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Analyst sees better days ahead for pork producer margins
Story Date: 6/28/2012
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Source: Chris Scott, MEATINGPLACE, 6/27/12
After experiencing six months of what he describes as “languishing” pork margins, producers should see a recovery to above breakeven over the next 40 days, according to BMO Capital Markets analyst Kenneth B. Zaslow.
Zaslow cites four recent factors for the positive projection:
Hog slaughter fell below year-ago levels in each of the last two weeks, the first year-to-year decline in three months.
Retail pork prices are falling and are better positioned as beef and chicken prices continue to rise.
Greater promotion of pork by major retailers like Kroger and Walmart Supercenters.
A recent pullback in gas prices that should fuel higher protein demand, including pork, among retail and foodservice customers.
Industry packer margins have been below breakeven levels since January at an average loss of between $7 and $8 a head, caused primarily by the largest increase in pork supplies in three years. Zaslow notes that elevated slaughter levels in April and May, soft retail performance and faster-than-normal weight gains over the winter all combined to weaken packer margins.
Pork export demand should continue to be strong in 2012, although Zaslow sees a more measured view than the U.S. Dept. of Agriculture projection of 5.384 billion pounds.
For more stories, go to http://www.meatingplace.com/.
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