Summary

For the balance of 2010, hog prices are expected to be supported by lower pork supplies and respectable consumer demand for pork products. The third-quarter price of live equivalent 51-52 per cent lean hogs is expected to average $59-$60 per hundredweight (cwt). Prices are expected to average $51-$53 per cwt in the fourth quarter. The Quarterly Hogs and Pigs report will be issued by USDA/NASS on 24 September 2010.

US Variety Meat Exports and the Global Marketplace

Variety meats may not make up the ‘heart’ of the US meat industry, given that dishes such as beef tongue or pig heart do not typically grace American dinner tables, write Daniel L. Marti and Rachel J. Johnson. In fact, these and other variety meats are often considered to be inferior food in US markets. Nonetheless, variety meat from beef and pork slaughter is important to the bottom line of the US meat industry. This is evident in both the value that variety meat adds to the US meat industry and the volume of sales into the variety meat channel.

Animal by-products are items produced as a result of animal slaughter and include portions of the entire animal that are not part of the dressed carcass. In the United States, animal by-products fall into two categories: edible and inedible offal. Variety meats are a subcategory of edible offal consisting of the liver, heart, tongue, tail, kidney, brain, sweetbreads (thymus and/or pancreas gland, depending on animal’s age), tripe (stomach), chitlings and natural casings (intestines), fries (testicles), rinds, head meat, lips, fats and other trimmings and blood (Ockerman and Hansen, 1998). Some edible offal is also used to make gelatin, sausage casings and rennin used in cheese-making. These products are all part of the US meat industry, but just how important are they?

The supply of edible offal produced in the United States is relatively large in comparison with its domestic demand. US demand for edible offal stems from consumption of products such as sausages and hot dogs and the use of variety meats in pet food. The remainder is available for shipment to foreign markets where they are more highly valued. While carcasses and high-value cuts comprise the majority of total red meat exports, edible offal exports have constituted about 22 per cent of the volume of total beef- and pork-product exports over the last five years. The United States has historically been the world’s largest exporter of beef and pork edible offal, accounting for more than 18 per cent of total world exports over the last 10 years (Figure 1). US pork edible offal exports were nearly 20 per cent of total pork exports in 2009, and over 24 per cent of total US beef exports last year were edible offal.

Variety meats in some countries are considered delicacies, while in other countries, their consumption is associated with low incomes (Halstead, 1999). However, in many regions variety meats are the basis of traditional flavors. Demand for variety meats is especially strong in many Asian nations. In China, most recipes call for sharp-tasting variety meats, not muscle cuts, which are considered bland (Hayes, 1997); cow tongues are considered expensive delicacies in Japan; sliced beef feet are used for soup in South Korea; and stomachs, lungs, and livers are highly valued meats in Colombia (Bean, 1996). Tongue and liver are used in many Mexican dishes, such as putzaze (tripe and liver with tomatoes), lengua (tongue with green chilies) and menudo norteña (tripe soup). However, in Russia, one of the world’s largest offal importers, variety meats are connected to lower incomes and used as an inexpensive way to obtain protein and nutrition (Kamenski, 2006).

Pork variety meat exports and markets

Mexico is by far the largest importer of US pork variety meats, accounting for 46 per cent over the last decade (Figure 2). Other major destinations of US exports include Hong Kong/China, Russia, Japan and South Korea. However, many of these markets have developed only in recent years. Since 2008, Hong Kong/China has begun to rival Mexico as the number one export market for US pork variety meats in terms of volume. In this study, Hong Kong and China are considered as one export destination because much of the US product is transshipped from Hong Kong to China (Bean, 1996). Until 2007, exports of all US variety meats to Hong Kong/China were marginal but last year, US exports of pork variety meat to Hong Kong/China jumped to almost 123,000 metric tons (MT), 32 per cent of all US pork variety meat exports.

Major US pork variety meat exports over the last five years include hog feet (14 per cent of US pork offal exports), fresh or chilled offal (11 per cent), rinds (10 per cent) and all other frozen offal (56 per cent) (Figure 3). In terms of the destinations for these products, Mexico imported over 94 per cent of all US-exported pork rinds and 76 per cent of US fresh or chilled pork offal exports, Russia was by far the largest purchaser of US hog liver exports in 2009, and Hong Kong/China also was the number one importer of US hog feet, pig tongues and pig-heart exports last year.

