Pork Profit Maximizer – Foodservice Edition
The value of the belly primal on Friday was pegged at $169.81/ cwt, $91/cwt or 115% higher than a year ago. The increase in the value of the belly primal has contributed almost $14.4/cwt to the overall cutout (about 74% of the overall cutout increase in value is due to bellies). Belly prices remain extremely volatile. It is not that unusual to see these kinds of prices during August when retail features and steady foodservice demand tend to shorten up supply in the spot market.
Pork belly prices were counter seasonally weaker in June and July (see chart to the right), providing an opportunity for processors to offer attractive prices to retailers for end of summer promotions. It also appears that end-users were intent on drawing down some of the inventories they built in the spring. This was negative for belly prices in June but has set the stage for better prices at this time. The question for market participants is whether this kind of pricing is sustainable as we go into the fall. Seasonally belly prices tend to decline in late September and October as supplies increase and retail features dry up. The second chart to the right shows the relationship of pork belly prices at wholesale vs. the retail feature price with a six-week lag (i.e. current feature price vs. wholesale price six weeks prior).
As wholesale prices are moving up, we would expect retail prices to also start pushing up, more likely in early September. Higher retail prices and the increase in pork supplies should pressure belly values lower.