THE MEAT MARKET - MAY 20.2020

Good Morning – I hope you had a good weekend; Hard to believe that we have arrived to the official start of the US & CAD grilling season – Victoria Day (Canada)/Memorial Day (USA). It is safe to say we have never had such a high priced, short of inventory beef and pork market during this time of the year – Perhaps any time of the year? The hunt for specific beef and pork items continues to be fierce; fresh availabilities have been wiped almost as fast as they have been able to be produced. Beef and pork prices remained on the offensive this past week; fresh and frozen availabilities continue to find themselves in extremely tight supply. Reported load counts for beef and pork production this past week continued to grow however there was still far greater demand than supply sending the price of most items higher throughout the week.  How long will it take for the “pipeline” of fresh beef and pork to be replenished? Prices from offshore markets have reacted to the strength of the N. American market by sending prices from EU, S. America and LATAM soaring to new highs – Everyone wants a piece of these N. American market! How sustainable could this high priced environment be around for? Export demand continues to be lackluster from anywhere else but the PRC; even then the interest out of that market at current price levels is mild at best. From a profit perspective; historically high margins will keep the beef and pork packers on the offensive in terms of production. The biggest challenge going forward will be conversion/deboning and therefore we will continue to see boneless product trade to a big premium VS their bone in counterparts.

Retail Ads for the current week were tailored to match the current supply (shortage) – Last minute changes were needed in order to ensure the shelves remained stocked. Over and above this; maximum purchase limits X item were being set across the fresh meat case. Retailers in the US have started to pass along some of the wholesale price increases onto the consumer; particularly in staple items like ground beef and pork chops. What effect could higher retail prices have on demand? Out front retail planning should become friendlier in terms of availabilities from N. American supply; not so friendly in terms of some of the pricing the packers will be looking for out front. Imported offers of beef and pork cuts have been quickly bought up by the domestic retail and processor trade in order to ensure some certainties around supply. From a retailers perspective; the most certain items as far as supply would be those that are further processed; leaving most of the supply risk to the further processor while capitalizing on the increased traffic through the stores. All of that being said, Ads in the US and CAD this past week all had some beef or pork on the front cover – Certainly every offering of meat throughout these Ads is below the cost at which these products can be replaced at today. The first long weekend of the summer combined with continued easing of COVID restrictions should be the perfect combination to fire up the BBQ & perhaps wholesale pricing of what little production Is continuing to come back online!

On the beef side, prices saw a big decrease throughout the middle part of the week – Led by one of the majors and quickly followed by the rest. The price of imported manufacturing beef has shot up once again with limited offerings and far out availabilities. Foodservice demand across the US for any other beef that is not ground beef continues to be subdued; initial downside risk on beef prices should be around the loin and rib cuts- foodservice. I am not so sure about prices following anything that is “typical” anymore; this is due to the fact that there has been such an unprecedented impact to demand and supply across the globe. Buying cycles for retail, foodservice and processors have been completely disrupted; in more ways than what we could have ever imagined. How has this affected your business? Frozen stocks are running very low; if demand continues to grow at a pace that leads us to where we were at Q4 2019 then we should see prices remain (historically) strong from here on in. Could high prices temper demand? Certainly. I would argue high prices may not make us shy away from eating beef; we may just eat it in different ways than what we had been accustomed to: Wieners, Deli Meats, Bugers, Etc… Buyers will continue to anxiously wait for the price of N. American beef to come down; it may be as steep on the way down as it was on the way up.

On the pork side, overall slaughter numbers finished off the week just over the 2MM head mark. Primal conversion continues to be the biggest culprit behind some of the astronomical prices on items like boneless pork loins, cushion meat, and boneless sirloins. 23-27 ham prices collapsed this week; 23-27’s spent the bulk of the week trading in the dirty $30s. This past week, the USDA reported a day of 4M LBS+ at these basement type levels - This makes me think there have been a very good # of hams booked up by the packer and the only way for them to move from here on in is higher – There is a big chase for lean right now and the BI Hams provide a good source of it with a little bit of labour added to them. However, I am not sure this will be the case just as fast as some may expect. Export demand continues to be lackluster in comparison to recent history; offerings out of the EU into N. America at levels far more competitive than the current spot market make me believe demand in almost every other market is flat. The big chase items this past week continued to be those retail driven cuts with a special shutout to the back ribs and tenderloins. Due to known circumstances, we should see record high prices and low availabilities on these loin by-product items. Hog weights have continued to tick higher; this is no surprise and is a direct effect of the plant shut downs. Packers in the US and CAD have begun to modify their specification sheets on items like butts, hams, and BI Loins as there are now too big to fit in their original pack off setup. Lastly, if the collapse of the bellies this week is an indication of what is to come across other primals then you should get ready for ongoing volatility. Foodservice demand for bacon continues to be down with the breakfast category being affected the most – Look for the belly roller coaster to continue on throughout the summer.

FOOD FOR THOUGHT?

What are some ways in which we can extract value out of larger primal sizes due to increased weights of hogs and cattle?

Out Front & Spot Buying Opportunities

** PRICING – INQUIRE VIA EMAIL/PHONE**

BI Picnics - Combos

Pork Jowls – Skinless Slashed/Unslashed

50% Pork Trim – Belly/Shoulder

Pork Bellies – Single Rib Imported

Pork Tenderloins – Imported

Have A Great Week,

Luis A. Londono