Markets

US Pork Outlook - February 2011

First quarter commercial pork production is expected to be almost one per cent above the same period last year with prices 15 per cent higher, according to the latest Livestock, Dairy, and Poultry Outlook from the USDA's Economic Research Service.

15 February 2011

4 minute read

Summary

Pork/Hogs: First-quarter 2011 prices of live hogs are expected to remain year-over-year higher, with 51 to 52 per cent lean live equivalent hogs averaging $57 to $59 per cwt (hundredweight), more than 15 per cent greater than a year earlier. US exports finished the year at 4.227 billion pounds, 3.24 per cent above 2009. Total 2010 imports were 3.1 per cent greater than in 2009, and live hog imports, at 5.7 million head, were 9.7 per cent below imports a year ago.

Increased Demand Likely Supporting Pork and Live Hog Prices

Increasing pork demand appears to be a driving force behind strong January prices for wholesale pork cuts and live hogs. Estimated January commercial pork production was more than three per cent above a year ago, while wholesale pork prices were almost 15 per cent ahead of prices in January 2010. Larger pork supplies sold at higher prices strongly suggest that pork demand has increased.

Strong wholesale prices are likely supporting live hog prices as packers bid to maintain – or even increase – slaughter numbers, in an environment of lower animal numbers. The December Hogs and Pigs report indicated that the inventory of the weight class of animals likely to be slaughtered in January and early February – animals weighing between 120 and 179 lbs – was slightly lower than in the same period of 2010. Smaller numbers of available slaughter hogs likely induced packers to increase prices paid for hogs. The January price of 51 to 52 per cent live equivalent hogs was $55.56 per cwt, 11.5 per cent ahead of hog prices in January 2010. First-quarter hog prices are expected to be $57 to $59 per cwt, about 15 per cent above the same period last year. First quarter commercial pork production is expected to be almost one per cent above the same period last year due to expected higher dressed weights.

Strong Exports Finish the Year

The USDA pork export forecast for 2011 was raised from 4.615 billion pounds to 4.675 billion pounds, largely on the expectation of increased exports to South Korea. A recent outbreak of Foot and Mouth disease in South Korea prompted its government to undertake a significant animal cull and to reduce the import duty on the 60,000 metric ton (MT) tariff-rate quota (TRQ) for frozen pork from 25 per cent to zero until 30 June 2011. Stronger economic growth in other important pork-importing countries is also likely to increase demand for US pork.

Total fourth-quarter 2010 pork exports were 1.147 billion pounds, an increase of 2.8 per cent over the same period last year. Total 2010 shipments were 4.227 billion pounds, 3.2 per cent more than 2009 exports. The largest foreign destinations of US pork in 2010 were Japan (accounting for 30 per cent of US exports in 2010), Mexico (25 per cent), Canada (10 per cent), South Korea (5 per cent) and Hong Kong (five per cent). Last year, exports accounted for almost 19 per cent of US pork production. In 2000, that proportion was 6.8 per cent.

US pork imports finished the fourth quarter 1.5 per cent below a year earlier, at 219 million pounds. Total imports for 2010 were almost 860 million pounds, 3.1 per cent larger than in 2009. Import shares stayed relatively constant year-over-year, with Canada accounting for 81 per cent of US imports in both 2010 and 2009. Nine per cent of US imports last year were of Danish origin, compared with almost 10 per cent in 2009. Live swine imports fell almost 10 per cent in 2010 compared with 2009.