Ron Sterk

Beef and pork cutout values, a common gauge of wholesale red meat demand and pricing compiled daily by the U.S. Department of Agriculture, climbed to near two-year highs in early June on strong domestic and export demand, while the supply picture was mixed.

The U.S.D.A. boxed beef cutout value averaged just over $250 a cwt in the five days ended June 16, topping at $252.52 a cwt on June 12, the highest since June 2015. The pork cutout averaged just over $94 a cwt for the same period, with a high of $94.90 on June 14, the highest since October 2014.

The cutout value for beef consists of pricing for seven primal cuts (rib, chuck, round, loin, brisket, short plate and flank) weighted by number of loads sold. The pork cutout consists of pricing for six primal cuts (loin, butt, picnic, rib, ham and belly) also weighted by number of loads.

Beef demand and prices typically see a surge in late May ahead of Memorial Day, the first major grilling weekend of the summer. Demand tends to ease some but remain strong through Labor Day weekend, the “official” end of the outdoor grilling season. Pork prices often are underpinned by strong beef prices, which has been the case this year. Current prices also are above year-ago levels, with the beef cutout up 13% and the pork cutout up 10% as of mid-June.

In its June 15 Livestock, Dairy and Poultry Outlook, the U.S.D.A. noted April beef production was down slightly from April 2016. The number of cattle slaughtered was up 2%, but average dressed weights (after slaughter) of steers and heifers were down 25 lbs and 22 lbs, respectively, from a year ago. Beef production at 1,963 million lbs in April was down 13% from March 2017.

Red meat
Beef and pork cutout values climbed to near two-year highs in early June.

“The decrease in the average carcass weight more than offset the increase in the number of cattle slaughtered and kept production from increasing,” the U.S.D.A. said, adding that average slaughter weights continued to decrease in May. “Weights are expected to move higher seasonally, but gains will likely be limited while there are incentives (high prices) to market cattle as rapidly as possible.”

Pork production in April at 1,988 million lbs was down 1% from a year ago and down 12% from March of this year. Unlike cattle, average dressed weights of barrows and gilts were equal to April 2016, so the decline in pork production was the result of lower numbers slaughtered in this year.

“Continued strong demand for pork products, particularly for bellies, ribs and butts, prolonged a spike in wholesale pork prices that began in April and continued through May,” the U.S.D.A. said.

But there isn’t necessarily a shortage of beef and pork as production rebounded in May with total red meat outturn a record high for the month. January-May beef production was up 5% from the same period last year and pork production was up 3%. For the year, the U.S.D.A. forecasts beef production at 26,225 million lbs, up 4% from 2016. Pork production in 2017 was forecast at 25,894 million lbs, also up 4% from 2016.

Strong exports have been a factor for both beef and pork this year, in part aided by weakness in the value of the U.S. dollar.

April beef exports were up 15% from April 2016, supported by growth in Japan (up 18%), South Korea (up 8%), Hong Kong (up 7%) and Canada (up 4%), the U.S.D.A. said. Beef exports in the January-April period were up 20% from a year earlier. For the year, the U.S.D.A. forecasts beef exports at 2,806 million lbs, up 10% from 2016.

Tight beef supplies in Australia, a key supplier to the Asian market, due to herd rebuilding also contributed to increased export demand for U.S. beef.

For pork, April was the 12th consecutive month in which U.S. pork exports exceeded year-over-year levels, the U.S.D.A. said. Shipments were up 8% from April 2016, with Mexico, Japan and China/Hong Kong accounting for 62% of exports, even though shipments to the latter declined. Pork exports for the year are forecast at 5,747 million lbs, up 10% from 2016 (like beef).

Two additional factors come into play in the U.S. meat export picture, especially for beef. First, Brazil’s meat scandal earlier this year that led to several countries banning imports of Brazilian meat products likely boosted demand for some U.S. products.

Probably more importantly, though, is the potential that exists with China’s decision to allow U.S. beef imports no later than July 16. China banned imports of U.S. beef in 2003. The U.S. had been China’s largest supplier of imported beef up to that point.