Looking ahead

Protein intake is often dependent upon income, as are the types of proteins consumed. Increasing per-capita incomes and rising GDP may have varied affects on consumption and trade of variety meats, depending on how the products are viewed in each country.

In countries such as Egypt and Japan, where certain variety meats are more highly valued, increasing wealth and GDP growth may result in increased US variety meat exports. Egyptian demand should remain strong since the country has a younger population, a relatively high rate of economic growth compared with world growth, and a limited capacity to expand domestic production, factors likely to support growth in demand for beef products (Kamenski, 2006). As incomes rise in other countries, certain variety meats may begin to be viewed as inferior goods, which may cause US variety meat exports to decline in some segments of these markets. In portions of the Mexican, Russian and Chinese markets, for example, variety meat consumption may give way to increasing consumption of muscle cuts as tastes and preferences change. However, preferences in other countries for certain culinary traditions – which are strongly tied to variety meat use – will continue to play an integral role in demand for US variety meat exports.

References

Bean, R. 1996. Beef tongues to pork maws, foreign markets hunger for variety meats. AgExporter, June-July 1996.

Halstead, T. 1999. US Variety Meat Exports on the Upswing. FASonline, 1999.

Hayes, Dermot. Chinese Market for US Pork Exports. Trade Research Center, August 1997. 11.

Kamenski, C. 2006. Variety meats vital to boosting US beef exports. Issues Update, March-April 2006, 29-30. x

Ockerman H.W. and C.L. Hansen. 1998. Animal Byproduct Processing and Utilization. 1st ed. Lancaster, PA: Technomic.

Higher Hog Prices Expected to Persist through Second Half of 2010

For the balance of 2010, US hog prices will likely continue to be supported by year-over-year lower pork supplies and respectable consumer demand for pork products. Third-quarter commercial pork production is expected to be 5.4 billion pounds, almost five per cent lower than the same period last year. Fourth-quarter production will likely fall about two per cent from production in the fourth quarter of 2009, to 5.9 billion pounds.

Wholesale pork prices, one indicator of consumer demand, continue to soar above 2009 levels. Through late August, the average 2010 USDA Estimated Pork Carcass Cut-out was 40 per cent above the cut-out value for the same period last year. This year, the July-August average cut-out averaged $88.14, 52 per cent above the same period in 2009.

While part of the strong increase in the carcass cutout is certainly attributable to lower pork production, domestic consumer demand is likely a significant factor in very strong belly prices (+49 per cent year-over year, January-August) and loin prices (27 per cent, year-over year, January-August). Foreign demand is also a probable factor in higher pork prices. In particular, strong export flows of US hams going to Mexico are reflected in ham prices: +68 per cent year-over-year for the January-August period. With lower year-over-year cold stocks, continued slow recovery of the US economy, and second-half US pork exports forecast to increase more than 10 per cent, consumer demand is expected to be supportive of hog prices, despite record-high retail pork prices. Prices of live equivalent 51-52 per cent lean hogs will average $59-$60 per cwt in the third quarter and $51-$53 in the fourth quarter of this year. In 2011, hog prices are expected to be $53-$57 per cwt.

USDA will release the Quarterly Hogs and Pigs report on 24 September [click here].

July Pork Exports Dip Below Year Earlier but Third-Quarter Forecast Unchanged

July pork exports, at almost 328 million pounds, came in at more than seven per cent below July of 2009. Lower shipments to Asia, particularly Japan (-9.4 per cent), largely account for the year-over-year reduction. US exports to Japan in June were the highest on record, so year-over-year lower shipments in July are not altogether unexpected. China was an exception to an otherwise dour set of July pork export statistics. China imported almost 20 million pounds of US pork in July, the largest shipment since the spring of 2009.

Over the last 10 years, weaker-than-expected July exports have been typically followed by stronger shipments in August. The third-quarter pork export forecast thus remains unchanged at 1.1 billion pounds, more than 10 per cent above the same period last year.

July pork imports were 75 million pounds and the third-quarter forecast of 215 million pounds is unchanged from last month’s forecast. The third-quarter forecast for live swine imports is also unchanged at 1.45 million head. July swine imports were 488,000 head.

Further Reading

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You can view the full report by clicking here.

September 2010