RETAIL beef sales are mixed as consumers remain cautious about their meat purchases and summer heat affects their eating habits. This means that cash live cattle and boxed beef prices ease further from their highs of the first week of July. Cattle prices fell again last week even though packers were buying for their second full production week after the July 4 holiday. Packers though continue to keep a lid on fed steer and heifer slaughter levels because their margins have turned negative again. They were negative by $8.95 per head the week before last and were negative by $40.05 per head last Thursday, according to HedgersEdge.com.
Reports from the week before last and the weekend were mixed regarding retail beef sales, says Andrew Gottschalk, HedgersEdge.com. The undertone to the beef cutout remains weak, with lower prices expected. Consumers remain cautious. Consumers in the lower half of income levels are suffering the most from the impact of inflation. The rate at which companies are hiring has fallen to a seven-year low, he says. But the extended weather outlook now calls for below average temperatures for much of the major cattle feeding areas, with some increased moisture prospects in the southern half of the U.S. The hot spot for above average temperatures remains for the area west of the Rockies, he says.
The comprehensive cutout (cuts, grinds and trim) the week before last averaged $320.79 per cwt. This was down $3.68 per cwt from the prior week’s $324.47 per cwt (the highest of the year) but was up 4.8% on the same week last year. The Choice cutout the first four days of last week declined by $5.91 per cwt to $316.15 per cwt. Volume was heavy though at 474 loads of cuts. The price of domestic lean manufacturing beef (90CL) the week before last set a new record for the ninth straight week. It averaged $373.90 per cwt, far above the Choice average that week of $322.25 per cwt. The ongoing record reflects the decline in cow slaughter, which is down an average 19,410 head per week on last year, according to HedgersEdge.com.
90CL Prices Raises Australian Cow Prices
The record 90CL prices has helped boost slaughter cow prices across Australia, says Beef Central. The substantial surge in prices is being driven by strong demand out of the U.S. for lean manufacturing beef and attractive margins on cows for Australian processors. Sale yard cows for the week ended July 10 averaged A263 cents per kilogram, up 26 cents on the previous week and up 57 cents on a year ago Imported lean beef prices have remained firm but are still trading at a steep discount to fresh domestic U.S. product, says U.S. analyst Len Steiner. The spread between domestic lean beef and imported is currently US70 cents per lb or more. There are more forward offers and more imported product in transit, which for now continues to feed the historically wide price spread, he says. Steiner said. The U.S. so far this year has taken more than 171,000 metric tons of Australian beef, up 75% on last year, says Beef Central.
The week before saw the 5-area steer price average $194.24 per cwt, down $2.85 per cwt from the record the week before. Last week saw a moderate trade the first three days on the Southern Plains, with prices in a wide range from $188 to $194 per cwt live. Iowa reported a few sales at $195-196 per cwt live. Thursday however saw a reasonably active trade in the Corn Belt, with prices at $193-198 per cwt live or $310 per cwt dressed. The same dressed price saw a light trade in Kansas, while Texas sold cattle at $186-188 per cwt live. Carcass weights meanwhile remain well above last year’s levels. Steer weights in the week ended July 6 averaged 916 lbs, up 24 lbs from the same week last year. Heifer weights averaged 834 lbs, up 22 lbs.
USDA ADDS TO MEAT PLANT GRANTS
USDA continues to pledge millions of dollars in federal grants to small and independent meat processors. The goal is to help the companies expand their capacities in an effort to increase competition in the meat industry and to give farmers more options, says USDA. Its latest pledges total $110M and range in value from $123,000 for a small custom meat shop in Washington state to $10M for an expansion of a new producer-owned beef plant in Texas that plans to employ 1500 people. The grant awards to more than 50 meat and poultry processors are meant to help alleviate the industry’s consolidation over decades that has at times decreased profits for farmers and increased prices for consumers, says Agriculture Secretary Tom Vilsack.
The funding will go into the Meat and Poultry Processing Expansion Program (MPPEP) and the Local Meat Capacity (Local MCap) Grant Program. So far, USDA’s Rural Development has provided 59 awards totaling over $291.4M through MPPEP. Under the Local MCap program, USDA is awarding $26.9M to 33 projects in 23 states to expand processing within the meat and poultry industry. The investment builds on the first round of $9.5M awarded to 42 projects. The funding noted below gives an insight into the scope of the grants and USDA’s rationale for awarding them.
