Beef, pork twists

Beef, pork twists

- Beef demand strong and pork demand weak, but both may reverse. - Pork cuts get new names. - Chicken sets new record; eggs gain 11-13

AT the end of last year, 915,000 farms in the U.S. had cattle, 7,000 fewer than at the end of 2011, and 729,000 farms had beef cattle, according to the U.S. Department of Agriculture.

The 50,000 largest operations with beef cattle held half of the inventory.

There were 68,300 farms with swine, 800 fewer than at the end of 2011, and 8,100 of the farms were contract growing operations.

The number and size of beef cattle and swine farms depends on several factors, including natural consolidation to achieve competitiveness of scale, equity and financing and demand for beef and pork.

Demand last week was an adventure with turns and twists, according to Feedstuffs sources.

Beef demand had a strong week, but sources cautioned that they expected demand to collapse; pork demand continued to struggle, but sources suggested that the call for pork will become much stronger -- and soon.

The cold storage report was one of the twists, coming in with beef stocks at the end of January that were even with year ago (Table), indicating that beef demand has kept pace with production.

However, pork stocks were burdensome in certain critical categories such as hams -- although bellies and loins were down from last year -- and total pork stocks were greater than year ago.

A number of analysts said the fed cattle sector is poised to reflect significantly decreased placements for most of last year that should be supportive to beef prices and, in turn, to fed and feeder prices. However, the beef twist is that analysts have been saying that quite a bit.

Beef packer/processors paid stiff prices for fed cattle two weeks ago, paying near-record-high levels to get them in off the snow-buried Plains after back-to-back storms, with offers at $127-129/cwt. on Feb. 28.

To accommodate their offers, they pushed wholesale beef to its own near-record high last week of $196.90 for the Choice and $195.09/cwt. for the Select cutouts. It appeared that the decreased placements theory was on track.

However, analysts explained that fed and wholesale beef prices surged as snowstorm-disrupted kills and production cleaned up the beef pipeline and insisted that beef priced at $200 won't move at the retail level.

Consumer beef prices already are record high; consumers, hit by higher gasoline prices and taxes, do not have the disposable income to buy beef; pork and poultry are abundant and attractively priced, and chicken storage is plentiful and will move into the marketplace. Beef demand is set to slide.

The pork twist was even more curious. Some sources acknowledged that they couldn't "figure out" what has been going on with hogs and pork.

Supply is not the problem, noted Chris Hurt at Purdue University. Hog slaughter and pork production actually are below last year at this time, but hog and pork prices also are lower, he said, suggesting that "demand is the issue."

He cited those higher gasoline prices and taxes and reduced consumer spending power.

Hurt also cited markets in China and Russia that are closed to U.S. pork due to ractopamine issues and the rapidly weakening Japanese yen versus the U.S. dollar. U.S. pork sales to China, Russia and Japan last year accounted for 3.4%, 1.2% and 6.0% of U.S. pork production -- or 10.6% of production -- which is now hanging over the U.S. market.

Exporting nearly 25% of pork production, as the U.S. did last year, "is wonderful," Hurt said, but it also leaves producers "vulnerable" to economic and trade troubles.

The National Pork Board, meeting at the National Pork Forum last week in Orlando, Fla., took some steps to address demand.

First, Ceci Snyder, the board's vice president for domestic marketing, announced an effort to "clear up consumer confusion" in the pork section of the meat case by renaming loin cuts, doing away with a mishmash of old terms and establishing four specific pork chops: rib-eye bone-in and boneless chops, a New York chop and a Porterhouse chop.

In addition to the new names on the labels, there will also be "on-pack help" for consumers, with labels suggesting the best cooking methods and peel-off stickers offering recipes.

Snyder said packers are embracing the concept, and USDA "is involved and supportive." Industry comments are currently being accepted at www.meattrack.com.

USDA will need to approve the label plan, hopefully by the end of March, she said, and it then will be launched in April.

The Pork Board also approved $3 million in supplemental funds to bolster domestic marketing this summer, which Snyder said will be used to promote the new pork chop names and the value and versatility of pork.

She emphasized that advertising, especially radio spots, will be used to effect immediate consumer responses, e.g., drive-time radio messages that prompt consumers to buy pork that day.

This is a different strategy from long-term pork positioning through the "Pork -- Be Inspired" effort, Snyder noted; it represents "an immediate, short-term push to promote value."

The Pork Board manages the national pork checkoff, which collects 40 cents on every $100 of value in all swine selling transactions for pork advertising and promotion and consumer information, among other purposes.

That value Synder mentioned is what analysts said they expect to come into play in the pork sector very soon.

Indeed, Smithfield Foods Inc. announced better-than-expected third-quarter earnings last week, attributing pork demand that is stronger than it's getting credit for.

