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USDA Livestock, Dairy and Poultry Outlook

19 January 2012

USDA LDP: US Pork Prices Under PressureUSDA LDP: US Pork Prices Under Pressure

Live hog prices in 2012 are expected to average $63-$67, almost 2 percent below prices in 2011.
Livestock, Dairy and Poultry Outlook


Estimates published in the Quarterly Hogs and Pigs report point to small increases in hog production in 2012. Price effects of larger pork supplies and stable exports are expected to be largely offset by higher prices of substitute animal proteins, especially for beef. Live hog prices in 2012 are expected to average $63-$67, almost 2 per cent below prices in 2011. Retail pork prices are expected to average in the low $3.50s.

Quarterly Hogs and Pigs Report Points to Slightly Larger Hog Production in 2012

Estimates published in the Quarterly Hogs and Pigs report issued by USDA on 23 December, suggest that there will be a small increase in the supply of slaughterready hogs in 2012. Such increases will likely be the product of modest farrowing increases and continued-strong gains in litter rates. Unlike most recent sector expansions, expected hog production increases in 2012 appear set to depend less on expanded breeding inventory numbers, and more on increasing litter rates via genetic improvements, along with enhanced management and animal care technologies.

The quarterly report indicated that producers farrowed slightly more sows (+0.5 per cent, year-over-year) in the fall quarter of 2011. Strong year-over-year gains in the litter rate however, yielded a pig crop almost 2 per cent greater than the fall 2010 crop. A larger second-half 2011 pig crop (a 0.7 per cent larger summer 2011 pig crop, and a 1.8 per cent larger fall 2011 pig crop) points to a larger first-half 2012 hog slaughter.

The report also indicated that hog producers intend to farrow fractionally fewer sows (-0.1 per cent) in the first half of 2012 compared with the same period a year ago. Again however, forecast year-over-year larger litter rates are expected to lift first-half pig crops—which are slaughtered in the second half of 2012—to almost 2 per cent ahead of second-half 2011 pig crops.

Larger pig crops available for slaughter in 2012, about the same number of live swine imports from Canada, and slightly higher estimates for average dressed weights are together expected to result in total commercial pork production of 23.2 billion pounds in 2012, a year-over-year increase of almost 2 per cent.

Prices of hogs and pork in 2012 are expected to reflect slightly larger hog supplies, in the face of expected-small production increases and stable exports. However, significantly higher prices for substitute animal proteins—beef in particular--are expected to provide some support for US pork sector prices in 2012. Prices of live 51-52 per cent hogs are expected to average $63-$65 per cwt for the first quarter, $66-$70 per cwt in the second quarter, $66-$72 per cwt in the third quarter, $57-$61 per cwt in the fourth quarter and between $63-$67 per cwt for the year. Retail pork prices in 2012 are expected to average in the mid-to-low $3.50s per pound.

November Pork Exports Were The Highest... Ever

US pork exports in November were more than 505 million pounds, almost 25 per cent greater than a year earlier, and a new monthly volume record. Shipments to China made the difference between a “strong” month, and a spectacular one. Exports to China were almost 118 million pounds. This is the most US pork ever shipped to China, and was almost 4 times greater than US exports to China in November 2011.

Twice in the last few years—2008 and 2011—China has imported US pork in quantities sufficient to sharply accelerate U.S pork export volumes, and to move US domestic pork prices higher, for sustained periods. The two Chinese "buys" have each been in response high domestic pork prices, brought about in each instance by disease outbreaks (ie, PRRS, sometimes termed blue ear disease) that reduced domestic pork production flows. Domestic pork production shortfalls and interruptions elevated consumer pork prices to a point where China dramatically increased imports of the animal protein most favored by Chinese consumers.

Total Chinese demand for imported pork in 2012 is expected to be in about the same ballpark as 2011. Total US pork exports in 2012 are forecast at 5.1 billion pounds, about the same as in 2011.

Pork imports in November, at 75 million pounds, were slightly ahead of a year ago—1.7 per cent compared with November 2010—with most of the increase coming from Canada. Imports of live swine from Canada in November ran about 9 per cent ahead of a year earlier. Import of early-weaned pigs accounted for most of the increase. Seasonally strong US prices of early-weaned pigs likely drew more animals out of Canada. Since late in the fourth quarter, and currently, cash prices of early-weaned pigs have been running well ahead of formula-priced pigs, as is typical for this time of year.

January 2012

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