Third-quarter commercial pork production is expected to be almost 5.3 billion pounds, about 3.2 percent above third quarter last year. Third-quarter prices of live equivalent 51-52 percent lean hogs are forecast to range between $50 and $52 per hundredweight (cwt). Pork exports in the first half of 2007 were 4 percent lower than a year ago.

Third-Quarter Pork Production Forecast To Increase More Than 3 Percent

Third-quarter commercial pork production is expected to be almost 5.3 billion pounds, about 3.2 percent above third quarter last year. Third-quarter dressed weights are expected to be slightly higher than a year earlier, for the first time in 2007. The small year-over-year increase in dressed weight likely reflects lower feed costs compared with first-half 2007, when farm-level corn prices averaged more than 62 percent above the same period in 2006. Total pork production forecast for 2007—21.6 billion pounds—is more than 2.8 percent higher than production last year.

Softer Export Demand May Be Affecting Prices

Third-quarter prices for live equivalent 51-52 percent lean hogs are expected to range between $50 and $52 per cwt, about the same as the third-quarter 2006 price of $51.83 per cwt. Third-quarter forecasts for largely flat hog prices, when hog slaughter is also expected to increase in line with production expectations, point to strong packer demand for live hogs. At the same time, indications are that demand for certain pork products could be softening. July 6-August 3 weekly average wholesale pork prices—as measured by the USDA Estimated Pork Carcass Cutout—were almost 1 percent lower than the same period last year, with large declines in ham values and lesser declines in butt values.

Some of the decline in ham values may be due to softer export sales, to Mexico and Russia in particular. During June, the weekly composite primal ham value declined about 8 percent, while stocks of ham increased 53 percent. Falling wholesale ham prices and larger ham stocks occurred during a period when exports of ham and shoulder cuts (HTS lines 020312 and 220322) declined 27 percent on a productweight basis. Exports of ham and shoulder cuts to Mexico—which accounted for 55 percent of the volume of the ham and shoulder tariff lines—were down 25 percent. Exports of ham and shoulder cuts to Russia—which accounted for 5 percent of ham and shoulder tariff line volume—were down 64 percent in June.

Retail Pork Prices Jump in Second Quarter

Second-quarter retail pork prices averaged $2.87 per pound, 3 percent above second quarter 2006. Pork price spread calculations (http://www.ers.usda.gov/Data/ MeatPriceSpreads/) indicate that most of the price increase was due to a widening of the wholesale-to-retail end of the supply chain. Consumers are likely paying slightly more for pork products because of higher supply costs, and not because of lower pork supplies. Higher retail pork prices make pork less competitive with other meat proteins. Chicken in particular will likely compete strongly with pork, as broiler production accelerates in the second half of this year.

For the second month in a row, the July retail pork price set a new record high, at $2.94 per pound.

Pork Exports Lower in June, and in First Half; Imports Slightly Lower

Exporters shipped 218 million pounds of U.S. pork products to foreign markets in June, more than 8 percent less than a year ago. For the first half of 2007 total U.S. pork exports were 1.477 billion pounds, 4 percent less than the same period in 2006. Lower year-over-year exports are largely attributable to lower shipments to Mexico (-31 percent) and Russia (-21 percent). U.S. pork exports to South Korea, although about even with a year ago, are lower than expected so far in 2007. Lower Mexican demand is likely due to macroeconomic weaknesses, related to manufacturing and repatriated wages from workers in the United States. In Russia, Brazilian competition appears to be slowing demand for U.S. pork products. In South Korea, expanded beef imports through June could have been a contributing factor to lowerthan- anticipated Korean demand for U.S. pork.

2007, 2006 U.S. export volumes and shares to major foreign markets
	U.S. pork exports			Share of U.S. exports
Country	2007 (Million lbs.)	2006 (Million lbs.)	Year-over-year change (Percent)	2007 (Percent)	2006 (Percent)
Japan	554	507	9	38	33
Mexico	220	320	-31	15	21
Canada	159	156	2	11	10
Russia	94	119	-21	6	8
S.Korea	146	146	0	10	10
Total U.S. exports	1,477	1,530	-4

For the year, U.S. exports are expected to be almost 3 billion pounds, almost 3 percent below 2006. In 2008, plentiful U.S. pork supplies and a low-valued currency are expected to push exports to almost 3.1 billion pounds.

U.S. buyers imported 496 million pounds of pork products in the first half 2007, slightly less than the 497 million pounds imported in the same period last year. About 80 percent of U.S. imports came from Canada, and about 11 percent from Denmark.

Closing of Slaughter Plants in Canada Brings More Swine to the United States

Live swine imports for the first 6 months of 2007 totaled 4.7 million head, an increase of almost 11 percent over the same period last year. Finishing animals comprised 69 percent of imports, versus 71 percent last year, while 30 percent of live swine imports were slaughter hogs, compared with 28 percent last year. The increase in the numbers and share of slaughter hogs is due to a recent closure of a slaughter plant in Saskatchewan, and the anticipated closure of another plant in Manitoba. For the year, almost 9.4 million head of swine are expected to come over the border, an increase of almost 8 percent over last year.

Further Information

For more information view the full Livestock, Dairy and Poultry Outlook - August 2007 (pdf)

August 2007