THE MEAT MARKET - APRIL 14.2019

Good Morning – I hope you had a good weekend; Spot market is starting to feel burdened by the spot supplies of fresh beef and pork( During a period of less than stellar demand). Things change rather quickly in the meat business; We will go from feast (if you can even call this a feast) to “famine” very fast – Spring is in the air. We have begun to see the beef middle meats show up early this year; as it relates to Easter. Easter however is very late this year; Leaving no time in between the short week and the time in which the packers can start producing (beef primarily) middle meats for the first long weekends of the summer (Victoria Day Canada/ Memorial Day USA). From a futures perspective, the lean hogs and fed cattle spent the week trading sideways with a feel of going higher – This is certainly not the feeling (price strength) we are experiencing on the “meat” however like I said earlier things can change in the blink of an eye. From a value perspective, beef continues to trump pork – Even when it comes beef loin cuts  VS pork loin cuts (This is hardly ever the case).  

Retail Ads for the current week are starting to smell of “BBQ” & Easter hams. There are some very sharp retails out in the marketplace for prime ribs, spiral and portion hams, full tenderloins, top sirloins, and the all might NY striploins. Very little poultry or pork to be seen; we will likely see lots of pork in the weeks following Good Friday right up to the May long weekends. Over and above this; beef chuck and round cuts are starting to look really attractive to both the domestic retailer and in some cases export buyers (Chuck Rolls/Inside Rounds).From an out front planning standpoint, beef continues to trump pork in value and price certainty out front. The best bang for your buck in this week’s cutout’s is the Chuck Rolls AAA/CH grade; trading at the $2.50/LB USD FOB these chuck rolls have value written all over them. Chuck rolls can be steaked, roasted, stewed, and ground up for retail trade domestically and abroad. From a merchandising standpoint, the chuck rolls have been developed to a great degree with the introductions of the Denver cut, Sierra cut (the beef equivalent of “secreto iberico”), along with the Rhomboideus  (only one without a “cool” name) which can be used for a great tartar or yakitori – Anyone else hungry now?

On the beef side, the cutout appears to be stabilizing – Rounds and Chucks have continued to erode a great deal; How much downside could there be left for these two primal groups? Can the loin and rib cuts keep the cutout supported through a time of increased production? Have the beef packers been able to get much meat sold out front at current levels? My guess is no; Not yet. The round and chucks have once again priced themselves in a range where we have seen plenty of demand in previous markets:  $2/LB for flats and $2.50/LB for chuck rolls. Typically, both domestic and export buyers alike come alive when these items get to those level. There is lot’s of margin opportunity for any user of those items to make increased margins with the current market pricing. “No brainer” right? Thin meats continue to appreciate as availability for the higher grades of skirts, short ribs, chuck flaps, sirloin flaps, and flank steaks are quickly gobbled up by rake order business and increased export interest – The spot market will see the effect of this in the way of higher prices going forward. Conversely, “credit” items like the beef back ribs are a great opportunity to margin as the packer is looking for a partner on these (Ribeyes are waiting to be made) ??.

On the pork side, pork just seems “expensive” to me. Understanding the fact that hog prices will drive pork prices I believe the market is still “shocked” from the rapid advance in price we saw from late Feb to first of April. While it is impossible for pork users not to buy pork on an ongoing basis; the degree to which pork is being bought over and above what is needed is likely very little. The recent downturn in beef round and chuck pricing alongside the overnight sticker shock of some pork cuts could potentially drive buyers away from pork and onto beef entirely (unless we see a big price reversal on certain pork cuts). The fear of ASF spreading will continue to loom over the marketplace and any signs of this could potentially send the market soaring once again – what happens in the meantime? How do you manoeuvre your way around this market?  Any knee-jerk reaction is typically not the best reaction long term; having a well thought out plan on how to hedge your business is likely the right approach. Interesting how 23-27 hams seem “’cheap” at $.60/LB after trading in the $40s through Feb; At current time, I would be negotiating a buy against the all of a sudden “cheap-er” 23-27 hams. Hams are an export friendly item that a packer can convert for your order into boneless if the price is right. At current time, boneless hams are overpriced to the BI and therein lies the opportunity to negotiate your boneless ham needs against the falling 23-27s.

Food For Thought..?

Have you ever heard of Secreto Iberico? Did you know this was the sierra cut out of the blade eye?