US Pork Outlook Report - August 2009

Summer prices for pigs and pork cuts remain at low levels due to slow demand for pork products, according to the USDA ERS August 2009 Livestock, Dairy and Poultry Outlook.
calendar icon 19 August 2009
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Summer prices for hogs and pork cuts continue to languish at year-over-year lower levels due to lacklustre demand for pork products. Second-quarter pork exports were 31 per cent lower than a year ago, largely due to lower demand for US pork in Asia.

Hog and Pork Prices Significantly Lower than a Year Ago

Summer prices for hogs and pork cuts continue to languish at year-over-year lower levels at a time of year when prices are typically buoyant. Lackluster demand from recession-battered consumers—both domestic and foreign—is ultimately the culprit for low pork and hog prices. Unwillingness/inability of consumers to pay year-over-year higher pork prices is reflected in lower wholesale prices. Wholesale US pork prices in July – approximated by USDA’s Estimated Pork Carcass Cutout – were almost 18 per cent below prices in July 2007, and nearly 27 per cent below July of last year, when China was a strong presence in the US pork market.

Weak domestic and foreign demand reflected in lower wholesale prices, together with stronger-than-expected July production, kept July live equivalent 51-52 per cent hog prices at $42.74 per cwt, more than 24 per cent below prices a year ago.

Third-quarter hog prices are expected to average $40-42 per cwt, with production almost two per cent below the same period last year. For 2009, USDA expects hog prices to average $40-41 per cwt, almost 15 per cent below 2008. Commercial pork production for 2009 is expected to be 22.8 billion pounds, more than two per cent below last year.

Higher Cold Stocks Reflect Lower Demand

Lower pork supplies, such as those forecast for this year, should cause prices to move higher. Part of the reason that lower 2009 pork production has failed to boost prices of hogs and pork cuts is that pork demand – domestic and foreign – has fallen faster than the decline in production. Most of the pork products not exported or marketed in the United States are being held as cold stocks. In fact, the projected average quarterly pork stocks-to-disappearance ratio for 2009 is 0.14, whereas this ratio averaged about 0.11 for the period 2000-2008.

Ending stocks for June were more than nine per cent larger than a year ago, and 23 per cent above the 2006-08 average.

Pork products not exported and not stored are marketed to US consumers.

Although slightly more pork will be available to US consumers this year than last year due to weak demand, US population increases have reduced per capita pork disappearance by about 0.5 of a pound. Retail per capita pork disappearance this year is expected to be 49 pounds, down about 1 per cent from 49.5 pounds in 2008.

Lower Exports on Weak Asian Demand

Second-quarter US pork exports dropped sharply from a year ago. Total shipments were 952 million pounds, down 31 per cent from the same period last year. The 10 largest foreign markets for US pork products are listed below for the second quarter and the first half of 2008 and 2009. All major export destinations, with the exception of Mexico, imported less US pork in the second quarter. Lower exports are most likely attributable to lower consumer incomes and uncertainty resulting from the worldwide recession. Surprisingly, the impacts of H1N1 concerns in Mexico appear limited.

Although exports to Mexico were three per cent lower in May, exports in June were almost 27 per cent higher than a year ago, representing a resumption of strong year-over-year increases of exports to Mexico in 2009.

The 10 largest foreign markets for US pork products: first-half of 2009 and 2008

2009 Pork, Swine Imports Decline from a Year Ago

Second-quarter 2009 imports of more than 196 million pounds were almost five per cent below a year ago. Larger imports from Canada, which accounts for more than 80 per cent of US pork imports, were not sufficient to offset declines from other import sources. Imports from Denmark, which typically accounts for over 10 per cent of US imports, were almost 11 per cent below second-quarter 2008. First half imports were five per cent below same period last year. Lower imports so far this year are more than likely due to reduced incentives to import pork that derive from lower domestic pork prices.

Second-quarter 2009 live swine imports of 1.6 million head of Canadian animals were 25 per cent below a year ago. Imports of slaughter-ready animals and breeding animals continue to decline the most year-over-year. Imports of animals weighing between 15 and 51 pounds, however, were actually higher than second-quarter 2008, an indication, perhaps, of the recent willingness of some US packers to process Canadian-origin animals. Total first-half imports were more than 33 per cent lower than the same period last year. Lower swine imports are largely due to ongoing industry contraction from continued dismal producer returns in Canada.

Further Reading

- You can view the full report by clicking here.

August 2009
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