Markets

US Pork Outlook – October 2011

Pork production in 2011 is expected to be 22.6 billion pounds, 0.9 per cent more than last year, while 2012 commercial pork output is now forecast to be 23.1 billion pounds, according to Rachel J. Johnson of the USDA ERS in the latest Livestock, Dairy, and Poultry Outlook.

18 October 2011

5 minute read

Summary

The Quarterly Hogs and Pigs report from 1 September showed that the US hog inventory was up one per cent year-over-year. The breeding herd was shown to be up 0.6 per cent year-over-year, and producers' first farrowing intentions for December- February were 2.857 million, up 0.5 per cent year-over-year, which perhaps indicates that the industry is cautious about any expansion plans. Pork production in 2011 is expected to be 22.6 billion pounds, 0.9 per cent higher than 2010. 2012 commercial pork production is forecast to be 23.1 billion pounds. Fourth-quarter barrow and gilt prices are expected to average $60 to $62 per cwt, while 2012 annual hog prices are forecast to average $62 to $67, slightly lower than 2011.

October WASDE revealed that corn and soybean ending stocks for 2011 and 2012 are estimated to be higher than expected, thus relieving some of the price pressure on feed in 2012 and allowing pork producers to have positive feeding margins in 2012. August pork exports were year-over-year 43.6 per cent higher. Forecast pork exports in 2012 were revised down to 5,090 million pounds, still up 2.8 per cent from projected 2011 export levels.

Pork/Hogs

Larger projected hog supplies but feeding returns should be positive

The September Quarterly Hogs and Pigs report shows marginally larger hog inventories and farrowings, and a continued pigs-per-litter rate remaining above 10 indicates there will be slightly more pork production in 2012. The breeding herd on 1 September was 0.6 per cent higher than last year at that time. Likewise, December-February 2012 farrowing intentions were 2.857 million, up 0.46 per cent from 2011 farrowings. September-November 2011 farrowing intentions were revised upward to 2.874 million, just slightly lower than 2010’s level.

Third-quarter 2011 hog slaughter is expected to have been 27.4 million head, up 150,000 from last month’s estimate, and average dressed weights likely were just over 200 pounds, resulting in a total of 5.5 billion pounds of commercial product. There has been a much larger number of hogs coming to slaughter, and the slaughter weight hog inventory (180 lbs and heavier), up 3.4 per cent year-over-year, is a reflection of that. Annual 2011 slaughter is expected to be just over 110.6 million head, with 22.6 billion pounds of commercial pork production, 0.9 per cent above the 2010 level.

Marginally larger breeding herd inventories and farrowings indicate that the industry is likely expanding. In light of a large pig crop in late 2011 and early 2012, 2012 hog slaughter was revised upward by 510,000 head to 112.6 million head. Dressed weights in 2012 should, on average, be marginally larger than 2011 due to lower than expected feed costs in 2012. Commercial pork production in 2012 is forecast to be 23.1 billion pounds, up 110 million pounds from last month’s WASDE forecast.

Although down from a record high in August of this year, 2011 third-quarter 51-52 per cent lean hog prices averaged $71.06 per cwt, an 18 per cent increase over last year’s third-quarter price and the highest average for that period. Fourth-quarter hog prices are expected to average in the $60 to $62 per cwt range, with the 2011 annual price projected to average $65.20. 2012 annual 51-52 per cent lean hog prices are forecast to average $62 to $67, a slightly lower mid-point than 2011. Interestingly, 2011 hog prices were higher than in 2010 despite pork production being slightly larger. This was mostly due to higher input prices driving up the costs of production and more international consumers bidding on the product, exemplified by surging US pork exports this year.

The recent decline in hog feed prices was largely due to the release of crop stock reports. The October WASDE indicated that estimated United States ending corn and soybean stocks for 2011 and 2012 are higher than expected, thus relieving some price pressure on feed. Using WASDE price forecasts for corn, 48 per cent soybean meal and National Base, live equivalent 51-52 pe cent lean hog prices indicate that hog producers’ face positive feed margins in the fourth quarter of 2011 and during 2012. The quality and quantity of the 2011 corn and soybean crops will play a large role in feed prices.

Continued strong pork exports in August; 2012 exports will grow slightly

August US pork exports were 433.4 million pounds, 43.6 per cent larger than last August's, making January-August US pork exports 18.7 per cent larger than 2010. US pork exports should remain strong into 2012. Although 2012 US pork exports were revised downward slightly to 5.09 billion pounds from last month, they are still forecast to be 2.8 per cent higher than 2011. Japan and Mexico are projected to continue to be the primary export markets and China/Hong Kong will continue to play a strong role. Exports to Russia are expected to be limited by the lower tariff-rate quotas Russia has imposed on pork.

Slightly larger US pork production and the reduced revision in US pork exports will translate into slightly more pork supply for domestic consumption. The per-capita retail weight disappearance forecast for 2012 was revised up from last month by 0.4 pound to 46.3 pounds. Pork retail prices in 2012 are expected to average in the upper $3.40’s per pound, up slightly from 2011 prices and up over 11 per cent from 2010 prices.