CME: Pork Cutout Values Explained

US - Steve Meyer and Len Steiner provide a background and summary of pork cutout values.
calendar icon 14 March 2016
clock icon 4 minute read

For pork, daily cutout values (morning and afternoon) are also calculated by AMS for the packer cash or negotiated trade (representing product priced and to be delivered from 0 to 14 days).

As opposed to beef, pork is not quality grade sorted, so there are no quality distinctions in this report.

This report also eliminates distressed product (product that packers are running out of time to sell as “fresh”).

Similar to the beef cutout values, pork cutout values are calculated through a weighted average price of individual items that is then used to calculate a weighted average value for primal cuts.

These primal cut values are then used to calculate a weighted average carcass equivalent value.

The pork cutout value has a different history compared to beef. The final rule establishing Mandatory Price Reporting (MPR) for wholesale pork became effective in January of 2013, compared to MPR becoming a rule for beef and lamb in 2001.

This replaced the voluntary price reported cutout value with the packer data reported under MPR, and the new MPR data captured more prices.

At this time, AMS also updated their carcass yields to hogs currently coming to slaughter plants (ie more meat per hog).

In short, historical comparisons of pre and post-2013 pork cutout data have become difficult, however MPR did provide more transparency in the marketplace. For more information regarding calculations of the composite pork carcass cutout click here.

Current pork cutout value movements continue to reflect 2015’s increased production, softer export sales, and some build up in frozen inventories. That is, pork cutout values are softer than the past five year average, but currently tracking at $75.24 per cwt. which is above year ago levels.

Within the cutout value, pork bellies are outperforming the other cuts from a price standpoint, currently $56 per cwt. higher than year ago prices (although still below 2014’s spring record ramp up in belly prices).

Wholesale pork sparerib prices are trading just below year ago values at $167.42 per cwt., but still above their five year average.

Performance wise, bellies and spareribs are the positive drivers in the pork cutout value right now.

Combined they account for 20% of a pork carcass. Ham prices are tracking at year ago levels, but below their five year average, and pork loins are currently just under $90 per cwt., $9 per cwt. below 2015.

Seasonally, belly, loin, and sparerib prices should see some upward movement into spring and summer. This past week has seen some significant upswing in the lean hog futures contract.

Barrow and gilt carcass prices have taken a dip the last couple weeks but they started the year off with a strong upswing, and feeder pig prices continue to remain above year ago levels.

Looking forward, pork production is expected to moderate this year, compared to the 7% year-over-year increase last year and that should help decrease the downside price risk.

© 2000 - 2022 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.