Yesterday we pointed out the weakness in wholesale beef markets and the impact this is having on live cattle values, according to the Daily Livestock Report.
Pork wholesale prices are not faring much better, so far. While hog values have rebounded from last fall’s crash, they have come under increasing pressure as prices for most pork primals are now well below year ago levels.
The decline is not a result of more pork coming to market. Weekly hog slaughter (based on a rolling seven-day moving total) is currently running around 1% above year ago levels. And pork output has lagged the increase in slaughter as hog weights continue to run below year ago levels, offsetting the higher hog numbers. The latest USDA Mandatory Reporting data indicates the average hog carcass weights are currently at 207.6 lb/carcass, 0.6% lower than a year ago.
Looking at the performance of individual primals, a couple of items stand out. The loin primal continues to struggle. On Wednesday, USDA pegged the loin primal value at $87.58/cwt, $12.34/cwt (12%) below year ago levels. The decline in the value of the loin primal accounted for almost 40% of the overall decline in the pork cutout.
Retail meat sales have been sluggish so far this year, as high retail meat prices force consumers to look at less expensive alternatives or reduce the supply of meat they take home. As with big beef roasts, retailers are having trouble moving items such as pork butts. Foodservice demand for top butts also has been disappointing. The top butt primal on Wednesday closed at $77.65/cwt, down $19.3/cwt (20%) from a year ago. The decline in the value of pork butts (shoulder) accounted for a quarter of the decline in the value of the cutout.
Ham prices also remain weaker than a year ago. Hams should be performing better given that Easter this year is earlier than in 2012. The earlier Easter tends to pull forward some of the seasonal purchases, but so far that does not seem to be the case. The ham primal was last quoted at $61.12/cwt, down $7.1/cwt (10%) from a year ago.
The only item that is outperforming year ago levels are pork bellies, which are up 3% from last year. Even bellies have lost ground recently, however, with prices down some 20 cents a pound (12%) compared to a week ago.
Bottom line: Despite the weakness, one could argue that pork is in a better place than beef at this point. Pork at retail is priced quite competitively compared to other proteins.
Some items, especially ribs and loins, will likely provide retailers with excellent feature opportunities this coming spring and summer.
Export demand, as always, remains critical since it accounts for about 1in 4 pounds of pork produced. Press reports have offered ample coverage in recent days to the spat between the United States and Japan regarding currency valuation. This is not a theoretical conversation or financial mumbo jumbo on CNBC. It is critical to the pork business, as it directly affects the sticker price for U.S. pork in world markets. It bears watching closely.
The Daily Livestock Report is published by Steve Meyer and Len Steiner, Inc., Adel, IA, and Merrimack, NH. To subscribe, support or unsubscribe visit www.dailylivestockreport.com.