Higher Prices for Beef, Pork and Shrimp are here to stay..
Beef
Cattle futures are at their highest in 22 months, reflecting growing demand for Beef. The drivers for this increased demand are the Retail sector and a revitalized export market. Year to date exports of beef are up 14%, with South Korea and Japan leading the way. Beef demand domestically actually stabilized this summer, rather than the normal fall off as it typically does. This weeks numbers have been driven up because of packers buying cattle to fill the retail markets Labor Day orders. In fact USDA shows wholesale beef prices up 5% since August 5th, 2010.
We are in the shrinking supply side of the Cattle cycle. The expansion side started in 2005 and peaked in 2007. Since then there has been a gradual run down of calves intended for the feed lots. An increase in cows being sold for beef production indicates that ranchers are still not ready to increase herd size.
Currently Feeder lots are seeing lighter carcass weights, due in part to the hot summer, and because cattlemen are pushing through their cattle to take advantage of these higher prices. As these cattle leave the feed lots, the replacement steers are getting near record prices. This is a result of the four year liquidation of feeder calve supply.
Cattle available outside of feed lots are at the lowest since 1996. This year alone 400,000 less feeder calves were produced versus last year. High quality cattle prices are adversely affected by this cycle, in that the number of cattle on feed long enough to grade out high Choice and Prime are diminished in the rush to market. Phew! Hang on for the fourth quarter.
Pork
The same story as beef in essence. After years of over supply and depressed prices, Hog supplies are down just as demand has significantly increased. The export marketing’s are up, with Japan the biggest importer of our pork, but big increases from Mexico have helped. The retail demand is so strong that July’s average price set a record new high, the previous record having been set in June. Where the last few years costs were absorbed by producers, this market has allowed farmers and packers to to pass on the increases in cost of production.
Shrimp
Traditionally wild high quality White shrimp supplies are running low this time of year, waiting for the new shrimping season to get underway in October. Historically, farmed shrimp have helped that gap, keeping prices relatively stable, even though they tend to creep up until the new harvest is available.
But the high end farmed shrimp market has shifted its focus from the US to Japan. In 2009 Japan removed all tariffs that had previously been imposed on imported shrimp. They reached out and struck deals with Vietnam and China. This has diverted supplies normally would have been headed to the US. Vietnam, for example, now ships 30% of it’s total farmed production to Japan.
This reduced supply to the states has increased the price of farmed shrimp into this country and done nothing to alleviate the seasonal shortage of wild shrimp we are currently experiencing. Gulf shrimping season has started , but even without the BP disaster, those shrimp are not coming to the East Coast.
As retail markets begin to buy farmed peeled and deveined raw and cooked shrimp for the Fourth quarter, the now reduced supply will not suffice to cover all of their holiday needs. So they will begin to buy shell on product to feature on ads. the tonnage bought by these retailers dwarfs the food service sector and will drive prices for all shrimp higher through next year.
Mike Devitt - VP Marketing