Producer Owned Beef (POB) LLC is receiving a $10M grant. It is a new producer-owned beef harvest and processing plant near Amarillo, Texas, says USDA. Its goal is to increase cattle processing capacity and competition and distribute plant profits to producer owners, who will reinvest in their businesses and communities. POB will primarily serve the region of Texas, Oklahoma and New Mexico, which ranks number one nationally in cattle on feed capacity but third largest in fed cattle processing capacity. MPPEP-2 funds will be used to support the purchase of the facility’s equipment as part of POB’s effort to significantly increase regional processing capacity by 15% and national capacity by 3%. It expects to serve 250 cattle producers and create more than 1500 new full-time jobs, says USDA.
Kosher Plant Will Get $10M
Noah’s Ark Processors LLC will also receive $10M. It is based in Hastings, Neb., and is one of three kosher beef distributors in the country. With support from MPPEP-2, it will double its cattle slaughter and processing capacity by expanding its facility and processing floor, says USDA. This expansion will allow Noah’s Ark Processors to serve an additional 54 producers while fully meeting the domestic and international demand for kosher beef. This project is expected to create 40 new jobs.
North State Processing LLC in North Carolina will also receive $10M. It is a new processing company created by local and experienced producers aimed at providing processing capacity to small and medium independent producers, says USDA. Utilizing MPPEP-2 funds, North State Processing will construct a new USDA-inspected facility focused on cattle, ostrich, emu, water buffalo and alpaca processing in Hamlet, N.C. It anticipates serving 37 producers and creating 54 new full-time jobs, says USDA.
Real Kansas Meats LLC will receive $6.9M. It is a start-up red meat processor established to serve local producers in southeast Kansas and southwest Missouri while providing high quality, affordable protein products to its community, says USDA. With support from MPPEP-2, Real Kansas Meats will construct, equip and obtain a grant of inspection for its slaughter and fabrication facility, serving an estimated 100 producers and creating 117 new full-time jobs.
Frontier Meat Packing LLC will receive $1.5M. It is opening a family-owned beef processing facility located in the second largest cattle-producing county in Georgia, says USDA. It will serve over 500 local, small-scale and veteran farmers by providing a much-needed independent processing option that will focus on producing value-added product lines targeting customers in the Atlanta market. Frontier Meat Packing will create 17 new full-time positions. MPPEP-2 funding will support the construction of a new facility, equipment purchases for raw and further processing and obtaining a federal grant of inspection, says USDA.
Another Georgia Plant Gets Grant
North Georgia Meat Company in Ellijay will receive $2.7M. This will transform the company into an efficient commercial facility, says USDA. It is a small, federally-inspected facility located in rural north Georgia that offers processing services for local producers. It also buys and processes cows and hogs for its own wholesale program. With support from USDA, North Georgia Meat Company will transform many of its operations from manual to automated processes. The project has several key components: purchasing new equipment related to cutting, grinding, mixing and packaging; reconfiguring the primary workspace to enhance ventilation and refrigeration systems; implementing appropriate safety measures to meet industry standards. The resulting increase in processing capacity will enable North Georgia Meat Company to cater to a broader range of local animal producers, supporting their growth and economic sustainability, says USDA.
South Carolina Tomahawk Processing LLC will receive $2.4M. It is a new beef slaughter, processing and cold storage business based in rural South Carolina. It was established in 2023 to serve local producers who lack consistent processing options, including underserved producers, and will provide USDA-inspected and value-added capabilities for those producers looking to sell their own beef. As a result of this MPPEP-2 investment, Tomahawk Processing expects to serve 12 new producers and create nine fulltime jobs, says USDA.
I’O Processing Company will receive $1.9M. I’O Processing Company is a USDA-inspected facility on the Big Island of Hawaii, says USDA. It is devoted to solving the state’s critical lack of meat processing capacity and increasing local food security, with a focus on locally-raised, grass-fed livestock. With support from the Local Meat Capacity Grants program, I’O Processing Company will expand its processing infrastructure through the installation of modular cutting rooms, specifically targeting harvest and primary processing, value-added production, cold storage and product packaging and retail. This funding will nearly double the company’s beef processing capacity and will facilitate the creation of ten new full-time jobs. It will also allow I’O Processing Company to add an estimated 65 new producers to its existing network, while providing expanded market opportunities for selling locally-sourced quality meat, says USDA.
AUSTRALIA’S KILL PATTERN CHANGES
SUBSTANTIAL increases in beef processing capacity in Victoria, South Australia and southern regions of New South Wales are changing Australia’s cattle slaughter patterns. They are contributing strongly to this year’s expanding national kill, currently sitting at around 140,000 head a week, says Beef Central’s Jon Condon. Recent weekly slaughter statistics have supported the view that a disproportionate share of this year’s increasing national throughput is coming out of southern states. Victoria’s throughput the week before last was up 60% compared with the same week last year, representing an additional 8400 head per week. The two weeks prior to that were up 43% and 59%, respectively, on the same weeks a year earlier. The trend is somewhat more erratic in South Australia but kills for the week ended July 5 were still up 51% on the same week last year, says Condon.
