- The US Senate passed a measure to shift $55 million within the USDA budget to prevent meat inspection furloughs through September. This averts threatened cuts and will now go to the House for approval. - Both cattle and hog markets have been disappointing this spring, with pork cutout values softer than normal historically for this time of year. Pork packer margins have improved due to lower hog prices. - For pork markets to improve, cutout values will need to increase to make room for higher hog prices while maintaining packer margins.

1. Sponsored by
Vol. 11, No. 54 / March 21, 2013
It appears the meat inspection furloughs that have been USDA ESTIMATED PORK CUTOUT
threatened/promised by Secretary of Agriculture Tom Vilsack may
have been averted. The U.S. Senate passed on a voice vote yester-
VALUE, WEEKLY
2008 2009 2010 2011 2012 2013 Avg. '08-'12
day a measure to shift $55 million in funds within the Department of $/cwt.
Agriculture’s budge to keep from idling inspectors and packing/ 120.00
processing plants between now and the end of the federal government’s
fiscal year on September 30. The spending bill itself was approved 73- 110.00
26 by the Senate and will now go to the House. It is not a done deal yet 100.00
but most observers expect the House to pass the spending measure
quickly. 90.00
It has been a heated but sad race this spring between cat- 80.00
tle and hog markets to see which one could be more disappoint-
ing. Cattle and beef cutout values have shown some signs of life the 70.00
past three weeks. We addressed the cutout value situation in Tues-
60.00
day’s edition. 5-market average fed cattle have jumped into the high
$120s the past three weeks as well. That is $4-$6 lower than we had 50.00
originally expected but the past two weeks’ average prices being above
year-ago levels is somewhat encouraging — especially with the normal 40.00
J F M A M J J A S O N D
seasonal peak in cattle prices still ahead of us in April.
Pork and hogs, though, have been a pretty bitter pill to swal- PORK PACKERS' EST'D GROSS MARGIN
low, especially for hog producers who are coming off some near-record
$/Head
losses on hogs sold last fall. But is this a case of unrealistic expecta- 50.00
tions as well? We don’t think so, primarily because we expected strong- 2011
er beef prices to lead pork upward. Daily Livestock Report readers 45.00 2012
2013
have read about all of the other factors that have hurt demand — as 40.00 Avg. '07-'11
well as the surprising staying power of total protein supplies this spring.
35.00
The top chart at right shows weekly data for USDA estimated
30.00
pork cutout value since 2008 as well as the average for 2008 through
2012. It is obvious that pork cutout values have been softer than nor- 25.00
mal so far in 2013. But the interesting feature of the chart is that pork 20.00
cutout values are NEVER ROBUST during this time of year. Only 2011
saw cutout values rise significantly during the first quarter and the 5- 15.00
years average increases by only about $4/cwt from January through 10.00
March. It is clear that, historically, April has been the time of value 5.00
gains for pork product and that conclusion would be even more solid if
the 2009 pork market had not encountered H1N1 influenza (or “swine 0.00
J F M A M J J A S O N D
flu”) in April — an unfortunate occurrence that completely negated that
year’s seasonal strength. The normal April-May increase is about $8/ awful to start with. The loin primal last week was down $12 from one
cwt. Adding that this year will only put the market back in the upper year ago. None of this paints a pretty picture.
$80s. That level would still far short of costs in the upper $90s but pro- Which brings us to pork packer margins. As can be seen
ducers will take any improvement they can get at this point. above, our estimate of gross pork packer margins has improved sharply
Pinpointing a culprit in the soft cutout value situation is not the past three weeks. But these gains are not like the gains in beef
easy. Hams have been very disappointing since February 1 with the packer margins we addressed earlier this week. Those were driven by
primal composite value falling by $12/cwt. But they are not alone. The improvements in cutout value which means there is “space” for higher
composite primal value (a value for the cut basically in the form that it cattle prices. The improvements in pork packer margins have been
first comes off the carcass) for butts has fallen by $9, picnics have accomplished by pushing down hog prices. Producers may not like that
dropped about $10 and bellies have fallen by $17. In addition, 72% but it is a necessary step to get out of this funk. There must be margin
lean pork trimmings and boneless picnic meat prices have lost $13-$14/ at the packer level to keep hogs moving at the proper rate. The chal-
cwt over that time period. Only loins have held their value relative to lenge now is to get cutout values higher — creating that same space to
the beginning of the year and most would argue that their price was accommodate higher hog values. It’s a good thing spring is here!
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