June 11, 2007

 

US beef, pork cutout declines could be from pump prices

 

 

This week's declines in beef and pork cutout values could be linked to high gasoline prices at the pump, in addition to increased pork production and seasonal weakness in beef, market analysts said Friday (Jun 8).

 

"Beef cutout values appear to be losing demand from high gas prices," said Richard Nelson, livestock market analyst at Allendale Inc, in McHenry, Illinois. "It usually takes four to six weeks (of high gasoline prices) for it to show up," he said.

 

Ron Plain, agricultural economist at the University of Missouri, also said high gasoline prices could be cutting into meat demand in general.

 

But beyond high gas prices taking a bite out of consumer pocketbooks, increased production, especially of pork, over the last few weeks has generated extra supplies that need to be moved with lower prices, they said.

 

Pork cutout values are lower after slaughter rates the last two weeks were up 2.8 percent over the same weeks a year earlier. Through Thursday of this week, slaughter was up 2.6 percent from a year ago, Nelson said.

 

Based on the last hogs and pigs report from the US Department of Agriculture, hog slaughter over the last two to three weeks should have been up only 1 percent to 2 percent, Nelson said.

 

In addition, Plain said the pork cutout may have been pushed to unseasonably high levels with a late spring rally. Current declines, then, could be seen as a retrenchment.

 

The two said there is a perception in the industry that April pork exports fell off from March, and Plain said exports over the first quarter "were not strong".

 

Nelson said pork export demand was fading as beef slowly makes its way into some export markets lost in 2003 when the US found its first case of bovine spongiform encephalopathy, or mad-cow disease.

 

The lower pork cutouts this week lent pressure to cash hog markets, and Nelson thinks the hog market may have hit its peak in late May, a little earlier than the normal first two weeks of June.

 

Cash cattle, on the other hand, usually bottoms in July or August, Nelson said, so this market could have another two weeks of pressure before stabilising.

 

CATTLE/HOG SLAUGHTERS

 

US cattle slaughter for the week was estimated at 697,000 head, compared with 609,000 a week ago and 712,000 a year ago. Year-to-date slaughter stands at 14.615 million head, up 2.1 percent from a year ago.

 

The USDA estimated this week's hog slaughter at 1.924 million head, compared with 1.720 million a week ago and 1.897 million a year ago. The year-to-date total is 45.897 million head, up 1.9 percent from a year ago.

 

TOTAL MEAT PRODUCTION

 

The USDA estimated total beef, pork and lamb production for the week at 917.6 million pounds. Last week's output was 807.4 million pounds. The year-ago output was 932.5 million pounds. Year-to-date combined meat output is 20.531 billion pounds, up 1.1 percent from last year.

 

Broiler/fryer slaughter for the week was estimated at 155.232 million head, compared with 167.665 million a week ago and 142.908 million a year ago.