In contrast, Queensland processing expansion compared with a year ago has been much more modest, says Condon. The past three weeks have seen numbers processed up 14%, 17% and 15% on this time last year. Nevertheless, Queensland still accounts for around 45% of the national weekly kill. Southern cattle buyers are struggling to find adequate numbers at home, and are buying Queensland and even Northern Territory cattle in record numbers to supplement their kills. Beef Central published an article in May last year. speculating about the prospect of the increased southern processing capacity pulling more northern cattle south, says Condon.
One large multi-site, multi-state processor livestock manager believes the active presence of southern processors in northern parts of the country may now move from a seasonal opportunistic occurrence to something more permanent, says Condon. There have been at least six large beef processing upgrades/refurbishments/rebuilding/repurposing projects that have unfolded in a region stretching from the eastern part of South Australia through Victoria and southern regions of NSW since early last year, he says.
TYSON SELLS POULTRY COMPLEX
TYSON Foods agrees to sell its Vienna, Ga., poultry complex to House of Raeford Farms. Terms of the sale were not disclosed. The decision to sell the complex is part of its continued efforts to optimize its plant network, says Tyson. This is the latest in a series of decisions by Tyson to close and divest operations. It announced in March that it was closings its pork plant in Perry, Iowa. Tyson in January 2015 broke ground on a $110M expansion project at the Vienna complex to convert the further processing plant to a tray-pack operation, including adding 100,000 square feet. Meanwhile, Tyson Foods heir and executive John R. Tyson pleads not guilty to a charge of driving while intoxicated. Tyson entered the plea last Monday in Fayetteville District Court in Arkansas. Tyson is next due in court on August 28. Tyson, 34, was arrested June 13 by University of Arkansas police in Fayetteville after he was seen driving carelessly and making an illegal turn. He was released from custody the same day on a $1105 bond.
SMITHFIELD WILL GO PUBLIC
SMITHFIELD Foods, the world’s largest pork company, may soon be publicly-traded again in the U.S. for the first time since 2013. WH Group, Smithfield’s Chinese parent, says it plans to float Smithfield’s business in the U.S. and Mexico on the New York Stock Exchange or Nasdaq. The plan was submitted in a proposal to the Hong Kong stock exchange, where WH is listed. Virginia-based Smithfield is the largest U.S. pork producer, slaughtering roughly 30M hogs per year. Smithfield sells products under brands including Armour and Farmland. It supplies hams and other fresh pork cuts to retailers.
As noted in a Wall Street Journal article, WH Group acquired Smithfield in 2013 in a $4.7 billion deal that marked one of the biggest takeovers of an American business by a Chinese company at the time. Smithfield, which used to trade on the NYSE, was then delisted. The combined company went public in Hong Kong in 2014 after raising more than $2.3 billion. The details of the spinoff have yet to be finalized but WH said it expects Smithfield U.S. and Mexico will remain a subsidiary of the company, says the WSJ. The plan requires approvals from Hong Kong’s stock exchange and the U.S. Securities and Exchange Commission.
Smithfield’s ownership made it a focus of criticism in Washington amid heightened tensions between the U.S. and China, says the WSJ. Some lawmakers say they want to ensure the U.S. food-supply chain is protected and that China can’t use U.S. farmland to facilitate spying. The company’s American CEO, Shane Smith, has pushed back against these concerns and says that WH’s backing has helped grow the company, which employs nearly 40,000 people. Smith has also said that expanding into other meat categories in the U.S. through acquisitions could be part of the company’s future, says the WSJ.
Smithfield’s return to the public markets in the U.S. comes as pork processors are looking to improve their profits after a brutal 2023, grappling with an oversupply of pork from flat demand domestically, says the WSJ. A Smithfield listing this year would come during what has been a choppy IPO market. To cut costs, Smithfield said earlier this month that it was closing an Iowa ham-boning facility that employed about 300 people. Last year, it said it was shuttering a smaller North Carolina pork plant and it closed an 1800-person California plant.
Lower grain costs this year for livestock feed are expected to boost meat companies’ bottom lines, says the WSJ. For the three months ended March 31, WH said its U.S. and Mexico business, which includes Smithfield operations, made an operating profit of $191M, up from $62M the prior year. Smithfield rival Tyson Foods swung to a $38M operating profit for its pork business in the first six months of its most recent fiscal year. It also closed a pork plant in Perry, Iowa earlier this year. Another one of Smithfield’s meatpacking rivals, Brazil’s JBS SA, said last year that it plans to restart its years-long effort to list its shares in the U.S. JBS is the world’s largest meatpacker and has a sizable U.S. pork business that competes with Smithfield.