US Pork Outlook Report - March 2008

By U.S.D.A, Economic Research Service - This article is an extract from the March 2008: Livestock, Dairy and Poultry Outlook Report.
calendar icon 20 March 2008
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Pork/Hogs: First-quarter pork production is expected to be 5.96 billion pounds, 10.5 percent above the same period last year. First-quarter prices for live equivalent 51-52 percent live hogs are expected to range between $40 and $41 per hundredweight (cwt), 12 percent below the same period a year ago. Stocks of frozen pork on January 31, 2008 were 563.6 million pounds, 16 percent above year-earlier levels. Continued buildup of cold stocks may signal a slowdown in pork demand. January 2008 pork exports were more than 353 million pounds, almost 27 percent above January 2007.


First-Quarter Pork Production Forecast Increased

In early March, USDA revised its 2008 pork production forecast by adding 90 million pounds to the first-quarter estimate to reflect higher-than-expected hog slaughter in February. First-quarter pork production is expected to be 5.92 billion pounds, 9.6 percent above the same period last year. Total commercial pork production in 2008 is expected to be 23.1 billion pounds, 5.4 percent above 2007.

First-quarter prices for live equivalent 51-52 percent live hogs are expected to range between $40 and $41 per cwt, 12 percent below the same period a year ago. With costs of producing market-ready slaughter hogs estimated to be in the low $50 per cwt range, many U.S. hog producers are operating at per hog losses of around $30 per hog. For 2008, hog prices are expected to range between $41 and $44, 10 percent below last year.

Sow Slaughter Numbers Increase Moderately, With Prices Down Sharply

High feed costs have recently focused attention on year-over-year changes in U.S. sow slaughter. Higher sow slaughter often signals the beginning of a liquidation phase of the hog cycle. Through March 1, 2008 weekly U.S. federally inspected sow slaughter has increased moderately—4.2 percent over the same period last year. This slaughter number includes sows imported from Canada. For the first 2 months of 2008, Iowa/Minnesota negotiated prices for 300-449 pound sows averaged $23.70, almost 31 percent below the same period in 2007. March 1, 2008 breeding herd inventories will be published in the Quarterly Hogs and Pigs report, to be released by USDA on March 28, 2008.

Stocks of Frozen Pork Jump in January

Beginning cold stocks of frozen pork in February increased significantly above recent stocks levels. Stocks of frozen pork on January 31, 2008 were 563.6 million pounds, 16 percent above year-earlier levels.

Larger-than-expected increases in stocks levels suggests that pork products are entering the supply chain faster than they are flowing through the chain to domestic and foreign consumers. Increased stocks levels were most pronounced in boneless hams, bellies, and butts. While part of the increase in boneless hams is likely attributable to Easter demand, the buildup in belly stocks, which are largely consumed domestically, and in butts—a large proportion of which are exported— may signal a slowdown in pork demand.

U.S. Pork Exports in 2007 at a Record High

Exporters shipped 3.1 billion pounds of U.S. pork products to 114 foreign countries in 2007, an increase of 4.8 percent over 2006. The year 2007 represents the 17th consecutive year in which exported volumes exceeded totals from the previous year. The most important export market for U.S. pork in 2007, by far, was Japan.

Exports to Japan last year were more than double the shipments to the next largest destination country (Mexico). Japan imported 5.7 percent more U.S. pork products in 2007, and increased its share of U.S. exports to 34.2 percent, compared with 33.9 percent in 2006.

12 Largest foreign destinations for U.S. exported pork: 2007, 2006

While both Mexico and South Korea maintained their rankings in 2007—as 2 and 4, respectively—both countries imported less U.S. pork in 2007 than in 2006, and each had lower export shares last year than in 2006. Exports to Mexico last year were more than 26 percent lower than in 2006. Mexico accounted for 14.3 percent of U.S. pork exports last year, vs. more than 20 percent in 2006. South Korea imported almost 10 percent less than in 2006, and lost more than one percentage point in its export share: 8.4 percent in 2007, compared with 9.8 percent in 2006.

China and Hong Kong together accounted for more than 11 percent of U.S. exports last year, with exports to each more than double those of 2006. Greater demand for imported pork in China and Hong Kong has been attributed to swine disease outbreaks, and harsh winter weather.

Low-Priced Pork and U.S. Dollar Fuel Huge January 2008 Exports

U.S. exports in January 2008 were more than 353 million pounds, almost 27 percent above a year ago. The top five foreign markets in January were Japan, China, Mexico, Canada, and South Korea. In addition to the huge volume of product shipped in January, two things stand out about January pork exports: China was the second-largest export market in January, a departure from the usual top-three grouping of Japan, Mexico, and Canada. Second, several key markets were yearover- year lower: Japan (-10.3 percent), Mexico (-7.1 percent), and South Korea (-15.2 percent).

