Beef packers continue to struggle with weak demand for some items and have consequently resorted to further harvest cutbacks in an effort to improve prices. Saturday slaughter was reported at just 20,000 head, down about 11,000 from the previous week and 50,000 head smaller than a year ago. While the USDA numbers have yet to come out, we estimate that for the week steer and heifer harvest was down 8.5% compared to a year ago. Cow slaughter also is running an estimated 3% below year ago levels. Dairy cow slaughter rates are only moderately higher than a year ago but they are expected to rise as the dairy cowherd retirement program brings more animals to market in late June.
Beef cow harvesting, on the other hand has been below year ago levels for a couple of months and will likely continue to be lower as the liquidation of the beef cow herd slows down. Overall, US beef supplies for the week were an estimated 8.2% lower than last year, which should help support prices going into Memorial Day weekend. The main problem that the beef industry has at this point is that there are plenty of inexpensive meat options available in the marketplace. Pork prices are especially competitive but chicken values are also relatively low, especially for items such as breast meat. There are reports that foodservice business is slowly improving but it is important to keep in mind how drastic the decline in foodservice demand was in the past six months. We propose that beef demand has especially suffered from the decline in business at fine dining establishments.
Hog prices for the week were about $3 /cwt lower than the week prior but prices were down much more significantly earlier in the week and actually gained about $6 /cwt on Thursday and Friday. Pork packers were actively looking for hogs late in the week and this bodes well for pork values going forward. It seems that demand is slowly returning as the influenza panic subsides. As we noted during the week, pork values now present great value for retailers. Also, a lot of them opted to deplete the pipeline following the influenza outbreak and delayed purchases. We think there is currently plenty of pent up pork demand in the system and this should be supportive of pork prices in the short term.
More longer term, however, we do need export markets to stabilize, especially the Mexican market. That may take some time. Especially important is the Mexican tourism industry. As for the Mexican consumer, that remains a wildcard due to all the wild speculation about the source of the flu outbreak.
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