Fed steer prices were up 1.3 per cent from the previous week and now 18.45 higher than a year ago. Choice beef wholesale prices were up 0.4 per cent from the week before and they are now 16.84 per cent higher than a year ago.

Beef prices were higher even though overall slaughter for the week continued to gain over last year’s levels. Total cattle slaughter for the week was 673,000 head, almost 2 per cent higher than a week ago and 2.7 per cent higher than last year. Much of the increase was due to more cows coming to market. We estimate that total cow and bull slaughter for the week was up 11 per cent compared to last year while steer and heifer slaughter was up 1.3 per cent.

Cow slaughter continues to run well ahead of last year and the five year average as producers respond to sharply higher prices for grinding beef. Steer and heifer slaughter was pushed higher given much higher prices being paid for a number of beef items going into the Memorial Day weekend. However, we expect that fed cattle slaughter will rub below year ago levels for much of this summer, reflecting tight feedlot inventories.

Wholesale pork prices also continued to move higher and the pork cutout for the week was quoted at an average $90/cwt, only slightly higher than a week ago but 57.6 per cent higher than last year. While pork supplies are lower than last year, the magnitude of the decline in supplies cannot account for the current spike in pork prices.

Hog slaughter for the week was 1,992 million head, just 1.2 per cent lower than last year. Hog carcass weights have been moving up in recent weeks, offsetting some of the reduction in slaughter. Total pork production for the week was only 0.6 per cent lower than a year ago. While export data will not be available for some time, we suspect that export demand remains a significant driver in the pork complex at this time. Domestic end users seem to have been caught a bit flat footed by the sharp spike in hog prices. While most expected prices to be higher this summer but the magnitude of the increase is well outside the range of forecasts that we have seen.

Despite very strong prices for beef and pork, risks remain. Chicken supplies continue to trend higher as overall production is currently up 7 per cent from year ago levels (live basis). In addition, a stronger US dollar and risks of a full blown debt crisis in Europe could negatively export demand for both pork and beef.