Cheap Pork Means More Ribs on U.S. Grills as Meat Output Expands
(Bloomberg) -- Alongside their traditional burgers and hot dogs, Americans may be grilling a lot of cheap pork ribs on Memorial Day, when more meat is barbecued than at any other time of year.
An avalanche of pork is overwhelming domestic consumption, with a record-sized U.S. hog herd for this time of year. Prices have taken a hit, and hedge funds are the most bearish on the market outlook since 2013. There’s about 2 percent more supply of the meat than a year ago, and the only way to get customers to eat more is if it’s less expensive.
“Some stores are doing buy-one-get-two pork ribs,” which shows grocers are offering bigger discounts to clear out inventory, said Rich Nelson, chief strategist at Allendale Inc. in McHenry, Illinois. “We do have to realize that we are in an oversupply portion” of the price cycle, he said.
Stockpiles of ribs in the U.S. as of April 30 were up 6 percent from a year earlier and an all-time high for the month, according to the latest data from the U.S. Department of Agriculture. Plus, there were nearly 73 million hogs and pigs in the U.S. as of March 1, a record for the time of year, USDA data show.
Wholesale ribs fell 10 percent from a year ago to $1.2646 a pound on Thursday, while wholesale pork is down about 18 percent and the cheapest for this time of year since 2009, government data show.
Hedge funds are taking notice and adjusted their holdings of hog futures and options. The net-short position -- the difference between bets on a price decline and wagers for an increase -- up for a fourth straight week to 10,053 contracts in the week ended May 22, according to U.S. Commodity Futures Trading Commission data released three days later. That’s the most bearish since April 2013.
“There’s no motivation to buy now because prices are going to go lower,” said Donald Selkin, chief market strategist at Newbridge Securities Corp., pointing to declining prices on the futures curve. “That’s the market’s way of anticipating huge supplies.”
Trade risks are also affecting pork because so much of the U.S. commodity is exported. Last year, about 27 percent of production was shipped overseas. President Donald Trump’s determination to renegotiate the North American Free Trade Act could affect sales to the country’s biggest buyer -- Mexico. China, also a purchaser, recently placed retaliatory tariffs on pork during a trade spat sparked by Trump imposing tariffs on some imported Chinese items.
To be sure, consumer demand for pork is strong, according to Brittany Bailey, director of market insights for the National Pork Board. Ribs and chops are summer favorites, with 40 percent of all ribs and a third of all chops sold between Memorial Day and Labor Day.
In the Hearth, Patio & Barbecue Association’s most recent survey, nearly three-quarters of American grill owners fired up their grills on Memorial Day, making it the No. 1 day for barbecues.
Hog futures for July settlement in Chicago closed Friday at 77.55 cents a pound, up 0.4 percent for the week and rallying for a third straight week.
While there’s also rising U.S. chicken and beef supplies, there seems to be more than enough demand in the grocery stores, especially with new products like pre-seasoned ribs that are increasingly popular, Bailey said.
“If there is meat in the case -- and retailers promote it -- consumers will buy and eat it,” Bailey said.
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