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Published October 24, 2011, 05:00 AM

Prices hold up for meats

When it comes to ag commodities, meats have enjoyed strong prices for much of the year.

When it comes to ag commodities, meats have enjoyed strong prices for much of the year.

In the pork industry, numbers remain better than a year ago and no liquidation is expected. Perhaps the earthquake and tsunami that occurred March 11 just off the shore of Japan was the underpinning support factor that has allowed both pork and beef to shrug off stiff sell-offs only to come back to the highs of the year, and, in the case of October hog futures, expire into new all-time highs.

Cattle futures based on the April expired contract had a chart pattern similar to November soybeans. The market V-bottomed and managed to move back up for a 61.8 percent correction before moving sideways into a range. Meats have been amazing this year. During the past 40 years, whenever economic woes occurred, domestic demand softened and prices waned.

Granted, the major drought of the Southern Plains this year helped prices hold. That is opposite what normally would have been expected as more cow beef on the market in the past would have pressured prices. Even with continual rhetoric about a poor U.S. economy and major financial risks with the European Union members’ sovereign debt, U.S. cattle prices and pork held relatively strong in recent days. Cattle numbers around the world are tight, and then the U.S. drought causes grain prices to rise, and that, along with lack of forage crops and pastures, led to liquidation of both dairy and beef cows. Still, the price of hamburger remained strong. China endured drought as well, but intentions of expanding the hog herd created a demand for corn and protein at the same time that industrial usage needed corn to meet consumer demands. Corn prices went through the roof in China.

Even in the face of harvest, Chinese importers found the need to import large amounts of corn from the U.S. Still, the demand for corn seems stronger than what USDA seems to be implying. Many Asian countries are finding it easier and cheaper to buy the frozen carcasses of hogs and cattle than to feed their own livestock to fattened stage.

We basically are exporting our corn through our livestock. Oct. 14, USDA indicated that pork exports for August were up 43 percent vs. same period last year. In August, China, our third-largest customer, accounted for an increase in exports up 478 percent from August 2010. Exports to Japan, our largest customer, were up 35 percent, while pork exports to Canada, the fourth-largest customer, were up 24 percent. Pork exports to South Korea were up 246 percent, and to Russia, up 241 percent from August of last year.

With the dollar declining this year, pork imports into the U.S. are down 10 percent. And exports to Mexico fell only 1 percent for August. Now, the free trade agreement with South Korea gradually will, over the next ten years, cut away the 22.5 percent tariff on U.S. pork imports. While supplies are ample in the U.S., beef supplies are going to tighten into 2012.

After 2008, the growing global economies coming have gotten a taste for better diets. That is hard to turn back. Add to this trend that Argentina went through major droughts for two years in a row, which caused its cattle numbers to decline — so no competition there. Then there is China, which has been exporting into Japan after the tsunami, and at the same time, its customers were demanding more meat. China is expanding into Vietnam and within its own borders, but still, China is finding it cheaper to buy pork and beef from the U.S. because of cheap freight costs.

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