THE MEAT MARKET - DECEMBER 14.2020
Good Morning - I hope you had a good weekend; export data for previous week continued to indicate YR/YR increases for US and CAD beef and pork. In a stark contrast to last year; Covid (fingers crossed) is on the way “out” while last year we were just getting into it. The debacle in N. American pork and beef pricing we experienced through end of year 2019 and Q1 2020 was single handedly driven by the slowdown in exports to Asia (China). A slowdown in exports during this very critical period of time sent pork prices tumbling. The circumstances this year are far different; how will beef and pork pricing reflect this moving forward? Availabilities appeared to be plentiful across packers; however, far from burdensome. Demand for shipments into Q1 has started to pique as buyers are quickly realizing Christmas is only two weeks away ?????? . The wishes of a sizeable setback in beef or pork pricing beyond this point may have to be “shelved” until next year! A profitable packers greatest desire is to maintain a good margin while running production as fast and efficiently as they can - as a buyer, all ??’s on buying opportunities that arise from the packers relentless desire to achieve those margins. Time is $; offering the packer liquidity in this environment represents a win/win for all!
Retail ads for the current week were a bit of a mélange this past week; retailers in both the US and CAD appeared to have written the merchandising script out of the same play book. Is it Christmas? Is it Middle of February? Depends which flyer you looked at! The majority of retailers dipped their toe in the water with seasonal items however the lead items ranged from chicken leg quarters to beef tenderloins - The full spectrum was covered! Turkeys continue to be an afterthought in the week’s leading up to the holidays. Is turkey becoming a year round staple VS the traditional “holiday warrior? Turkey pricing and availabilities would certainly suggest that to be the case. Beef loin and rib cuts remains hot and should almost be procured on a “back to back” basis until after holiday season. From an out front planning perspective; plenty of unknowns lie around the corner in terms of dormant food service demand. North American packers continue to battle Covid amongst their production work force and while this is not a great deal of concern right now i still believe it is something we need to take into account as we look into the future. As expected; bottom round flats and chuck rolls lost double digit % value throughout the week making them great options for promotional activity through January. The best bang for your buck in this week’s cutouts comes out of the beef category in the way of Top Rounds/Inside Rounds. XT Top rounds have struggled to get much lift beyond the $2.10/LB Fob mark for some time now and rest assured this is attracting business for January. In the meantime, top rounds are available to be bought below their value of lean into a time when they seasonally appreciate - too good to be true? Perhaps, better act on it now!
On the beef side, packers were not shy about discounting product in order to keep the boxes moving and the (Juicy; although less juicy than in previous weeks) margins rolling in. Buyers were able to capitalize on this as items across the cutout provided a well-deserved break for end users: Beef prices finished off the week almost $20cwt lower than previous week. The lack of beef in the N. American grocery ads this week makes me believe there is plenty of it coming in the weeks to come; also a reason as to why we may have seen an influx of boxes onto the spot market over previous 2-3 weeks. Off course almost every analyst report I have read suggest a looming “wall” of cattle (fat) coming our way through Q1 – How much of this is true/How much will this affect spot market pricing from here on in? I have to believe the packers are selling meat against the knowledge of this cattle availability becoming accessible. If this happens, wholesale prices could remain steady-ish as the packers work their back end cattle cost to reflect the same margin against their out front sales commitments. Why would the packers want to give up the margin if the cattle is available? Why not sell meat forward and maintain historically wide margins? Either way, N. American beef continues to fill in the void left by Australia across export markets far and wide and therefore the looming “wall” of cattle may become something like Donald Trump’s infamous wall across the Mexican border…
On the pork side, Asian export markets remained active this past week as buying for post Lunar New Year has resumed. Export data out of the US along with buyer interest out of Canada has confirmed what we thought had begun a few weeks back; Asia (PRC) is active once again. Off course this does not necessarily mean that pork everywhere will be moving higher; however, it does mean that any pork around the world that can access PRC will be accessing it in conquest of sizeable higher returns. It is interesting for me to observe destinations that are net exporters of pork all of a sudden start chasing slaughter and credit items out of the N. American packers. What can we make of this? Conversion remains a challenge at primary and secondary processors which in turn is keeping boneless items at an abnormal premium to their bone in counterparts. Production #s this past week remained a bit behind last year in head count; higher in total volume. Off course this is only favourable to trimming availability; after all, there continues to be only two cuts x head. Hams continued their stellar performance this past week with the primal pushing higher while buyers scrambled to get covered on bone in product. Deboning margins remain as healthy as packer margins and that will keep Mexico and the secondary processor market chasing bone in hams!
FOOD FOR THOUGHT?
Why are destinations that are net exporters of pork looking to source slaughter and fabrication “credit” items from N. America?
Out Front & Spot Buying Opportunities
** PRICING – INQUIRE VIA EMAIL/PHONE**
Pork Back Ribs – COV USA
Pork Butts Bnls COV - USA
Pork Loins Bnls S. Off -USA
Pork Picnics Bnls – USA
Pork 90% Trim CAD
Pork 75% Trim CAD
Lamb Racks - Aus
Lamb Shortloins - Aus
Lamb Legs - Aus
90% Lean Trimmings – Imported
Beef Hears – Imported
Beef Tripe – Domestic
Have a Great Week,
Luis A. Londono