MARKET BRIEF - NORTH AMERICAN BEEF & PORK 5/22/18

Good Morning – I hope you had a good weekend; Hard to believe the first long weekend of the summer is here (Canada) and competitiveness on the street is on in full effect. Beef is once again the KING of the front pages across conventional and discount banners in the Canadian marketplace. All that being said, there continues to be plenty of product in the marketplace as it pertains to spot availability – There seems to be more beef than pork available at current time. Out front packer offers continue to be worked at levels slightly back of the spot market – This has begun to generate some interest on round and chuck meat. From a futures perspective, we have seen some sizable setbacks on the fed and feeder cattle throughout the week while the hogs were able to hold their own. The reality of producing 2.3+M head of hogs per week has become reality and the market has found a way to market this excess supply through domestic and export channels – Bravo! Beef appears to be trying to find some traction (ongoing) and until the market feels like this is the case the futures will continue to swing in wide ranges – this past week the swing was down and buyers should be using that argument when negotiating their needs for the July1/4th holidays.

The Ads for the current week are now in full blown grilling mode and virtually every retailer has a grilling steak or ribs on the cover. Retailers are going after sale$ + volume and beef is a sure way to get that done. Retail prices on grilling steaks in the marketplace are all below replacement cost…. How could this be? Is every retailer planning on losing money? Hardly doubt it. The packers got out front and sold meat at extremely competitive levels about 12 weeks ago and the results of that are evident in today’s marketplace. Middle meats continue to be best way to generate traffic + dollar$ + volume and as a retailer I would be capitalizing on the futures move this past week in order to negotiate the July long weekends Ad items. Pork appears to be getting lots of traction on the retail side as well based on spot and out front pricing ideas. The pork retail cuts are all showing signs of strength (Boneless Butts + Spare Ribs = WOW) as a change in seasonality has done wonders for demand  - Even the boneless loins are enjoying some of this rekindled love from the retailers. While pork appears to be well sold for the time being, out front commitments at today’s spot levels would not make much sense to me. I believe there will be an opportunity to get some pork booked out front however I believe that we may still be 2-3 weeks away from that timeframe. The recent downturn in beef pricing/interest will certainly put pressure on retail pork cuts as well – After all, the retailer would much rather feature a NY striploin VS a boneless pork loin. The best bang for your buck in this week’s cutout if the bottom round flat; trading out front  in the $1.90/LB range (USD FOB) these flats are a recipe to print $.

On the beef side,  Where did all of the top butts go? The hunt for Top Butts is on in full effect as the market find itself short of this product in the US and CAD – All grades. Offerings on boneless L.O ribeyes appeared to be top priority on the packers push list this past week and not much progress has been done at alleviating the spot market on this item. Out front offers on middle meats into the FH of June continue to be an opportunity for the July long weekends; based on out front sales activity we believe there has not been much interest at current time. Conversely, there has been action out front on rounds (bottom rounds particularly) – Goes to show where the market sees the “value” on the carcass at current time. The middle meats still have a way to go (down) before any interest gets rekindled and buyers should sit tight and allow for the market on grilling items to come back into range. The XT inside rounds appear to also be grossly overpriced at current time and if I were to pick one item that is due for a sizable correction to the downside my vote would be on the Top/Inside rounds.

On the pork side, it’s all about spare ribs and butts. The pork retail cuts have finally taken off after spending the better part of the spring against the ropes. The loin complex appears to be well sold into the FH of June and packers are all talking steady to higher money on all of the loin items. Hard to believe loins got as cheap as they did; buyer interest has been sparked and there finally appears to be some support under them. The spare ribs and butts have performed extremely well this spring and prices are expected to remain steady to slightly higher as we get into the FH of June. Pork butts have slowly but surely started to creep their way into the front page flyers in the Canadian marketplace; It was only a matter of time! If the US market is any indication of how well these will perform we can certainly expect butts to become part of the front page roster (Back Ribs, Tenders, Sirloins, Boneless Loins, BI Loin Chops) of the Canadian retailers. From a planning perspective, pork tenders appear to be the best value for retailers at current time. The ribs (back and spare) are well sold through the middle of June and we can expect the tenderloins to be the next ones to “go”.

23-27 Hams continue to be challenged to move over the $50 mark; they actually dipped into the “dirty 40s” by weeks end. Export interest out of the far east and LATAM has started to rise as it pertains to boneless rolled out product. The current bids are still well back of the packers asking prices ($.90-.99/LB USD FOB) however based on the current value of 23-27s a packer can still afford to sell something in the high $80s- Lots of business will get done on these levels domestically and abroad.  Look for hams to trade sideways through the LH of May before starting to inch higher into June and July. The packers are certainly building boneless ham inventories and that is a clear indication that there are better times ahead for the ham market.

Food

For Thought…

 IS IT TIME TO GO "LONG" ON ROLL-OUT HAMS FOR THE EXPORT MARKETS?