With the long holiday weekend behind, buyers are now back and looking to schedule full production weeks. Combined with the lower slaughter, it resulted in tighter spot supplies and higher prices towards the end of the week.
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Low Belly Prices Continue to Impact Pork Cutout Values
The pork cutout at the end of last week was quoted at $99.5/cwt, 7.2% lower than a year ago. In the last two weeks, hog slaughter has been 2.316 million and 2.143 million head compared to 2.5 million back in March. And yet the cutout is trading at about the same level as it did then. As we have noted in previous updates, the primary reason for the lower cutout is the sharp decline in pork belly prices. The pork cutout on Friday was down $7.8/cwt vs. a year ago and the decline in the value of the belly primal, which is 16% of the carcass, accounted for $7.2 of the decline.
There is not just one reason for the recent weakness in bellies. First and foremost we think the decline is a reflection of the broader slowdown in QSR sales, something that is also evident in the trend for boneless skinless chicken breasts, a staple of QSR purchasing. Second, we think high prices last summer and the uptick in price in Feb/Mar impacted retail features for Q2. Retail bacon sales have also been lackluster at best. In the last four weeks, sales volume of bacon at multi unit grocery stores was down almost 4% vs. a year ago even as the average sales price was slightly lower than last year. There is this idea that retailers sell more bacon for Memorial Day and then during the summer (BLT season) but retail sales figures tell us that it’s year end holidays when more bacon is sold. The expectation/hope is that lower slaughter combined with a few well timed features will help bellies mount a rally, albeit brief, in July and early August.
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