Cutout prices underscore positive impact of recent pork, beef export success | TSLN.com

Cutout prices underscore positive impact of recent pork, beef export success

USMEF

While pork and beef cutout prices have fallen back from peak levels reached earlier this summer, both remain well above the price level of one year ago. Record-high pork exports and surging beef exports appear to be important factors supporting these cutout prices, says USMEF Manager of Research and Analysis Erin Daley.

“When you look at the cutout cut by cut, it reveals a strong trend,” Daley said. “Pork and beef cuts typically bound for overseas markets are showing excellent strength compared to cuts that primarily sell in our domestic market.”

Over the past week, the pork cutout has averaged about $80 – down from a mid-August record high of nearly $95, but still well above the $69 level posted at this time last year. This comes as especially welcome news to the U.S. pork industry, where many analysts had expected high production levels – about nine percent above 2007 – to exert severely negative price pressure on the pork cutout.

Meanwhile, U.S. pork exports have been running at an all-time record pace in 2008. Through the first half of the year, pork plus pork variety meat exports have increased 67 percent in volume over last year (to 1.02 million metric tons, or nearly 2.25 billion pounds) and 58 percent in value (to nearly $2.32 billion) over the same period last year. Daley says an examination of specific cut prices shows the pork cutout is experiencing a significant price boost from this strong performance in the export markets.

“Loins, butts, picnics and hams are all up significantly over last year’s prices,” Daley said. “But prices for the mainly domestic items – including ribs and bellies -are actually lower than last year.”

“Tremendous performance in markets like China, Russia and Japan has allowed us to export almost 25 percent of our pork production,” added Daley. “This has been the key to keeping hog prices at close to record highs, despite the high production level so far this year.”

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The U.S. beef industry is enjoying similar results. Beef and beef variety meat exports in the first half of 2008 reached their highest level since 2003, increasing by 30 percent in volume (to 445,036 metric tons or more than 981 million pounds) and 39 percent in value (to $1.58 billion) over the same period in 2007. This performance has helped the Choice beef cutout price – which has averaged $161 over the past week – to remain about 10 percent above last year’s level. Daley says these results also come at a time when beef cuts typically destined for export markets have shown the greatest strength, while demand has been softer for domestically consumed cuts.

“Domestic beef items such as loins and ribs are actually lower this year,” she said. “But chucks, rounds and short plates are all significantly higher than last year, and trimmings are essentially double the price from last year. This is driven not only by export demand, but also the tight global beef supply.”

Overseas demand for manufacturing beef also has provided a boost for cattle prices, helping offset negative price pressure that had been anticipated from a high level of U.S. cow slaughter.

“Russia, for example, is bidding beef away from the United States and pulling beef from Australia and Uruguay,” Daley explained. “Despite our increased rate of cow slaughter this year, this has resulted in very high prices for manufacturing beef.”

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