Beef, pork demand takes twists

Published on: Mar 8, 2013
Beef and pork demand this week has been an adventure of turns and twists, according to Feedstuffs sources.

Beef demand experienced a strong week, but sources cautioned that they expect demand to collapse; pork demand continued to struggle, but sources suggested that the call for pork will become much stronger and will become so soon. 

A number of analysts said the fed cattle sector is poised to reflect significantly decreased placements most of last year that should be supportive to beef prices and, in turn, to fed and feeder prices. However, the beef twist is that they have been saying that quite a bit.

Beef packer/processors paid stiff prices for fed cattle last week, buying them at near-record-high levels to get them in off the Plains that were buried in back-to-back snowstorms, offering $127-129/cwt. on Feb. 28.

To accommodate their offers, they pushed wholesale beef to its own near-record-high level this week to $196.90 and $195.09/cwt. for the Choice and Select cutouts. It appeared that the decreased-placements theory was on track.

However, analysts explained that fed and wholesale beef prices surged as snowstorm-disrupted kills and production cleaned up the beef pipeline and insisted that beef priced at $200 won't move at the retail level. Consumer-level beef prices already are record high, consumers -- hit by higher gasoline prices and taxes -- do not have the disposable income to buy beef, pork and poultry are abundant and attractively priced and chicken storage is plentiful and will be moved into the marketplace. Beef demand is set to slide.

The pork twist was even more curious. Some sources acknowledged that they couldn't "figure out" what has been going on with hogs and pork.

Supply is not the problem, noted Chris Hurt at Purdue University in West Lafayette, Ind. Hog slaughter and pork production actually are below last year at this time, but hog and pork prices also are lower than year ago, he said, suggesting that "demand is the issue."

He cited the higher gasoline prices and taxes and reduced consumer spending power.

He also cited the Chinese and Russian markets that are closed to U.S. pork over ractopamine issues and the rapidly weakening Japanese yen versus the U.S. dollar. U.S. pork sales to China, Russia and Japan last year accounted for 3.4%, 1.2% and 6.0% of U.S. pork production -- or 10.6% of production -- which is now weighing over the U.S. market.

Exporting nearly 25% of pork production as the U.S. did last year "is wonderful," Hurt said, but is also leaves producers "vulnerable" to economic and trade troubles.

The National Pork Board, meeting at the National Pork Forum in Orlando, Fla., this week, took a couple steps to address demand.

First, Ceci Snyder, the board's vice president for domestic marketing, announced an effort to "clear up consumer confusion" in the pork section of the meat case by renaming loin cuts, doing away with a mishmash of old terms and establishing four specific pork chops: Ribeye bone-in and boneless chops, New York chop and Porterhouse chop.

In addition to the new names on the labels, there will also be "on-pack help" for consumers, with labels suggesting the best cooking methods and peel-off stickers suggesting recipes.

She said packers are embracing the concept, and USDA "is involved and supportive." Industry comments are currently being taken at www.meattrack.com.

USDA will need to approve the label plan, hopefully by the end of March, she said, and it will be launched in April.

The board also approved $3 million in supplemental funds to bolster domestic marketing this summer, and Snyder said the funds would be used to promote the new pork chop names and the value and versatility of pork.

She emphasized that advertising, especially radio spots, will be used to effect immediate consumer responses, e.g., drive-time radio messages that prompt consumers to make a pork purchase that day.

This is a different strategy from long-term pork positioning through the "Pork -- Be Inspired" effort, Snyder said. It represents "an immediate, short-term push to promote value."

The Pork Board manages the national pork checkoff that collects 40 cents on every $100 of value in all swine selling transactions for pork advertising and promotion and consumer information, among other purposes.

It is the value that Synder referred to that analysts said they expect to come into play in the pork sector very soon.

Indeed, Smithfield Foods Inc. announced better-than-expected third-quarter earnings this week, crediting pork demand that the company said is stronger than for which it's being given credit.

Dennis Smith at Archer Financials in Chicago, Ill., in wires this week, said wholesale pork prices are bottoming out, approaching levels at which pork started to realize "value demand" last fall. He said he expects value demand to be retriggered soon, at which time pork prices will improve and support packer margins that then will support higher hog prices.

Editor's note: This is excerpted from a full markets report that will be published in the March 11 issue of Feedstuffs and posted to www.feedstuffs.com.