Processing

Weekly North American market update 08 Jan 2010

The New Year is starting auspiciously with 3 major trade challenges facing the US meat and poultry industries - a near-ban by Russia on imports of US pork (alleging antibiotic residues - a highly sensitive issue); a similar near-ban by Russia on imports of US chicken (based on a long-running dispute over the US processing system of chlorine-washing chickens, in which the EU has also been long embroiled); and a major political about-turn in Taiwan - with BSE-related restrictions being re-imposed on imports of US beef (thereby revoking an earlier-signed agreement between the 2 nations, amid uproar).

By Graeme Goodsir

In beef context, trade disputes also exist with Canada and Mexico - about sharp reductions in US cattle AND beef imports from those two countries - caused by a year-old implementation of COOL rules. There also is a counter-balancing reduction of US beef exports going the other way - into Canada and Mexico - which amounts to trade protectionism that can hurt everyone!

Adding to these "export trade" headaches is an ongoing problem of weak consumer demand within the US - for meats and all other foods - caused by a 10% national unemployment rate, which is not yet abating with any degree of significant job recoveries.

End-year editions of US newspapers ran many stories about growing numbers of families in need - with over 10% of the US human population now receiving government food stamps from USDA (which at least generates food spending) - and many more people seeking free hand-outs at charity food banks - not a pleasant picture for what is still called the world's richest nation (with its poor people apparently getting poorer, while many of its richer people appear to get richer).

Adding further to economic woes, over two thirds of the main US land mass has this week experienced its coldest (and often snowiest) weather in many decades - from the northeast out to the Great Plains - down to Texas (near-freezing temp in San Antonio today) - across the deep south states to Florida - and then back up the Atlantic coast - threatening a lot of

fruit trees and winter food crops en-masse. So far, food distribution does not seem to have

been badly affected. Livestock and meat supplies have, for the most part, kept moving OK.

After a drop in national slaughter numbers last Thursday (New Year's Eve). Meat output returned to normal levels this week, with daily national kills on Mon-Tues at 126,000 head of cattle, and 429,000 hogs. (Numbers today weren't available - some USDA offices closed due to blizzards - but red meat deliveries were reported to be still moving). In absence of other USDA statistics today, it appears that fed beef and cattle wholesale prices remained fairly steady from last week, at recent struggling levels (82-84c/lb live, for fed slaughter steers, and 139.4c/lb for Choice-grade carcass cut-out value - with drop-credit value down 23c/100lb to yesterday's quote of $9.29 per 100-lbs). Retail beef prices are currently all-over-the-shop. Foodservice trade is mostly weak, with only high-profile restaurants like Mortons doing well; middle-cut beef steaks like striploins still sell cheaply at retail - whole $3.99/lb, sliced $5.99.

With ground beef and burgers continuing to sell well in recent cold weather, cowbeef trade is stronger. The canner-cutter cow carcass cut-out value is up 2.2c/lb this week (to 114.3c) and fresh domestic 90CL boneless cow beef has jumped sharply (to 148c/lb fob), with 90CL frozen imported cowbeef following partly upward to 144-45c/lb fob & 95CL bull up to 149.5c.

Beef supplies are still reportedly hard to procure in Aust/NZ, with flood & finance disruptions. Fresh 50CL steer trim (the flavor ingredient in ground beef) has risen from 74-75c to 80c/lb.

Wholesale pork trade stayed firm during the past week, despite some pre-set low retail prices in parts of eastern US that promoted traditional "roast pork and sauerkraut" dinners. (Whole boneless pork loins were down to $1.49/lb in past week - lowest level in a long time). However, Purdue University Economist Dr. Chris Hurt is currently forecasting better demand ahead for a more stable US pork supply - helped by ongoing strong export trade to Mexico and Asian markets. Currently, the pork carcass cut-out value is firm near 68c/lb (up 15c/lb from mid-October); live hogs at auction are quoted near 41-44c/lb range (with sows 32-36c).

Wholesale US chicken trade has again been reported mixed. Demand continues red-hot for bone-in wings (favorite party and bar food for watching sport on TV) at top prices above 165c/lb, while USDA's 12-city average index price for whole birds is now 80.5c/lb (up 2.2c from week-ago, and up 10c from 6 weeks ago, and getting close to year-ago level) - but it is a thin market, and carcass numbers decrease as more pricey wings get removed. On the flip-side of this coin, chicken breastmeat and leg quarters keep struggling in face of export uncertainties, and of sluggish domestic retail demand - with "special retail prices" as low as $1.39/lb for boneless skinless breasts, 45c/lb for leg quarters (10-lb bags).

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Footnote: As a guideline to US beef export trends, here are some excerpts from a current USMEF report about 2009 tonnages, up to Dec 24:

Accumulated beef (muscle cut) exports for January through December 24:

Total shipments were 472,612 MT, down 5.4% from year-earlier period.

A 28 percent increase in exports to Asia was not enough to offset the 20 percent decline in exports to our largest markets, Mexico and Canada, who are adjoining neighbors in NAFTA zone.

Exports to Asia accounted for 46 percent of total muscle cut exports, up from 34 percent in 2008. Exports to Mexico and Canada accounted for 50 percent, down from

59 percent in 2008.

The Greater China plus Vietnam region was the largest growth market for U.S. beef in 2009, surpassing Japan as the third largest market. The auto industry has also seen sharp growth in China…with the Wall Street Journal reporting GM sales to China up 67% in January through November - while GM sales in US during same period fell by 32% !

US beef exports to Korea averaged 1,591 MT/week during November and December, 2009, compared to 868 MT/week during the same period in 2008.

*** For week ending Wednesday 6 Jan 2010

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