Exports to China in January were almost 59 million pounds, more than double January 2007 shipments. January trade data indicate that the majority of Chinese exports fall into a very general tariff category for U.S. pork exports, titled “Meat of Swine, Not Elsewhere Specified, Except Frozen Processed.” The data also suggest that China is importing relatively low-valued products. The average unit value of Chinese imports of U.S. pork in January was $.95 per pound, compared with the average unit value of all U.S. pork exports for the same period of $1.09 per pound.

Although Japan’s January 2008 imports of more than 94 million pounds of U.S. pork were year-over-year lower, they were the second-largest January shipments ever recorded, second only to its January 2007 imports of U.S. pork, which were more than 105 million pounds. On the other hand, for Mexico and South Korea, January 2008 export volumes appear to be a continuation of year-over-year lower monthly exports. U.S. export data indicate that Mexican shipments have been yearover- year lower since early 2007. Exports to South Korea have been year-over-year lower since the first half of 2007

U.S. Pork Imports Lower in 2007

The United States imported 969 million pounds of pork products last year, 2.1 percent less than in 2006. Canada, Denmark, and Mexico shipped the most pork to the United States last year. While Canada and Denmark each shipped less pork to the United States last year—U.S. imports from Canada were 3.6 percent lower than in 2006, and Denmark’s were 4 percent lower—Mexico’s shipments to the United States increased almost 29 percent. Mexico’s share of U.S. imports increased last year to 4.4 percent, from 3.4 percent in 2006. Mexico effectively gained import share from Canada and Denmark, each of whom accounted for a smaller share of U.S. imports last year than in 2006.

3 Largest originating countries for U.S. Imported Pork: 2007, 2006

Live Swine Imports Surge in 2007

U.S. packers and swine finishers imported slightly more than 10-million head of live swine last year, almost 14.2 percent more than in 2006. All but a few head were of Canadian origin. Canadian producers, in Western Canada in particular, had every incentive to export swine to the United States last year, as the strong Canadian dollar continued to hammer international competitiveness of Canadian pork products. The pork processing industry in Western Canada is contracting, having lost several packing plants last year.

The response by Western Canadian producers was, and continues to be, to send hogs to the United States as an alternative to constrained slaughter capacity and very low bids by Canadian packers. For Ontario, the second-largest swine exporting province, relatively low provincial corn prices last year, together with increased slaughter capacity, created incentives to finish swine in Ontario.

Agricultural Marketing Service/USDA weekly import data
suggest how constrained slaughter capacity and lower packer bids in Western Canada, along with favorable corn prices and increased slaughter capacity in Ontario, may have impacted the make-up of U.S. swine imports last year (i.e. number of finishing animals, number of slaughter-ready animals, etc.). State of Entry data shown below for North Dakota and Michigan indicate that U.S. imports of barrows and gilts not-for-finishing increased significantly. The total number of swine entering the United States through North Dakota—most of which are assumed to originate mainly from Manitoba—increased almost 20 percent, with imports of barrows and gilts not-for-finishing increasing more than 40 percent. Finishing-animal numbers exported to the United States via North Dakota increased almost 17 percent over 2006.

Canadian live swine imports by State of entry: North Dakota and Michigan, 2007

Source: Canadian Live Animal Imports by State of Entry WA_LS635

The “mix” of Canadian swine entering the United States through Michigan—most of which are assumed to originate from Ontario—differed from that of North Dakota, due to local (provincial) market conditions. While barrow and gilt not-forfinishing imports increased almost 3 percent, total imports through Michigan declined almost 6 percent because imports of finishing animals declined almost 12 percent. The decline in finishing animal imports was likely a result of excellent Ontario corn crops in 2005 and 2006, which created incentives to finish swine in Ontario. Also, slaughter capacity increased slightly in Ontario last year. Animals for finishing ordinarily exported to the United States via Michigan were likely fedout and processed in Ontario last year. Final Canadian Federal slaughter numbers show that while, as a whole, Canadian packers processed 2.4 percent fewer hogs in 2007, slaughter numbers for Ontario increased almost 8 percent.

Imports of Live Canadian Swine Surge in January

U.S. packers and swine finishers imported more than 1 million head of live swine from Canada in January, 40 percent more than January 2007. Largest year-overyear increases came in the less-than-15-pound animal category, which was up 50 percent over a year ago, and in the category for animals weighing more than 110 pounds, for immediate slaughter. Imports of slaughter-ready hogs were up 47 percent over January 2007. The high-valued Canadian dollar and escalating feed costs created additional incentives for Canadian producers to sell swine. For much of the recent past the highest bidder has been U.S. swine finishers and packers.

Further Reading

More information - You can view the full report by clicking here.

March 2008

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