THE MEAT MARKET - NOVEMBER 2.2020
Good Morning - I hope you had a good weekend; pork availabilities continued to open up as a combination of larger kills and a downturn (Temporary?) in export interest left prices lower across the board by weeks end. A bit of a different story continues to develop on the beef, a brisk move in the fed cattle futures contracts at week’s end along with reported strong load counts at steady to higher money make me a believer that a beef bottom has finally been set. Where do N. American beef and pork prices move to from here on in? The world economy and overall business environment remains bleak at best; specially when we try to look beyond the yearend holidays ??????. It seems crazy to think we have been dealing with Covid for almost a year now; uncertainty around it remains as rampant as it was back then. It is worth noting; we have been able to achieve purchases over the past 12 months that have tested & set net New historical “highs” & “lows”. Talk about an opportunity; talk about volatility! Lastly, Covid remains rampant across the US and CAD which alongside the seasonal slowdown in export business through calendar year end should provide both a threat and an opportunity to buyers far and wide ??????. Mobility restrictions across the EU have the potential to curtail not only demand; production is now being affected over there as well. What could this do to livestock prices? Will the different governments be forced to intervene?
Retail Ads for the current week were once again “value” driven with beef loin and rib cuts being absent from the front pages of Canadian and US flyers. The absence of loin and rib cuts was more than offset by ground beef offerings; all below the magic mark of $3/LB - talk about value. Ground beef prices will remain competitive through fall and winter months - this will provide a backbone to round and chuck cut pricing moving forward. Aside from US Thanksgiving week; the rest of 2020 will have plenty of beef in the weekly promotions - How will loin and rib cuts fare through all of this? The recessionary “boogey-man” continues to hang over the global economy and beef will be the protein to suffer most due to this. The big unknowns around Covid could temper export interest into Q1 of 2020; after all, the second resurgence of Covid is only starting to appear and impact to demand remains biggest unknown. Out front planning conditions should Improve as it pertains to pork VS beef moving forward. US based retailers have started to capitalize on some of these pork-tunities’ with major retailers offerings bone in butts (whole cov) below the $1/LB. This is beyond ??????; wholesale levels for bone in pork butts were well over the $1/LB just a few weeks ago. The best bang for your buck in this week’s beef and pork cutouts comes out of the pork category; in the way of bone in pork loins. 1/4 “ COV loins finished off the week in the $80 range which almost puts them in line with bone in hams and butts! I expect domestic and export retailers to come after the bone in pork loins as the packers increase their deboning efforts in an attempt to reverse the pricing curve for the bone in loin; in the meantime, why not take advantage of this?
On the beef side, a bottom appears to have been set in by the market this past week. A combination between a run-up in futures contracts along with sizeable reported spot load counts makes me a believer that the packers are getting ready to start marching prices higher. I have been feeling like beef is poised to run however my timing has been a bit off; I wonder if this is the beginning of this run? From a support perspective; retail has beef penciled in heavily through the latter part of Nov and into 2021. Could this be enough support for prices to remain firm/stronger if food service remains subdued? A lot of this would have to do with what ends up happening with pork pricing; if pork pricing remains strong, I expect beef prices to find lot’s of support moving forward. Off course this is a big “if”; pork prices are teetering with the risk a sizeable setback – particularly those retailer friendly cuts. From a processor perspective; it really can not get any better than it is at current time; I think it would be safe to say ALL processing cuts (Trims, Head/Cheek, Hearts, Etc…) are all trading at levels back of last year – in some cases; flirting with historical lows *cough, cough* Beef 50s. Imported offers remain mild in volume and steady-ish in price to the domestic market; that is off course pending prices in N. America stay steady which I don’t feel will be the case. Imported raw material will continue to play a key role to the N. American processors and with the end of the year in sight we now need to start focusing our attention on arrivals for the spring/summer items. In most cases, when beef prices in the US and CAD spike the imported offers spike alongside – Why wait for the N. American market to continue slowly heating up? Offshore lean & niche trim options are waiting to be had!
On the pork side, a combination between increased US production alongside a handful of de-listed (China) Canadian plants started to put incremental unsold product onto the spot market thought-out the week. This did not help product values off course; items like pork bellies and bone-in pork loins have quickly eroded to the tune of 20-40% in what appears to be the blink of an eye! Opposite to what happened with cattle/beef; the lean hog futures contracts were sold off this week which along the fact there was more product in the spot market could indicate lower prices are here to stay… for now, anyways. Pork butts remained under pressure with product values on the B.I ?” product remaining below the $.80/LB FOB plant – Interestingly enough, some of the retail flyers surveyed this past week had bone in butts on feature for $.99/LB. Hmmm…. Did these butt’s get booked before or after the butt debacle? Based on typical retailer planning/turnaround time I would suggest this was planned a while back; if so, how cheap will butt’s get to without this retail support over next 3-4 weeks? No different than the butts, bone in pork loins have suffered sizeable losses over past 14 days. I expect loins to be supported as we get through Thanksgiving however no different than what hams I feel packers are happy to discount the bone in, combo loins while keeping their boneless counter parts priced firm with little availability.
FOOD FOR THOUGHT?
Could a second wave of shut-downs/Instability across the EU have any repercussion on N. American beef and pork prices?
Out Front & Spot Buying Opportunities
** PRICING – INQUIRE VIA EMAIL/PHONE**
Pork Butts BI
Pork Loins B.I Combo
Pork Loins Boneless S. On
Pork Backfat
Pork Ham Fat
Pork Cushion Meat
Pork Hearts
Pork Jowls Skinless
85% Ham Trim
Beef Knuckles – Sel/CH
Beef Chuck Rolls CH
Beef 95% Trim Imported
Beef 90% Trim Imported
Beef 85% Domestic
Beef 65% Domestic
Beef 50% Domestic
Have a Great Week,
Luis A. Londono