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Weekly North American market update 26 Jun 2009

Father's Day festivities passed by last Sunday with hardly a whimper of extra demand for red meats, partly due to more rain in north-east last weekend, though some restaurants were noticeably crowded.
US and world stock markets receded sharply during past week, which rekindled "outlook fears" among many consumers and investors.  The broad environment has not been friendly for BBQ cookouts.

The main feature of the past week has been further depression in US hog and pork markets, with burdensome supply pressuring prices as several major export markets (other than Mexico and Japan) remained closed to US pork because of the unjustified "swine flu" stigma kept alive by the Media and consumers in numerous countries had groundless fears about eating pork. 
 
In China, however, which has virtually stopped importing US pork, the government is reportedly buying-up domestic pork to stockpile strategic reserves, and to help bolster current low prices.  The US government has also pledged to do more to help hog producers, whose "volunteer efforts" to buy-up sow herds for liquidation were abandoned a week ago, nearly as quickly as the ideas were proposed. In the meantime, commercial sow kills have risen and live prices have plummeted (into the range of 22 to 32c-lb, like week ago). Sausage-makers have been inundated with cheap offers of trimmings, and retail prices for items like "Italian rope sausage" have fallen from near US$1.99-lb to as low as 99c-lb.
 
For regular market hogs, the US domestic market saw relatively less price decline.  Live price at auction is quoted today near 38c-lb (low end of last week's range), but lean carcass cut-out value fell 1.5c-lb from week-ago to 53.4c-lb today (lowest level this year), as national kills stayed at 412,000 head daily since Monday.  Lean hog  futures prices fell sharply today - by 2.8c-lb for July contract (to 57.4c-lb) and by 1.6c for August (to 58.8c-lb) and lower to October (55.8c-lb).
 
US cattle and beef markets were steadier, as packers maintained unusually high kill levels near 129-130,000 head daily, but Choice-grade carcass cut-out value lost another 0.5c-lb (to 139.9c) and leaner Select-grade fell 0.9c-lb (to 133.1c - with the spread between them now at 6.8c-lb).
 
Average gross slaughter margins of beef packers - in week to last Saturday - were near US$15 per head, compared with near breakeven in prior two weeks) while cattle feedlot margins were near an estimated loss of US$20 per head, with live sales last week steady in 80-82c-lb range. It seems almost like feedlots are flushing out loss-prone animals (and reducing replacements) in order to lessen future supply pressure, in case demand stays weak. The June 1st USDA Cattle-on-Feed Report last Friday indicated total numbers at 96% of year-earlier, with new placements during May at a record-low 1,638,000 head (only 86% of year-earlier number) and placement in the market of 1,952,000 head (a low 91% of year-earlier).  Production seems to be heading downward, with futures markets flat.
 
One good omen this week, however, was a sign of Taiwan fully re-opening its market to US beef. Cowbeef markets steadied from last week's decline, with canner-cutter carcass cut-out recovering 2c-lb to be quoted today at 109c-lb.  Fresh 90CL boneless cowbeef today ranged 136-138c-lb fob, (up 2c from week-ago, with a slightly firmer undertone approaching the July 4 holiday) and imported frozen 90CL cowbeef stayed at 134-135c, with spot supply still appearing tight, and nobody keen to bid too far out-front because of uncertainty.  Grinders had no plans to work extra hours for July 4 orders - leaving the big US packers to fill any needs with coarse-ground from their big steer kills. The wholesale value for 50CL steer trims (other hamburger ingredient) remains steady at 67-68c-lb.
Chicken - the usual summer holiday favorite - seemed to remain steady in US wholesale markets, though USDA's 12-city index for whole birds eased 1c-lb this week to 85c-lb.
 
US supermarkets and retail food stores are reportedly staying profitable, with No.1 supermarket chain Kroger this week announcing a 13% rise in latest quarterly profit - and attributing this to "basic food item sales from center aisles - specially with private labels," but no mention of meat or poultry.

Today's Wall Street Journal newspaper had a detailed story about "Frugal Shoppers Driving Grocers Back to Basics" - citing sales up 3.1% at giant Wal-Mart, but down 4% at organic firm Whole Foods. Elsewhere in the media, debates are ensuing about whether "private labels" are really so successful.
 
In local supermarkets in the central Central Pennsylvania area, advertising for July 4 cook-out foods became dominant this week - with low prices for 80CL ground beef widespread at US$1.69-1.79-lb (down nearly US$1.00 from recent levels) and Choice-grade boneless rib-eye steaks at US$5.99-lb. High-profile Wegmans supermarket is promoting "juicy burgers cooked the way you like, thanks to irradiation," with prices at US$3.09-lb for 90CL, US$2.89 for 80CL, and US$4.79-lb for pre-packed 90CL ground patties).
 
In chicken cases, the best bargains across the board are 49c to US$1.19c for leg quarters and US$1.79-1.99 for boneless, skinless breasts. Pork items didn't seem so conspicuous, but Italian rope sausage is as low as 99c-lb, and "Ball Park" brand of all-meat frankfurters is also at 99c-lb - good July 4 bargains.
 
 
Written by Graeme Goodsir
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