Agribusiness Weekly Update: Retailers keep pork prices high

Beef
U.S. beef packers lost $14.40 per head processed, versus a $7.79 deficit a year ago, according to Stephens Inc. analyst Farha Aslam. She reports cattle slaughter was down 1.6%, while beef production rose 1.6% from a year ago last week.

Drought continues to force liquidation in some regions, though the magnitude of the impacts on the broader market is much smaller than last year, according beef market analysts at Okla. State University. The aggregate numbers suggest that an 18 to 20% year over year decrease in beef cow slaughter, combined the slight increase in beef replacement heifers reported on Jan. 1, will be needed to stop beef cow liquidation in 2012. Beef cow slaughter is currently down 6% from last year, not enough to stop additional liquidation.  However, the drop in beef cow slaughter has been much more pronounced lately.

Aslam says U.S. beef exports are expected to remain intact post the USDA’s recent confirmation of the BSE case in California. Canada, Mexico, Japan, South Korea and the EU, among others, responded by affirming they will continue to accept U.S. beef.

Hogs & Pork
Pork processors lost $3.56 cents per head last week, compared to $1 profited last year. Weekly hog slaughter numbers rose 7%, while pork production increased 7.6% compared to 2011. Aslam says retailers have been pushing back on wholesale prices, while keeping retail prices high, hindering domestic demand. Retailers have been content to enjoy larger margins rather than reduce prices to drive volume.

Chicken
USDA reports broiler sets were down 4.3% last week. There were roughly 200.1 million eggs placed in hatcheries. The chicken processing margin averaged a one-cent loss per pound last week, 9 cents better than a year ago, according to Aslam. Heads slaughtered rose 0.1% year over year, while pounds produced fell 0.5%. Sources say the industry is making very good money despite breast meat prices are roughly flat compared to last year at $1.28 per pound. Higher dark meat pricing is offsetting lackluster profits in white meat.

Table Eggs
The egg margin averaged 13 cents per dozen, 9 cents below a year ago. Southeast egg prices were 84 cents per dozen, 27 cents below a year ago. Retail and foodservice demand is light to moderate, according to Aslam.
           
Grains
Cash corn prices finished the week down 29 cents to $6.43 per bushel and 12.5% lower than a year ago. Soybean prices rose 49 cents to $14.78 per bushel, up 7.8% from a year ago. May’s future contract on corn rose 5% Friday as China purchased 1.5 million metric tons of corn, according to media reports.
             
Dairy
The cash Class III milk price finished the week at $15.73 per CWT, down roughly 8% since the start of 2012. Excess production is pushing prices lower, according to Aslam.
       
Ethanol & Energy
The ethanol crush margin averaged 50 cents per gallon, up 12 cents from last week and 10 cents above last year. Ethanol averaged $2.20 per gallon, trading at a $1.01 discount to gasoline. Bearish to ethanol, gasoline demand decreased 3.2% from last week and remains 7.1% below the year-ago level. Implied ethanol consumption based on current gasoline demand of 13.0 billion gallons remains below the annualized production rate for the third consecutive week.