US Pork Outlook Report - January 2009

By the USDA's Economic Research Service (ERS) - This article is an extract from the January 2009: Livestock, Dairy and Poultry Outlook Report. Recession-squeezed consumer budgets will likely constrain increases in pork and hog prices this year, despite expected reductions in production foreshadowed by the 1 December Quarterly Hogs and Pigs.

22 January 2009

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Effects of Recession To Partially Offset Lower Pork Production in 2009

Pressures for higher hog prices, which would ordinarily be created by the smaller 2009 pork supplies implied by the December Quarterly Hogs and Pigs report, could be tempered this year by slower consumer demand in domestic and international markets. In the December Quarterly Hogs and Pigs report, USDA reported a lower second-half 2008 pig crop (down 1.6 per cent, year-over-year), and lower first-half 2009 farrowing intentions (down 2.4 per cent, year-over-year). Both of these factors, combined with expectations for significantly lower 2009 US imports of live Canadian swine (down 21 per cent, year-over-year), point to lower 2009 hog slaughter. As a consequence, US commercial pork production is estimated to be slightly more than 23 billion pounds, 1.4 per cent below production in 2008. Litter rates – which are likely to continue to trend upward this year, but at a slower rate than in 2008 – and lower expected feed costs should limit reductions in pork production this year.

With slower-to-declining economic growth anticipated in the United States and in major pork-importing countries in 2009, consumer meat demand is likely to stagnate or even decline. Pork and hog prices will likely reflect soft-to-declining consumer demand. As a consequence, lower 2009 pork production should bring about only modest increases in hog prices. Prices for live equivalent 51-52 per cent lean hogs are expected to average between $47-$51 per cwt, 2.4 per cent higher than in 2008.

Despite lower pork production, US consumers will have slightly more pork available for consumption in 2009. Per-capita pork disappearance this year (disappearance is a residual quantity, equal to commercial pork production less net exports, plus any change in cold storage, divided by the US population) is expected to be 49.9 pounds, an increase of 0.7 pounds per person compared with last year. Domestic availability of pork will increase slightly this year because US pork exports are expected to decline by 14 per cent. Relatively high retail prices for beef and broilers in 2009 – due to lower product supplies – should hold retail pork prices in the high $2.90s this year, despite slightly higher pork supplies. However, the pressure of recession-squeezed consumer budgets is likely to keep retail pork prices below the $3.00 per pound level seen in the second half of 2008.

November Exports Slightly Ahead of a Year Ago, Imports Lower

US pork exports in November were slightly ahead of shipments a year ago – up 0.5 per cent, at 344.7 million pounds. Exports to major markets – Japan (+13 per cent), Mexico (+58 per cent), and Canada (+8 per cent)– ran significantly ahead of November 2007, while exports to Russia (-36 per cent), South Korea (-33 per cent) and China (-89 per cent) were below year-ago levels. November pork exports accounted for 18 per cent of commercial pork production versus 17 per cent a year ago.

US pork imports were 69.2 million pounds, 6 per cent lower than November 2007. Most of the reduction was accounted for by Denmark, the second-largest source of US pork imports. In November, US imports of Danish pork were more than 47 per cent lower than a year ago. Imports from Canada, on the other hand, were 8 per cent higher than a year earlier.

November’s year-over-year reduction in Denmark’s exports to the United States, relative to Canada, represents a continuing American response to relatively high-priced Danish pork.

Imports of Canadian Hogs and Pigs Off Sharply

US live swine imports in November – at 682,931 head – were almost 31 per cent lower than a year ago, likely reflecting industry contraction in Canada and COOL-related US pig-finisher reluctance to source Canadian early-weaned and feeder pigs. November imports of all finishing animals (pigs weighing 50 kg and less) were almost 12 per cent below a year earlier, and accounted for 81.3 per cent of imports compared with 63.8 per cent last year. Finishing pigs accounted for a greater share of November imports because slaughter hog imports were off so sharply. November slaughter hog imports were 65 per cent below a year earlier.