Summary

USDA revised second-quarter hog prices downward, to reflect price weakness in April and negative effects of H1N1 flu virus in May. June prices are expected to recover from May lows. First-quarter US pork exports were 1.033 billion pounds, 6.6 per cent below a year ago, but more than 30 percent above first-quarter 2007. First-quarter US pork imports were 205 million pounds, 5.5 per cent lower than last year, with imports from Mexico accounting for a significant share of the decline. Live swine imports were almost 40 per cent lower in the first quarter than a year ago.

Concerns About H1N1 Influenza Push Second-Quarter Hog Prices Lower

USDA lowered its price forecast for second-quarter live equivalent 51 to 52 per cent lean hogs to $44-$46 per cwt from $49-$51 per cwt last month. The lower forecast reflects generally weaker demand, amplified by the negative price effects that resulted from international H1N1 flu outbreaks in late April and early May. Consumer and foreign government reactions to the flu likely resulted in temporarily lower domestic and foreign demand for pork products. Domestic demand weakness likely reflected caution on the part of wholesale purchasers as they gauged consumer reaction to the flu. Export demand was likely affected by both foreign government actions to restrict imports and by the impact of disease concerns on the buying habits of foreign consumers.

Foreign and domestic consumer confidence with respect to pork products is expected to rebound as flu incidents recede. Prices of US pork and hogs are expected to adjust upward as demand normalises and seasonal product flows are restored. June hog prices are expected to be seasonally higher, reflecting lower supplies of slaughter-ready animals.

Strong First-Quarter Pork Exports

US companies exported 370 million pounds of pork in March, bringing total firstquarter US exports to 1.03 billion pounds. While first-quarter exports lag the same period last year by more than 72 million pounds, first-quarter 2009 shipments were more than 30 per cent ahead of the same period in 2007. The difference between the first quarter of 2009 and 2008 is largely attributable to China and Hong Kong.

The presence of China and Hong Kong last year as buyers of US pork cuts was likely more of a policy decision made in response to a random supply shock, i.e. reduced pork supplies as a result of blue ear disease, than the beginning of a consistent, growing source of demand for the US pork industry. USDA expects China’s pork production in 2009 to be almost six per cent larger than last year, while total Chinese pork imports this year are forecast to be almost 17 per cent below 2008 (click here).

The largest importers of first quarter US pork products were Japan (+9.7 per cent year-over-year), Mexico (+59.6 per cent, year-over-year), and Canada (-2.6 per cent, year-over-year).

The export forecast for the second quarter is unchanged from last month, at 950 million pounds. Stronger sales expected for early in the second quarter in many foreign markets will likely be offset by declines due to actions by some foreign governments to ban pork, as well as declines in pork consumption in other countries, due to influenza concerns.

First-Quarter Pork Imports Lower Than a Year Ago

First-quarter 2009 US pork imports totaled more than 205 million pounds, 5.5 per cent below the same period last year. On a volume basis, US buyers imported almost 12 million fewer pounds of pork products than a year ago. Imports from Mexico accounted for more than half of the reduction, followed by lower imports from Denmark. Lower pork imports from Mexico are likely attributable to lower demand for specialty cuts from immigrant population centers in the United States, while lower demand for Danish pork products – also something of a specialty product – is likely due to slower meat demand in a recessionary economy.

Live Swine Imports Off Sharply

Live swine imports were almost 1.8 million head in the first quarter, down almost 40 per cent from a year ago. Slaughter swine imports from Canada were down almost 67 per cent, while imports of Canadian finishing animals decreased 28 per cent, year on year. Factors that likely account for lower imports include continuation of the contraction of Canadian hog inventories that began early in 2005, due to persistently negative producer returns, and market uncertainties surrounding Country of Origin labelling (COOL) in the United States.

Further Reading

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May 2009