Highlights

Despite slightly lower second-half pork production, hog prices will likely remain below year-ago levels for the balance of 2009. One of the few bright spots in an otherwise dreary July pork export number (down 13 per cent year-over-year) were shipments to Mexico, which were 19 per cent above a year ago. Exports to Mexico for 2009 so far are running 35 per cent ahead of last year.

Seasonally Strong Production plus Lacklustre Consumer Demand Equals Low Prices

Hog prices will likely remain significantly below year-ago levels for the balance of 2009 as the year advances toward the fourth quarter—the period where production accelerates and prices typically achieve their lows for the year. Prices of live equivalent 51 to 52 per cent lean hogs are expected to average between $38 to 39 per cwt in the third quarter – close to 33 per cent below a year ago, and to average $35 to 37 in the fourth quarter, more than 14 per cent under the same period a year ago.

Current lackluster pork demand – both domestic and foreign – simply does not support the present level of US pork production at prices that allow North American hog producers to make any money. Monthly producer returns computed by Iowa State University show hog prices exceeding break-even twice – May and August 2008 – since returns turned consistently negative in October 2007. Recent sow slaughter data suggests that liquidation is picking up. The Quarterly Hogs and Pigs report, to be released by USDA on 25 September 2009, will show complete hog inventories as of 1 September.

Actual sow slaughter under federal inspection
(weekly; 2008-August 2009)

July Exports Lower, Imports Higher; Live Swine Imports Continue Sharply Lower

US exporters shipped 356 million pounds of pork products in July, a quantity 13 per cent below July of last year. The five largest buyers of US pork in July are shown below. Mexico, in particular, stands out as the second largest buyer of US pork, both in July – up 19 per cent year-over-year – and for the first 7 months of 2009, +35 per cent.

July pork imports of almost 72 million pounds were more than five per cent higher than a year ago, with purchases from Canada and Denmark up 13 per cent and eight per cent, respectively. Canada and Denmark together typically account for the lion's share of US pork imports. July was no exception, with Canada accounting for 80 per cent and Denmark for 12 per cent of total imports. The United States is on track to import about four per cent of its annual pork consumption. This is a bit lower than last year, and likely due to ample domestic pork supplies and lower consumer incomes.

July imports of live swine – all imports were from Canada in July – were almost 573,000 head compared to 745,000 head in July 2008, a decrease of more than 23 per cent. For the year so far, live imports are off 32 per cent. Lower imports are the result of ongoing herd reduction in Canada and lower demand for imported animals in the United States, due largely to new labelling procedures.

Further Reading

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