October 10, 2003

 

 

US Beef & Pork Prices Great Gap in Price

 

Despite cattle and wholesale beef prices having been very strong throughout the summer and reaching all-time highs this week, the pork sector thus far has seen little supportive influence from beef, market analysts said.

   

The wholesale beef and pork price spread "has gone off the charts - never before has it been this wide," said Chuck Levitt, senior livestock market analyst with Alaron Trading Corp.

   

At the close of business on Thursday, the U.S. Department of Agriculture reported lightweight choice boxed beef values at $168.03 per hundredweight, the highest the category have ever been quoted. The composite value for pork carcasses was reported at $59.32, making the spread, or difference, between the two $108.71. One year ago, the spread between light-choice beef and pork was $54.17.

   

Which means, light-choice beef prices are up $58.65 from a year ago while pork carcass cutouts are up only $4.11.

   

The wholesale beef markets have been strong throughout the year. In March, the composite prices for choice beef carcasses hit what then were new record highs in the mid-$130s per hundredweight. Prices moved up further this summer and fall as supplies have tightened since the May 20 implementation of the ban on Canadian cattle and beef.

   

Imports of cattle and beef from Canada were banned following confirmation of a single case of Bovine Spongiform Encephalopathy (BSE), or commonly known as mad cow disease. The U.S. partially lifted its ban on beef imports from Canada in August, and some shipments of certain boneless beef cuts began arriving in September.

  

Many pork industry participants and livestock market sources have been wondering why the pork sector has not benefited more from the surge in wholesale beef prices. Below are some of market analysts' speculations.

   

Some analysts point to different demand levels for beef and pork and that changes in supplies or prices for one category seem to have had little influence on sales of products in the other. Perhaps significantly higher price points for beef may cause some consumers to switch to more pork or poultry. However, it is also possible that consumers might purchase less beef but not necessarily eat more pork and chicken. Some grocers appear to be promoting more seafood as well.

   

The sources also said that so far, consumers have seen only a small portion of the price advances that have occurred in the cash cattle/wholesale beef markets. Grocers have tended to hold the line on retail prices for some cuts due to possibly several factors. Among these are a reluctance to change prices very often, adjusting their weekly meat features to include more of the lower-priced beef cuts or promoting fewer of the premium steaks. Also, some meat buyers as well as processors may have been expecting a quicker resolution to the Canada beef and cattle ban, thus were not prepared for a jump of more than 50% in wholesale beef prices overall from this time a year ago.

       

Ron Plain, agricultural economist at the University of Missouri, said consumers likely would see the affect of the higher wholesale beef markets in restaurant prices later this year and into early 2004. Restaurants have had reduced margins on some menu items and some still have not yet changed their prices.

           

How much longer the ban on Canadian cattle will remain in place is unknown by anyone, the sources and analysts said. Most of the sources contacted this week about the matter said it could be months before the ban is lifted and cattle begin moving across the border. Even then, the flow may not be as large as some people might expect because the flow of animals into and through the feedlots in Canada has been disrupted. Ranchers there have not been able to move feeder cattle out of the country and may not have enough hay or other feedstuffs for the winter months and some, possibly a significant number of producers there may exit the business before the ban is ever lifted.

   

Levitt said the Canadian beef industry has put too much reliance on the export markets. "They can't rely on the openness of borders," he said. There are a number of things such as health and food safety issues, outbreaks of animal diseases and the like that can shut down exports. "No question--it (the BSE case and ban that followed) will have a long-lasting affect on the Canadian beef industry."