July 30, 2007

 

Seasonal demand slump, hefty output weigh on US pork prices

 

 

US wholesale pork prices declined last week amid a midsummer demand slump and record-large hog slaughter for the month of July.

 

The US Department of Agriculture estimated this week's federally inspected hog slaughter at 1.977 million head, which eclipsed the previous record for July of 1.961 million set just last week. The back-to-back weekly records virtually guarantee that the monthly slaughter total will also set a record.

 

USDA's pork carcass composite price, commonly referred to as the pork cutout, declined US$1.84, or 2.4 percent, this week. Market analysts and meat brokers said the mid-summer heat, more families taking vacations at this time of the year and preparations for back-to-school expenses can have a detrimental effect on meat sales.

 

Normally, fewer hogs are available for slaughter during the mid-summer period, so the reduced demand is offset by smaller production and wholesale prices usually don't move much in either direction. This week a year ago, the pork cutout was quoted from a low of US$69.82 to a high of US$70.58 and the weekly change - Friday versus the previous Friday (July 27) - was US$0.76 lower.

 

Wholesale pork prices are expected to rebound somewhat in August on better buying interest from grocers for the Labour Day holiday. However, gains in pork prices could be tempered if hog slaughter rates continue to run well above year-ago levels.

 

Still, pork prices are currently above year-ago levels, so demand overall is considered to be good. Glenn Grimes and Ron Plain, agricultural economists at the University of Missouri, said in their weekly pork outlook report released Friday that demand for pork at the consumer level for the first six months of this year was up 0.3 percent from the same period in 2006. Demand from packers for the live hogs grew even more, up 2.9 percent from a year ago.

 

In the beef complex, wholesale choice carcass values were down slightly this week but rebounded from a mid-week low. The late-week rally, although modest, led to ideas among some market analysts and meat traders that prices could be poised to advance further into early August.

 

Urner Barry's Yellow Sheet, a private reporting firm, in its Friday afternoon market comment, said: "The week closed with prices moving somewhat higher. Working from an improved inventory position given improved mid-week demand, as well as adjusting for higher costs for inbound slaughter-ready cattle, sellers were able to achieve slighter better money."

 

US cattle slaughter for the week was estimated at 668,000 head, compared with 678,000 a week ago and 650,000 a year ago. Year-to-date slaughter stands at 19.330 million head, up 1.5 percent from a year ago.

 

The USDA estimated this week's hog slaughter at 1.977 million head, compared with 1.961 million a week ago and 1.898 million a year ago. The year-to-date total is 59.250 million head, up 2.2 percent from a year ago.

 

The USDA estimated total beef, pork and lamb production for last week at 915.3 million pounds, lower than 918.4 million pounds registered the other week. The year-ago output was 885.9 million pounds. Year-to-date combined meat output is 26.867 billion pounds, up 1.1 percent from last year.

 

Broiler/fryer slaughter for the week was estimated at 164.414 million head, compared with 165.807 million a week ago and 161.268 million a year ago.