range. By contrast, grain futures were steady – corn up slightly (to a range of $4.32-4.55 range per bushel) and soy the same (in a high range of $10.8 to 11.8 per bushel, for 2009 contract months.

While most of the above red meat reports were in the negative, there were some other brighter reports. The US dollar has kept weakening against $Can, $Au and other currencies which improves competitiveness of US export trade - with a converse price-squeeze effect on beef exports from Australia-New Zealand-Uruguay to the US.

However, some US importers said that despite currency pressure - their trading is holding steady, with frozen 90CL cow beef trading at 137-138c-lb fob (same as week-ago) and 85CL at a healthy 125.5 to 126c-lb fob, with end-user processors not complaining - due to continuing tightness of supply for imported beef - compared with "over-supply" of US domestic beef.

Chicken seems to be winner in the past week as it becomes the meat of choice for hard-strapped American consumers. Chicken production in 2009 to-date has been reduced by near 6 percent, and USDA's 12-city index price for whole birds keeps rising - up a further cent this week to average 87c-lb. Breast and leg-quarter wholesale prices are not available tonight, but appear to be very firm at last week's strong levels.