Beef and pork prices have settled lower from the highs established in the spring although there is some hope that the top in the pork market may still be ahead of us.
The pork cutout closed on Monday afternoon at $83.6 /cwt, $1.2 higher than a week ago and now some $24.3 higher than the previous year. Pork cutout values normally get some seasonal support going into late August and early September. The pork cutout is above not just the depressed levels of 2009 but also ahead of 2008, a year that saw record pork prices in August.
Will we see a repeat of 2008 this summer in the pork market? In order for that to happen we will need to see a number of things develop:
1) Ham prices need to continue to gain ground. The peak for ham prices is generally in late August as retailers and foodservice operators rush to put product away for the holidays. In 2008, US end users had to compete hard with export markets for product and it seems that is the case again this year. There is some fear that high ham prices will cause end users to not feature hams as prominently this fall, thus limiting the normal up in August and early September.
While this may be the case at the margin, generally retailers do not want to mess with traditional items and feature them regardless (think hamburgers going into Memorial Day). The price of competing items, especially turkey, has also increased sharply, which should support ham demand.
2) Pork trimmings need to remain high into the fall. It has been somewhat of a rocky summer in the pork trim market although generally prices are at relatively high levels. Volatility has been the name of the game so far, with price swings of 15-20 cents for an 80 cent item. Demand for inexpensive meat products remains good, which should be supportive of the hot dog and sausage markets this summer and fall. Exports also remain critical at this juncture and we will need to look at the May numbers which will be published today to get a sense of the direction in markets such as Russia, which traditionally are large buyers of pork trim.
3) Bellies hold up, at least until September. Seasonally pork belly prices drop sharply into September as summer BLT demand comes to an end. In past years we have seen belly prices capitulate in late July as bacon demand fails to materialize and end users rush to liquidate inventories before the September break in prices. So far belly prices are holding up, in part supported by foodservice promotions featuring bacon.
4) Hog carcass weights drop in July and August, limiting supplies in an already tight market.
