June 29, 2009

Pork complex prices, cash as well as futures, saw ongoing pressure last week and slid further on supply that is too large for the current level of demand.

 

The US Department of Agriculture's pork carcass composite quote, commonly known as the cutout value, on Wednesday fell to its lowest level since April 2003. Meanwhile, at the Chicago Mercantile Exchange, the nearby July lean hog contract posted new lows Wednesday through Friday and lost 472 points on the week. Most-active August hogs also fell to a new low Friday.

 

From the 2009 high of 79.67 cents a pound hit Jan. 9, July hogs have declined 22.97 cents, or nearly 29 percent. Wholesale pork prices last week have averaged about 31 percent below a year ago.

 

Market analysts and economists said pork production most weeks during the past two months has been equal to or slightly above a year ago and too large for the market to bear. Hog slaughter rates have averaged slightly below a year ago but were offset by heavier carcass weights.

 

Meanwhile, export sales in May and June likely fell significantly from a year ago after the discovery of the new AH1N1 influenza in late April in Mexico and southwestern areas of the US The viral disease was initially called swine flu, which many consumers in Mexico and later worldwide associated with pork even though health officials have said eating properly prepared and handled pork or pork products is safe.

 

Temporary bans by Russia and some other countries on imports of pork from some or all US states remain in effect. Mexico, which was the largest international customer for US pork and pork variety meats by volume during the first quarter, has purchased little US pork since late April, said analysts and industry participants. USDA's export sales data for meats for May will be available mid-July.

 

Some analysts and meat brokers said the resumption of brisk export sales is needed if the pork complex is to see a turnaround in prices before the fall supply increase hits. If that does not occur, prices could move lower and producers will face even deeper losses during the second half of the year.

 

Last week's cattle slaughter was estimated at 673,000 head, compared with 675,000 a week ago and 713,000 a year ago. Year-to-date cattle slaughter is down 5.2% from a year ago.

 

The week's hog slaughter estimate was 2.032 million head, compared with 2.062 million a week ago and 2.140 million a year ago. For the year, hog slaughter is off 4.2%.

 

The USDA estimated total beef, pork and lamb production for the week at 933.4 million pounds. Last week's output was 941.5 million pounds, and the year-ago figure was 978.7 million pounds. Year-to-date output is down 3.7%.

 

Broiler/fryer slaughter for the week was estimated at 161.025 million head, compared with 160.495 million a week ago and 168.743 million a year ago.