June 9, 2008

 

US meat prices expected to be weak in the summer 
 
 

Most meat market analysts believe seasonal tendencies toward price weakness in US beef and pork markets over the summer would be repeated this year despite strong export markets currently.

 

Their outlooks in general said wholesale meat prices likely would ease, unless export markets took a dramatic turn upward. A surge in domestic demand could push beef and pork prices higher, but an upturn is more likely from continued strong exports.

 

Market analysts like Greg Wagner, senior commodity analyst for AgResources, said it is surprising to see the current meat market strength in light of struggling cattle and hog markets. In addition to the export markets, the outlook for declining beef supplies in coming weeks may be playing a large role in supporting beef prices.

 

Previous feedlot placement data from the USDA suggest a declining number of slaughter-ready cattle in six to eight weeks, and buyers know it, Wagner said.

 

Futures markets tend to lead a cash-market move by two to 2 1/2 months, so recent support in live cattle futures may be linked to expected declines in cattle.

 

Pork markets also are holding up phenomenally well, Wagner said. The landed cost of US product is driving exports because it often is cheaper than domestic production.

 

Scot Miller, owner and analyst at Scot A. Miller & Associates, said he expected seasonal factors to take their toll on beef and pork markets over the summer.

 

"It's hard to think of going through the summer without some weakness," Miller said. Not only is the US economy struggling, but when the weather turns hot, people don't want large quantities of protein, he said.

 

Troy Vetterkind, director of livestock analysis and trading for Vetterkind Cattle Brokerage, said both meat markets would struggle through the summer. The five-year average decline for beef ribs, for example, is 12 percent, and for loins it is 20 percent. This is a pretty strong seasonal pattern, he said.

 

Export markets are supportive of chucks and rounds, but Russian business has backed off lately, and the US is meeting stiff resistance re-opening the South Korean market.

 

Vetterkind said he expected overall cattle slaughter to decline a little over the summer, but it should still be hard to maintain beef prices at current levels with the more expensive middle meats at risk.

 

Pork loins do not seem to be moving well in wholesale markets and retailers indicated they are well-stocked for the summer. This market will need another shot in the arm from exports to keep it going, he said.

 

Jack Salzsieder, president of K&S Financial & Marketing, said export markets appeared to be strong enough to hold meat markets through the summer as long as the world economy holds together. If there are no major changes in these factors, he sees no reason to think US beef and pork exports would not hold at high levels to support wholesale prices through the summer.