US Pork Outlook Report - March 2009

By USDA, Economic Research Service - This article is an extract from the March 2009 issue of Livestock, Dairy and Poultry Outlook Report. Pork production is now expected to be 1.4 per cent higher in 2009 than in 2008. Exports in January were down more than 8 per cent.

19 March 2009

5 minute read

Summary

The estimate for commercial pork production in 2009 is creeping upward, as lower feed costs contribute to increases in expected average dressed weights for the year. Increases in average dressed weights are expected to offset production declines from reductions in the number of live swine imported from Canada this year. US pork exports were 322.7 million pounds in January, down 8.7 per cent year-over-year.

Expectations for Dressed Weights and Live Imports Cause Small Change to Commercial Pork Production

US commercial pork production is expected to be slightly more than 23 billion pounds in 2009, about 1.4 per cent below production in 2008. This forecast quantity is slightly higher than the production level estimated last month, due to expected heavier dressed weights, which will likely more than offset anticipated reductions in imports of live swine from Canada. Average dressed weights this year are expected to run about three-quarters of a pound higher than last year, due mostly to lower feed costs. The projected 2008/09 crop year farm price of corn þ $3.90-4.30 per bushel – is below the farm price for last year. The forecast price for 2008/09 soybean meal – $265-305 per short ton – is also below the 2007/08 price. Lower feed prices reduce the per pound cost of weight gain, often creating incentives to feed hogs to higher weights.

US swine finishers and packers are expected to import 7 million head of swine this year, a reduction of 25 per cent from 2008. All but a few of US swine imports come from Canada. This forecast is revised down from a month ago, due to sharp reductions in early 2009 imports of feeder pigs and slaughter hogs. Lower imports result from the ongoing contraction of Canadian hog inventories, brought about largely by exchange rate and production cost volatility. Potential responses to Country of Origin Labeling (COOL) in the United States may also be contributing to the uncertainty faced by hog producers in Canada. But it may also be that the uncertainty is contributing to recent increases in Manitoba's slaughter and to apparent expansion of swine-finishing space in Western Canada.

US imports of live swine were 645,434 head in January, 41.6 per cent below a year ago. With the exception of breeding animals, all import categories – animals for finishing, animals for immediate slaughter – were lower than January 2008. USDA will release the Quarterly Hogs and Pigs report on 27 March 2009.

January 2009 Pork Exports Below Year-Ago Imports

US exporters shipped almost 323 million pounds of pork to foreign destinations in January, 8.7 per cent below January 2008. The three largest markets for US pork in January were Japan (+21 per cent, year-on-year), Mexico (+63 per cent year-on- year) and Canada (-9 per cent year-over-year). In contrast, the three largest markets in January 2008 were Japan, China/Hong Kong and Mexico. The China/Hong Kong region imported 24.3 million pounds of US pork in January 2009, down 70 per cent from a year earlier. Continuation of Mexico's strong showing in January 2009 is doubtful, given North America's weak macro-economic outlook this year. Japan's year-on-year increase may be due in part to a favourable US dollar-yen exchange rate compared with competitors, particularly Denmark. The graph below suggests that since 2007, everything else equal, the yen-dollar exchange rate has enhanced the competitiveness of US pork.

Yen price of US dollars and Danish krone
^{(Board of Governors of the Federal Reserve System)}

For 2009, total US pork exports are expected to be 4 billion pounds, 14 per cent below last year but more than 27 per cent greater than 2007.

Pork imports in January came in at 71.7 million pounds, nearly 2 per cent below a year ago. Although imports from Canada and Denmark – primary foreign suppliers of pork to the United States – were both higher year-on-year, reductions in imports from other smaller suppliers (Mexico, United Kingdom, Ireland, Germany, France, Netherlands, Poland and Hungary) were together enough to tip the balance of total imports below that of January 2008. The United States is expected to import 840 million pounds of pork this year, about one per cent above 2008.