The incredible price action witnessed in grains, metals, and energies in recent weeks has understandably distracted many traders from another opportunity-rich realm of commodities – meats.
If you aren’t aware, the US cattle herd is the smallest in more than 50 years. And given the explosion of beef exports that gained momentum in 2010 and grows still, the U.S. Department of Agriculture confirms that cattle prices have soared close to 30% in the past year alone. And Mike Zuzolo of Global Commodity Analytics is among the myriad analysts now forecasting declining herds well into 2013.
Led by a global economic recovery that has elevated meat demand in emerging markets like China, cattle is far from being alone in the broad category of meats that are accelerating in price at a breakneck pace. Smithfield chief executive officer Larry Pope tells the Des Moines Iowa Register this week that the industry is looking at “sharply higher hog prices, and that will be reflected in higher meat prices this summer.”
“There’s still more pressure on prices,” Pope told ag reporter Dan Piller, adding that hog producers are now feeding corn priced at $6-$7 per bushel to their animals. Pork bellies, Pope says, “may go to $2 a pound by summer. That’s unheard of! Retailers understand there will be more price pressure, whether they like it or not.”
Cattle futures for June delivery reached $1.18 pound after the close of regular trading Wednesday on the Chicago Mercantile Exchange, a new contract high since the commodity began trading in 1964. As Bloomberg subsequently confirmed, global food costs hit an all-time high in February. Consequently, with beef and pork as producers paying substantially more for livestock feed, US consumers can expect to pay more for meat well into the future.
So what does it all mean for traders? Without question, the meats will be sizzling this summer for traders who take the time to “beef” up their knowledge and go “hog” wild in the opportunity and risk laden sector of meats.