Bacon everywhere

Bacon everywhere

Hog markets keep moving up thanks to bacon demand.

CATTLE did not trade in sufficient volume through Thursday last week to establish prices and, at week-before levels, were $120.00-121.50/cwt., 4.1% higher than at this time last year.

However, bids were coming in as low as $116.00 in the South last Thursday, and the Choice cutout fell $1.27 to $199.36/cwt., off more than $10 from its record high last month.

Traders were divided on the direction of the markets.

The cattle markets are entering a "major" bearish scenario, with beef demand weakness expected from now into mid-August, Bob Price at North America Risk Management Services Inc. said in a Monday note. He cautioned that Choice could drop as much as $15 in the next six to eight weeks, which would be brutal to cattle demand and prices.

Consumers are switching from beef to less-expensive pork, and beef prices have to decline "to uncover demand," Dennis Smith at Archer Financials said in an afternoon wire. However, as beef declines, packers will lower their bids for cattle to hold onto margins, he said.

At the same time, cattle have "room" for some strength, Steve Meyer and Len Steiner said in an edition of their "Daily Livestock report." Marketings will be 3-4% lower than year ago this summer, liveweights will be heavy but comparable to year ago and packers are making money and will be encouraged to go after cattle, they said.

The big concerns are pasture and potential cow slaughter, which could add to beef supplies nearby but add to beef supply tightness and out-of-reach beef prices into next year, if not longer, according to Feedstuffs sources.

Good rains in recent weeks certainly have improved pastures, said Tim Petry, an extension livestock marketing specialist at North Dakota State University. In North Dakota, for instance, he said pastures improved from 23% in poor to very poor condition at the beginning of May to just 3% at the beginning of June.

Nationwide, pasture conditions improved from 36% rated poor to very poor at the beginning of May to 24% now, and the pasture improvements — and hay prospects — have slowed forced cow herd sell-offs, Petry said.

Nevertheless, continued rains will be needed in a large portion of the Southwest and West, which are low in moisture from two consecutive drought years, Petry said, noting that more than 30% of the beef cow herd is in states where 40% or more of the pasture is rated poor to very poor.

 

Hog legs

The hog markets declined last week but remained high and profitable on strong demand for pork as a feature item versus beef — and even chicken — and for the Fourth of July weekend that could be at least four days long, sources said.

Hogs dropped $1.62-2.41 to $98.73-100.48/cwt. on a lean carcass basis east to west across the Corn Belt, prices equivalent to a $75-76 live cash hog market and $10-12 per head in the black.

The markets do have legs, sources said, noting that demand for bacon, hot dogs and sausage is "red hot."

Sources also noted that pork supplies will be lower than year ago for the next several weeks, with hog slaughter set to be under 2 million head through mid-July and hog weights to be almost 10 lb. lower.

Moreover, Smithfield Foods reported that it is now shipping pork to China because it can certify pork from ractopamine-free herds.

Bellies, from which bacon is sliced, were $6.38 higher last week at $175.15/cwt., an all-time high and 34.1% more than year ago.

Bacon is everywhere, according to Meyer and Steiner, who noted that two-thirds of bellies go into the foodservice market, where bacon is a "staple," especially to accompany eggs and add flavor to sandwiches. (Bacon-covered ice cream was a big hit at the World Pork Expo earlier this month.)

Indeed, the number of bacon items used by foodservice operations increased from 1,700 in 2000 to 2,700 in 2009 and likely now exceeds 3,000 — "several times more than any other pork item," Meyer and Steiner said.

Demand for bacon is the difference between hogs in the high $90s and hogs in the $80s — a difference between hogs that are profitable or not, they said.

 

News dismissed

The cattle and hog markets apparently dismissed news coverage last week surrounding a fairly large study that tied meat consumption to type 2 diabetes as markets moved on the fundamentals all week and not on peripheral reports.

The study, conducted by researchers at the National University of Singapore using data from long-running studies at Harvard University involving the health profiles of doctors and nurses, found that individuals who increased their red meat consumption during a four-year period were more likely to develop type 2 diabetes during the following four years.

