US Pork Outlook - December 2010

Pig meat production in 2011 is expected to be about one per cent above this year, while hog prices are forecast to be one per cent lower, according to the latest Livestock, Dairy, and Poultry Outlook from the USDA's Economic Research Service.

21 December 2010

4 minute read

Summary

USDA lowered hog prices in response to some apparent softening of demand for pork. Despite the reductions, average fourth-quarter prices are likely to remain more than 20 per cent above fourth-quarter hog prices in 2009. Commercial pork production next year is expected to be about one per cent above 2010, with hog prices less than one per cent lower than this year, averaging $53 to $57 per hundredweight (cwt). October pork exports were 9.5 per cent below a year ago, with shipments to all major export destinations lower, except to Mexico, China and the Dominican Republic.

Hog Price Forecasts Lowered Slightly

Indications that higher pork prices could be curtailing demand to some degree, along with a slight year-over-year production increase now expected in the fourth quarter, prompted USDA to lower forecast hog prices slightly for 2010 (fourth quarter) and for 2011. Similar to September’s cold stocks report, October 31 USDA monthly cold stocks data showed pork products accumulating at faster rates than expected. Part of the accumulation might also have been attributable to slightly higher fourth-quarter pork production, but with retail pork prices at record highs, US consumers are likely buying less pork. October pork exports also fell below expectations, suggesting that despite a competitively priced US dollar, high US pork prices likely caused foreign buyers to back away from US pork products. Record-high retail prices and competitive chicken prices on the domestic side, lower than expected export demand, and slightly higher production may be weighing on wholesale pork prices.

For the balance of 2010, upward adjustments in fourth-quarter slaughter and dressed weights resulted in an expected commercial pork production estimate of just over six billion pounds, about 0.3 per cent above a year earlier. This would be the first instance of year-over-year increased production since the third quarter of 2009. The average fourth-quarter price of live equivalent 51 to 52 per cent lean hogs is expected to be $49 to $50 per cwt, more than 20 per cent above the same period in 2009. USDA’s 2011 commercial pork production forecast – just slightly below 22.6 billion pounds – is expected to be about one per cent above production in 2010. Hog prices next year are likely to average $53 to $57 per cwt, less than one per cent below the estimated average annual price for 2010.

October Pork Exports Below a Year Ago, Imports Higher

October pork exports, at 339 million pounds, were 9.5 per cent below a year earlier, with shipments to most major destinations falling below October 2009 levels. Only Mexico, China and the Dominican Republic bought more US pork products in October than a year ago. Seven of the 10 largest foreign destinations in October registered year-over-year declines (see listing below). With the October exchange rate of the US dollar highly competitive in most foreign markets, high US pork prices were likely a major contributor to lower October exports.

US pork imports in October were 77.5 million pounds, 6.8 per cent above a year earlier. More than half of that increase is attributable to Canada, whose shipments to the United States were up about five per cent. Relatively high US pork prices likely created market opportunities for Canadian pork products, despite the US dollar’s depreciation against the Canadian dollar in October and November.

October imports of live swine were slightly above 457,000 head, almost nine per cent below a year ago. With the exception of breeding animals (greater than 50kg) and animals for immediate slaughter, all categories of live imports were lower in October.