CME: March Pork Value Up 3.8% Compared to Previous Month

US - In the futures markets last week, the April Live Cattle contract posted much stronger prices week-over-week as it was forced to catch-up with the cash market, deferred contracts also gained ground, according to Steiner Consulting Group, DLR Division, Inc.
calendar icon 17 April 2017
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Feeder Cattle contract prices increased, too. For hogs, the nearby contract (April) softened week-over-week, but the deferred months posted price upticks.

On the bottom of the page is our weekly cash price and production summary. Cash prices for fed cattle were higher for the week, while slaughter hog prices declined. Week-over-week, both the Choice beef cutout value and the pork cutout were essentially unchanged.

Federally Inspected cattle slaughter was well above a year ago (up 7.2 per cent). The year-over-year increase in hog slaughter was only 1.3 per cent, a percentage gain well below that of recent weeks. For comparable weeks (same number of slaughter days), hog slaughter recorded its smallest percentage year-over-year increase so far this calendar year.

Several media stories last week played-up the in person meetings of President Trump with Chinese President Xi Jinping in Florida, at which the reopening of China to US beef was one of the many topics discussed.

Even market reporters with USDA’s Agricultural Marketing Service highlighted the associated optimism in their weekly national feeder cattle summary (see that report here). However, there were no new developments announced compared to what was already said by the Chinese leadership back in September 2016 (see the Secretary of Agriculture announcement here).

For many years now this situation has been discussed (a quick online search results in references back to 2006) and there have been meetings between US and Chinese officials. For at least the last five years, statements have been made that reopening of China to US beef was just a matter of months away. Maybe that situation will materialize, maybe not. The details to actually reopen China still need to be worked out, or maybe more correctly stated need to be agreed upon.

For readers that want to dig deeper into the likely Chinese positions, we suggest looking at the details of the Chinese reopening to Canada (announced by Canadian Food Inspection Agency on 8 October 2016). Specifically, the announcement e-mail said “China requires that the beef exported from Canada to China must be produced under the Canadian Beta-Agonist Free Beef Certification Programme developed by the Canadian beef industry.”

Further, from the documentation (the link is here ), the cattle from which the beef is derived for export to China must meet several requirements, importantly “each animal has a unique identity, the farm of origin (place of birth) can be traced, and the cattle should be slaughtered less than 30 months of age.”

The USDA’s monthly World Agricultural Supply and Demand Estimates (WASDE) report was published last Tuesday, the full report is available here. From the perspective of livestock industries, there were no surprises. In fact, all the livestock and poultry livestock changes were insignificant from numbers reported in the prior report.

On Friday, USDA’s Economic Research Service (ERS) released their March retail meat and poultry “prices”, which are actually values (the link is here). As regular readers of this newsletter know, those values are calculated using data collected by the by the US Bureau of Labor Statistics to develop the monthly national Consumer Price Index (CPI).

ERS then applies a set of assumptions to the CPI collected items to calculate retail values for beef, pork, etc. The surprise in the latest ERS calculations was the price (value) of pork, which increased by a rather large amount month-over-month. The March pork value increased 13.7 cents per pound (up 3.8 per cent) compared to February’s.

The March pork value was the highest for any month since September 2016. ERS gives two calculated beef values. Choice graded beef increased 6.4 cents per pound month-over-month and was the highest since August 2016. In March, the “All Fresh” beef calculation (which includes all grades of beef items collected for the CPI plus hamburger) was 2.7 cents (0.5 per cent) above February’s, but remained below January of this year.

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