THE MEAT MARKET - MAY 4.2020

Good Morning – I hope you had a good weekend; North American beef and pork production continued to be crippled by ongoing plant closures. There was literally ZERO fresh, COV pork to be had this week – Buyers scrambled to get covered as best they could. Out of stocks were a commonality from packer to packer, distributor to distributor and retailer to retailer – The chase for frozen, COV pork items continues to be fierce with very little product left in the spot market. The high price environment in N. America has started to attract imported beef and pork offers at far more competitive prices than current spot market levels – Buyers have quickly reacted to this and have begun to book up those offers with quickest arrival times (Processors primarily). All that being said, offers for fresh hams appeared to be readily available by week’s end which is not surprising based on current labour constraints at the major plants. Unfortunately for the packers, the Mexican market has reached a limit in terms of what they are willing to pay for BI hams on formula leaving product leftover for weekend ship. Over and above this, prices continue to be driven by availability of supply at current time which in turn was driven by plant closures- What will happen to beef and pork prices when production starts to increase once again?  Could current demand support spot market levels? In current market conditions, it is nearly impossible to book meat forward without having a formula priced method of transacting tied to it – In time of great uncertainty, this is the safest way to transact for buyer and seller alike.

Retail Ads for the current week were once again heavy with meat offerings; typical for end of month merchandising. Retailers in the US and Canada continue to scramble in order to keep their counters stocked. Out front planning would be very challenging in current market conditions; formulated business may be the best way to transact for buyers and sellers alike.  Frozen pork continues to be a great opportunity for the retailer; imported offers from overseas are starting to look very appealing– From frozen lean beef trim to boneless pork loins there are a # of great opportunities with delivery windows of 4-5 weeks out at current time. From a domestic supply perspective; I would expect to see a continued push on ground beef, and BI pork chops – This is the best way to align your retail business to the items that will have the best value coming out of the packer. Further processed meat products could also be a great way to capture some sales and margin if fresh beef and pork remain this expensive. A flurry of processors have begun to lock up their needs through August; the fears of a second wave of COVID remain top of mind and ongoing disruptions to supply/demand may be with us for some time. The best opportunities at current time are all found from imported markets; in the way of lean boneless beef trimmings for ground beef and burger production. Imported lean beef trimmings out of offshore origins are trading at a steep discount to domestic product; this is a great opportunity to capitalize on some discounted prices at a time of peak seasonal demand.

On the beef side, availabilities on fresh domestic product remained non-existent while prices continued to break records. Record sales on ground beef continue to provide an extremely juicy return to the cutout – This has opened the flood gates to the grinder for almost any piece of beef coming off the round., chuck, or clod. Unlike pork, export business for N. American beef has  been lackluster – This will likely be the case for balance of year or until the economy gets back up on it’s feet. North American beef remains a luxury item in export markets leaving most of the marvelous N. American “produce” to be enjoyed @ home. The slowdown in production will back cattle up considerably; this combined with the slowdown in white table cloth food service establishments will leave opportunities on highly marbled meat for the N. American retailers – What a great opportunity to promote this type of offering through your retail channels. It is interesting for me as a consumer to see restaurants adopt a different pricing structure for their COVID takeout service (Cheaper in most cases) – Consumers have reacted positively to this by supporting them with different food items. I have yet to purchase anything with meat in it as of yet. Why would this be? Pricing in my opinion; beef options are still being sold at full price. This presents itself as a great opportunity for the retailers to pick up some incremental sales at potentially a full margin – What is wrong with a USDA/CAD Prime Ribeye steak for $40 (16oz) at a grocery store (A typical CH graded ribeye would in the $25-30 range)? Restaurants are currently offering this option out for $80+. What is the biggest difference between these two offerings? In most cases, an upgrade in the quality of the beef + incremental wet or dry aging - in most cases this would be no mora than an extra $2-3/LB or X 16OZ steak!

On the pork side, slaughter #s continued to dwindle with a historically low # of 1,550,000 heads this past week. Needless to say,  prices exploded once again with the carcass gaining an impressive $38cwt over previous week. Every primal group contributed to the gains this past week; the charge was led by the belly primal. Once again, there was virtually no fresh or frozen pork to be had this past week – Spot loads of BI Hams became available towards the end of last week; I find this very surprising with such a small kill #. Mexican demand for fresh hams was lackluster this past week; spot prices have moved higher too fast for the Mexican buyers appetite. The packer has a historically wide  margin at current time and their preferred method of transacting going forward will be formulated business – A combination of the previous two will not be friendly to BI ham prices. The high prices for N. American pork have attracted offers from destinations like the EU and Mexico – Incredible for me to see that in some cases this past week and for the next few North American buyers may be paying more for their pork than our Chinese counterparts: Talk about a turnaround. Liquidation across the herd is something that is never talked about until it is likely too late for buyers to react; feast to famine/famine to feast. What are your thoughts on coverage moving forward? Have you thought about exploring supply out of markets outside of US and CAD?

FOOD FOR THOUGHT?

How long will this low supply/high priced environment be around for? What happens to demand throughout it?

Out Front & Spot Buying Opportunities

** PRICING – INQUIRE VIA EMAIL/PHONE**

BI Hams – Fresh

BI Hams – Frozen

BI Picnics – Fresh  

Have A Great Week,

Luis