The work covered about 150,000 people and looked at nearly 20 years of data. It was funded by the National Institutes of Health and was published June 17 in JAMA Internal Medicine, a journal of the American Medical Assn.

Broadly, the analysis found that — compared with individuals who did not increase their red meat consumption — increasing red meat intake by more than a half-serving per day over four years was associated with a 48% increase in the risk of developing type 2 diabetes in the next four years.

The researchers noted that the link did not suggest causation.

Decreasing red meat consumption by the same amount over the four-year period did not reduce the risk of developing type 2 diabetes in the next four years.

"Our results confirm the robustness of the association between red meat and (type 2 diabetes) and provide additional evidence that limiting red meat consumption over time confers benefits for ... prevention," the report authors wrote.

However, Dr. William J. Evans, who is affiliated with Duke University and GlaxoSmithKline PLC, in a commentary published with the study, said it's not red meat but "the type of fat" in protein "that's the problem."

He said consumers who chose lean cuts of red meat, such as beef sirloin or pork loin, won't be so subject to the increased diabetes risk.

Analysts suggested that the market reaction was muted because the news coverage was not only confined to a few broadcasts and stories but was fairly accurate and objective.

The cattle markets also dismissed news coverage surrounding suspected cases of Creutzfeldt-Jakob disease (CJD) in British Columbia, although much of the coverage on this inaccurately linked the cases to bovine spongiform encephalopathy (BSE) and suggested that the victims had contracted BSE.

Sources said conventional and social media coverage confused CJD — which occurs in the global population at one to two cases per 1 million people per year — with variant CJD (vCJD) that's associated with BSE in cattle.

However, sources said the damage was contained by Dr. Paul Van Buynder, chief medical officer at Fraser Health in British Columbia, who issued an immediate statement explaining the difference between CJD and vCJD and reporting that, of the six suspected CJD cases, there was no evidence that any were linked to food consumption.

 

Market roundup

The chicken markets slipped last week on soft middle-of-the-month buying, but markets remained well ahead of year ago as demand for chicken has increased significantly this year, sources said.

Chickens were down 1-4 cents to $1.06-1.12 and 93 cents to $1.04/lb. in the eastern and midwestern regions last Thursday, 30.5% higher than year ago.

Breasts were unchanged to down 7 cents to $1.17-1.31/lb. but still were 40.1% more than year ago, and breast meat was unchanged to down 12 cents to $1.57-1.71/lb. but still was 29.1% more than year ago.

The egg markets, after dropping nearly 40 cents from mid-May because prices got too high, increased 9-10 cents last week when prices got low enough to attract buyers' interest, sources said. Mexico also has started importing U.S. eggs again at the lower prices, sources added.

Eggs were $1.03-1.07 and 95-97 cents/doz. for large-sized eggs delivered to eastern and midwestern store doors last Thursday, unchanged from year ago.

The turkey markets improved slightly last week but still were struggling versus last year. Hens were unchanged to up 1 cent at 96 cents to $1.01/lb. last Thursday, 6.2% lower than year ago, and retail-sized toms were unchanged at 92 cents to $1.01/lb., 8.0% under year ago.

Turkey companies have successfully decreased production since the beginning of the year, but buyers see no reason, given current prices, to buy and store turkeys now for this fall, sources said. Buyers who are not brand specific can easily find turkeys, sources added.

Fresh tom breast meat, which increased 3 cents two weeks ago after being stalled for 12 straight weeks, increased 3-7 cents last week to $1.61-1.65/lb. as warmer weather finally started to kick up demand for cooked and deli meat, sources said. Still, breast meat was 12.4% lower than year ago.

In the dairy markets, butter was $1.5075/lb. last Thursday, unchanged from last year. Barrel cheese and block cheese were $1.7225 and $1.7250/lb., 5.4% and 6.2% more than year ago.

Analysts said they expected butter and cheese to move sideways into mid-July and then begin increasing on export demand for U.S. dairy products.

Volume:85 Issue:25

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