CME: US Beef and Pork Markets Remain Strong
US - Livestock futures markets closed on a strong note last week despite wobbly equity markets and a general unease about the outlook of the global economy, write Steve Meyer and Len Steiner.On the later point, it will be interesting
to see how markets react to news over the weekend
that Greece will receive upwards of $US150 billion in
loans from the EU and IMF over the next three years.
Despite the announcement, the value of the Euro currency
has come under renewed pressure as speculation
builds about the outlook of other countries threatened by
rising debt re-financing costs.
There is also growing concern
that the Chinese economy may be overheating and a
bursting of the property bubble there could negatively
impact the global economy. US beef and pork prices have
been driven higher in part due to strong demand from
Asian markets. China in particular has benefited from
the resurgence in global economic activity. With over 20 per cent
of US pork production going to export, the ongoing events
in Europe and China represent an important factor that
bears watching closely.
For the moment, however, US beef and pork markets remain strong as higher prices at the wholesale level continue to
support livestock prices. The choice beef cutout value closed on Friday above the $170/cwt mark, almost $3 higher than the
week before and $19/cwt or 12.6 per cent higher than a year ago (see summary table on page 2). Fed cattle supplies remain tight and
are currently below year ago and notably lower than the levels seen in 2008, a year when cutout prices reached some fairly lofty
levels. We estimate that for week ending 1 May, steer and heifer slaughter was 519,000 head, 19,000 head or 3.5 per cent lower than
a year ago and 50,000 head or 8.8 per cent lower than in 2008. In addition to bringing fewer fed cattle to market (what’s driving prices
for choice and select beef) producers also have to contend with lower carcass weights, which have further reduced the available
beef supply.
The average dressed cattle carcass for the week ending 1 May was pegged at 760 pounds, down 9 pounds or 1.2 per cent
from 2009 levels. Part of the reason for the lower weights may be because of a larger proportion of cows (which are lighter) in
the slaughter mix. However, fed cattle weights also remain lower than a year ago and we estimate steer weights for the week
ending 1 May at 808 pounds, down from 820 pounds a year ago and below the 814 pounds on 3 May 2008. The decline in fed
cattle weights has especially impacted the market for beef trimmings.
Ground beef is one of the main features going into the
grilling season and meat processors and food retailers are finding it increasingly difficult to source enough product. The price of
fresh fat beef trimmings (50CL), one of the components going into ground beef production, was as high $110/cwt last week, the
highest price we could find in the last 30 years. With lean beef prices also near record high levels, retailers will have to contend
with some fairly expensive ground beef features this May. How retailers and ultimately consumers respond to these prices will
eventually decide the direction of beef and cattle prices this summer.
Further Reading
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