Dennis Smith at Archer Financials, in wires last week, said wholesale pork prices are bottoming out, approaching levels at which pork started to realize "value demand" last fall. He said he expects that to be retriggered soon, at which time pork prices will improve and support packer margins that then will support higher hog prices.

The hog markets were down $1.07 to up $3.74 last week to $74.04-75.17/cwt. on a lean carcass basis last Thursday, prices equivalent to a $56-57 cash hog market and 11.4% under year ago. Hog prices remained well in the red, but the futures markets suggested a rally to at least breakeven levels in the second and third quarters.

A good corn crop could reduce feed costs enough to push summer hogs over the line, sources said. For pork producers who lost money all of last year and are currently projected to lose money all of this year (Feedstuffs, March 4), that would be a welcome kind of twist, sources said.

Elsewhere in the markets last week, the chicken markets were steady, with foodservice and retail buyers not showing too much interest but with supplies limited and clearing at premiums, sources said.

Chickens were $1.07-1.13 and 99 cents to $1.05 in the eastern and midwestern regions last Thursday, setting a new record high in the East for the second straight week, 16.4% higher than year ago.

Breast meat was up 2 cents to $1.31-1.40/lb., 3.8% higher than year ago, and jumbo wings were unchanged to up 2 cents to $1.42-1.60/lb., 8.5% lower than year ago. Sources said wings probably were near the bottom and would begin increasing for basketball tournaments.

The egg markets were steady, with prices rising 11-13 cents to $1.21-1.25 and $1.11-1.13/doz. for large-sized eggs delivered to eastern and midwestern store doors last Thursday, 19.6% more than year ago.

Supplies were moderate and being held with confidence for Easter demand, sources said, suggesting higher prices for the next three weeks.

The turkey markets were up 1-2 cents to a national average offer of 94-99 cents/lb. for both hens and retail-sized toms last Thursday, 5.9% lower than year ago. Reporters said turkeys were being booked for October shipments at $1.03-1.04/lb.

Fresh tom breast meat was unchanged at $1.62/lb., down 23.2% from year ago.

In the dairy markets, butter and cheese staged a rally, with butter increasing 4.5 cents to $1.6150/lb. last Thursday, while barrels and blocks increased as much as 4 cents to $1.58 and $1.59/lb. Prices were up 10.2%, 5.3% and 6.9% from year ago.

Sources said demand was coming in for Easter and also for more competitively priced U.S. product.

 

Cold storage, Jan. 31 (selected stocks)

 

Jan. 31,

Dec. 31,

Jan. 31,

%

%

 

2012

2012

2013

month

year

Category

-Million lb.-

before

before

Dairy products

 

 

 

 

 

Butter

170.348

153.027

206.612

135.0

121.3

Cheese products

 

 

 

 

 

American

642.204

635.590

643.466

101.2

100.2

Swiss

25.909

31.747

30.571

96.3

118.0

Other

351.944

355.765

358.228

199.7

191,8

Total cheese

1,020.057

1,023.102

1,032.265

100.9

101.2

Egg products

37.415

27.376

29.713

108.5

79.4

Meat products

 

 

 

 

 

Beef products

485.059

465.716

484.003

103.9

99.8

Pork products

 

 

 

 

 

Bellies

53.685

36.037

36.377

100.9

67.8

Hams

99.643

79.266

109.266

137.8

109.7

Loins

48.851

41.364

43.839

106.0

89.7

Ribs

86.457

109.235

112.162

102.7

129.7

Trimmings

56.565

52.684

57.379

108.9

101.4

Total pork

585.307

551.510

605.266

109.7

103.4

Lamb/mutton

19.275

21.379

18.716

87.5

97.1

Veal

2.996

5.221

4.982

95.4

166.3

Total meat

1,092.637

1,043.826

1,112.967

106.6

101.9

Poultry products

 

 

 

 

 

Chicken products

 

 

 

 

 

Whole chickens

15.430

14.601

18.780

128.6

121.7

Breasts/breast meat

116.924

130.909

130.128

99.4

111.3

Leg quarters

84.503

97.177

115.370

118.7

136.5

Wings

35.657

68.410

59.212

86.6

166.1

Total chicken

607.571

676.442

657.676

97.2

108.2

Turkey products

 

 

 

 

 

Hen turkeys

68.580

50.391

79.335

157.4

115.7

Tom turkeys

41.410

45.463

69.302

152.4

167.4

Whole turkeys

109.990

95.854

148.637

155.1

135.1

Breasts

49.726

54.140

64.024

118.3

128.8

Total turkey

297.736

296.479

361.842

122.0

121.5

Ducks

2.371

2.363

1.444

61.1

60.9

Total poultry

907.678

975.284

1,020.962

104.7

112.5

Total meat/poultry

2,000.315

2,019.110

2,133.929

105.7

106.7

Source: National Agricultural Statistics Service.

 

Volume:85 Issue:10

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