THE MEAT MARKET - SEPTEMBER 14.2020

Good Morning – I hope you had a good weekend; pork/hog markets were rocked once again this week with the discovery of a deceased wild boar with ASF in Germany. ASF? It seems as if with all of this COVID talk we had almost forgotten about that nasty disease. ASF wiped out Chinese hog barns and drove pork prices/demand out of Asia/China to the levels we are seeing today; What impact could this have on the EU’s # 1 producer/exporter of pork? Off course, I would imagine the Germans have been getting prepared for this for some time; there had been rumours about ASF being present in Deutschland well before this news broke out – Years before. From an export standpoint; asking prices immediately moved higher in a response to an imminent ban of German pork into the traditional Asian powerhouse markets – Korea, Japan, China. Not only did prices move higher; packers in US and CAD were off the market on many items – Primarily hams & bellies. Germany accounts for a double digit share of total pork imports for China and Korea; certainly this volume will have to be re-directed elsewhere. This will be a buying opportunity for many markets; unfortunately, not the US. A bit of a different story is developing on the beef side; US and CAD packers appear to be getting into some bigger numbers of unsold inventories In the weeks to come – I expect to see continuous downside pressure on rounds, chucks, clods, loins and ribs. Without a doubt; a TON of business will get “written” up as soon as these beef prices get to where they need to – We may be closer than you think. Lastly, from a futures perspective both fed cattle and lean hogs look well supported by the prices and interest on the meat – Seasonally larger numbers into the fall along with a developing ASF situation in Germany may throw a curve ball into buyers plans. How are you gearing yourself up for the fall? Just when we thought things could not get more volatile; ASF strikes Germany!

Retail Ads for the current week were all centered around ‘value’ and “budget”; Not uncommon for them to do this after long weekend’s. Ground beef; Lean ground beef in particular was present in almost every Canadian front page. Discount and conventional banners went out with sub $3/LB retails on lean ground beef; historically sharp retail prices! At current time, I would suggest beef is where “its @” in terms of value for our front bookings – Particularly on the rounds, clods and chucks. Beef packers have gotten themselves out of position and are in need of getting some beef sold out front; retailers rejoice as this is great timing for them to set up the balance of your promotional activity for 2020. From a further processed category; the recent news about ASF in Germany could open up room for the CAD market to buy some pork back ribs, bellies, and CT butts well back of the US and CAD marketplace – This could be great raw material costing for private label deli programs. From an out front planning standpoint; I would be focusing my efforts in getting some bottom round flats booked. Flats are being traded back of their value of lean; processors will be all over them as the situation in Australia will have very little product coming in from that origin over next 8-12 months.

On the beef side, availabilities continued to open up while prices softened. Packers found themselves discounting product in order to get week’s fresh production cleaned up. Buyers have yet to step into the spot/out front market in any significant way; that off course will/could quickly change this coming week due to the situation developing with CAD & US pork into China. Pork packers were not looking to book anything out front at week’s end; this was due to the headline news of ASF found in Germany – great opportunity for the beef packers to get some retail Ads out front. A (temporary) ban from China on German pork appeared imminent; this came over the weekend. This ban leaves a high probability of combustion/explosion to N. American pork prices - Beef will get bid up because of it! Prices across items like clods, chuck rolls, and bottom round flats is once again approaching the “too good to be true” territory - Processors have begun to step into these flats well back of their value of lean! Availability of the “PRIME” grade continues to be non-existent; who is eating all of this prime beef anyways?? Certainly not the restaurants! Imported beef offerings remain appealing to the N. American spot market however if prices continue to erode at same speed they did last week this may not be the case for long; i hardly doubt it will be!

On the pork side, the news of ASF reported out of Germany sent shockwaves through industry. The EU’s #1 pork producer is now facing a ban (Temporary) into key markets like China, Japan and Korea. Even countries like Canada have imposed a temporary ban on goods coming out of this origin until zoning areas are set and approved by the authorities; no different than the way Poland has been for some years now. The US and CAD pork markets were already hot; this can only add fuel to the fire! Conversely, exports out of Germany will need to remain in place making markets like LATAM and parts of Asia key participants in marketing all of the hogs/pork built into the German pipeline. In times like these (ASF); consumers don’t necessarily change habits therefore the impact to overall demand is non-existent. This will entail a massive change in the flow of pork directed/re-directed in an out of these markets; great opportunity to capitalize! Demand out of markets like LATAM has turned higher once again as buyers in those markets scramble to get yearend business locked in - Not a ton of opportunities out there at current time. Trimmings and spare ribs hold the best value in cutout; credit items like feet and fats remain well sold and historically high! In most cases; these credit items are money makers for all and having them booked may be worth more than not having them booked “cheap” enough.

FOOD FOR THOUGHT?

Is the recent downturn in US and CAD beef prices a buying opportunity or a sign of things to come?

Out Front & Spot Buying Opportunities

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Pork Butts BI COV

Pork Ham Ends BI

Pork Spare Ribs 3PC COV

Beef Clods XT LC

Beef Flats CH

Beef Chuck Rolls CH

Beef Ribeyes CH

Beef Striploins CH

Beef 50% Trim

Beef Top Butts XT – Steer/Importe

UT Tenderloins – 190A – Various Sizes