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Weekly North American market update 18 Dec 2009

As world leaders came to Copenhagen this week for final stages of the Climate Change Conference, compromise levels of consensus seemed to look increasingly difficult (mainly due to developing nations seeking more financial help than rich nations were willing to extend) - but livestock industries seemed (temporarily) to be off the hook for becoming subject to carbon-trade taxes.
By Graeme Goodsir
 
In US wholesale trade during the past week, the lead-up to Christmas holiday next week was relatively quiet - with less company parties and social festivity than usual, due to the economic recession. Beef packers juggled their daily slaughter lower on some
days (118,000 head today) to offset slow demand, and some supermarket chains promoted middle beef cuts at low prices (e.g. Weis chain today pushing SteakHouse Angus Rib Roast at $4.99-lb for Christmas). Walmart pushed cheap holiday meal combos - "Christmas dinner for a family of 8 - for under $30" - and other competing stores tried similar low-cost strategies.
 
The center-piece of most low-cost meal promotions is ham - with retailers struggling to liquidate ham inventories ahead of the traditional wholesale price "put-down" - from near Christmas into January - which is starting now with price drops extending from 10 to 15c/lb - causing the pork carcass cut-out value suddenly to drop 2c/lb today - after a phenomenal rise from 57c/lb in mid November to 72c on Monday this week (now back to 70c/lb today).  
 
Exports (plus ongoing pork purchases by USDA) have helped significantly to drive up wholesale pork prices in recent times, while national hog slaughter levels have stayed high near 2.2 million head weekly. US beef exports also have shown good pick-up (latest monthly figures to October) but not enough to offset weak domestic demand - which seems exacerbated by ongoing publicity about E.coli and other food safety issues. The overall beef demand weakness caused live fed cattle prices to edge below 80c/lb last week for the first time in many months - but reduced kills since Friday (down to 118,000 head today) have helped live cattle prices to improve near 81c/lb today - but still with financial losses for both feedlots & packers. 
 
Producers' future outlook is also currently clouded by corn & soybean "futures contract" prices rising in past week  - by 35c-bushel and 30c-bushel respectively - due to very late harvests tightening supply - and thereby portending higher feed costs for livestock in the New Year. This whole situation is causing worries for NCBA.
 
Processing beef prices firmed this week, due to a combination of cow killers trying to curb activity over the upcoming holiday period, and fast food hamburger restaurant sales continuing to look good. Domestic fresh 90CL boneless cowbeef price is up 3 to 4c/lb in the past week (to range 134-35c/lb in midwest - near 142c for delivery to east/west coasts), which puts it back on par with scarce supply of imported frozen 90CL cowbeef - which is still quoted in 139-140c/lb range, fob at port of entry. Some analysts think these lean cowbeef prices might rise a bit further in the near future, but others say that consumer demand might not hold up at present strength beyond the holidays & into New Year.
 
Some encouraging news came out this week when the Technomic food market research group gave its "5 expected market pointers for 2010":

 
(1) More consumers leaning to "comfort foods", including burgers;
(2) Growing interest in Asian/ethnic foods;
(3) Interest in new sauce flavours, which could help burgers, among other foods; 
(4) More consumer focus on "fresh garden foods"; and
(5) More focus on breakfast-style foods around-the-clock.
 
FOOTNOTE: Mutton has suddenly snapped out from its low profile, and become a high-priced meat. The large Fletcher sheep meat plant at Dubbo, Australia, put out a long email statement to its many customers, stating that low sheep numbers will curb mutton production for the next 2 to 3 years, and product allocations to customer needs will need to be "rationed by arrangement". This extraordinary statement has been accompanied by Fletchers cutting 300 plant jobs, and by mutton prices continuing to rise - temporarily exceeding some beef prices in the Australian market - because demand from Middle East markets - for both mutton and live sheep - continues to be strong. 
 
That's all for now. There was little change apparent in chicken markets this week, with wing prices strong and breast meat prices very sluggish - consistent with seasonal trends at this time of year.
 
***For week ended Wednesday 16 December 2009
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