THE MEAT MARKET - MARCH 16.2020

Good Morning – I hope you had a good weekend; panic & fear are running rampant –Markets suffered double digit losses for a second straight week. North American beef, pork and poultry prices have become extremely HOT as domestic retail business exploded this past week. Conversely, export interest for N. American beef, pork and poultry has been put on hold due to the quick rise in all major export currencies – Against USD. A series of announcements throughout the mid part of last week around the cancellation of NBA, NHL, NCAA , Etc.. along with a travel ban from the EU into the US makes me wonder what type of longer term effect will this have on demand? When will the market feel this effect? Could export markets pickup the “slack” if the domestic demand slows down? The degree of volatility in today’s world is unprecedented; what could a global recession do to beef and pork prices? From an export standpoint; the sudden and drastic rise of the USD has the potential to send LATAM into a recession – What happens to N. American pork prices if both Asia and LATAM go quiet? Last week’s announcements around the cancellation of social gatherings across the US, CAD, EU & LATAM has the potential to curve protein demand. Conversely, the uptick in retail sales we have experienced in North America over the past 7 days has been unprecedented – This will inevitably occur in other parts of the world. In this type of market; would you “bet” on prices moving higher or lower? I could argue passionately for both instances; However, the only thing I am dead certain about is that In time of crisis inventory (liquidity) is king – How well positioned are you?

Retail Ads for the current week mattered little; Corona-fear driven customers ransacked the shelves of both conventional and retail banners. Pork and poultry continued to be the go-to proteins across the Canadian and US retail meat flyers. Retailers used St. Patrick’s day to merchandise a vast array of brisket items – Along with ground beef and some bone in ribeye steaks/roasts – Great spreads this past week with very competitively priced items. In hindsight, the flurry of demand would have cleaned up the shelves at any price without much need of discounting. Unprecedented levels of demand across club stores and grocery retail locations has the potential to carry the pork and beef cutout through Easter – In a regular year this would make for an explosive spring market. Pork ribs (spare and loin) continue to be the best bang for your buck although I feel the upside to Choice middle and rib cuts is limited in current market conditions – White table cloth food service is extremely affected by this. In today’s market environment; it would be hard to find a packer that will be willing to offer a discount on out front pork, beef or chicken commitments. The reality of major plant shutting down due to an outbreak will continue to loom over the retail industry for as long as the situation remains equal to or worse than it is. From an out front planning perspective; pork spare ribs and boneless loins look like the best items – Even with the boneless pork loins appreciating almost 10% over the past 7 days! In today’s marketplace; the biggest challenge will be trying to keep up with demand.

On the beef side; unprecedented retail demand at the supermarket level has left meat department shelves empty. It will be increasingly hard to refill stocks if mobility decreases. The other risk to supply could a circumstance in which a plant employee finds itself infected with the virus prompting plant shut down – This could be catastrophic for N. American availability if it were to materialize. Export business on the other hand has gone quiet – No surprises here. The risk to the cuts going forward may be isolated to the middle and thin meats; the ground/round & chuck complex will continue to find it’s way into the “hopper” as a worst case scenario. Demand for fresh trim/grinds continues to outpace demand for frozen product providing the fresh N. American market with a premium opportunity over the imported trimmings market. Fresh ground beef or burgers made out of fresh trim have been proven to outsell those made out of frozen trims by a multiple: Have you had a ?’LB’er as of late? - https://www.cnn.com/2019/06/24/business/mcdonalds-fresh-beef/index.html . What type of raw material are you using for your own burger production? Imported fresh beef out of Mexico could be a great source for Canadian and US processors looking to source this type of raw material – Fresh, tested trim/cuts. The Mexican beef industry has matured tremendously and is a viable option to packers in both Canada and the US. I expect the cutout to continue moving higher throughout the balance of the month – fresh (Panic buying) US and CAD retail business will ensure this is the case.

On the pork side, prices finished higher on a carcass basis – The gains were led by the belly, loin and butt primals. The butt primal led the way posting gains of $6.75+cwt in a rather impressive turnaround from the basement type levels they reached 4-5 weeks ago. The majority of the pork retail cuts will continue to appreciate as the US and CAD retailers rush to fill empty shelves; pork lends itself to be merchandised easier at retail VS beef. Processing (chilling) time and optimal palatability time for a pork cut is quicker than beef – Nobody likes a “fresh” beef steak. Export demand on the other hand has taken a back seat as buyers far and wide try to manage with currency, late loadings (equipment shortage), and a steady rise in local demand for imported product. The biggest risk in this type of market conditions will be to not have enough inventory; potential plant closures and ongoing logistical challenges around equipment availability will make on-hand inventory king. From an out front planning perspective; pork spare ribs continue to be a solid buy – These will find a great deal of support from the recent uptick in retail demand. From a futures perspective; the lean hog contracts finished off the week suffering large sell off’s – Could these be driven by a slowdown in export or simply collateral damage from the overall global financial situation? The announcement by USDA of China cancelling 50,000 MT of pork that was bought but yet to be delivered did not help matters. Could this be a re-negotiating technique? Prices will tell the truth moving forward. Fun Fact – Bone in ?” COV pork loins and Boneless Strap On Centre Cut Loins 1/8” are worth the same !

FOOD FOR THOUGHT?

Could the panic buying we have seen in the US & CAD spill over onto other parts of the world ?

Out Front & Spot Buying Opportunities

** PRICING – INQUIRE VIA EMAIL/PHONE**

Beef Shortloins CH 0x1 XT

Beef Chuck Rolls CH 2x2

Beef Livers 2PC

Beef Tripe – Scalded

Pork Spare Ribs Med COV USA 

Pork St Louis Ribs COV

Pork Trim 42% Fresh

Pork BI Hams – 23/27

Pork Feet Hind/Front

Pork Brisket Bones FC

Have A Great Week,