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North American Pork Demand Unprecedented, Prices Could Be Nearing Highs

by 5m Editor
11 May 2004, at 12:00am

US - North American hog and pork prices are currently very profitable. However, sources were unsure how high values could actually go before retreating amid unprecedented strong demand. A trade dispute between Canada and the U.S. also has the potential to disrupt the market, sources added.

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"Considering the (high) production level, the market has been reflecting a phenomenal demand for pork in the U.S., both domestically and for export," said Chuck Levitt, a livestock analyst with Alaron Trading Corp.

"I have never seen such protein demand as I have this year," said Levitt. Roughly 35 million to 40 million Americans have committed to high-protein diets, such as the Atkins and South Beach diets, said Levitt. However, he was unsure if the diets were a fad or would support the meat markets permanently.

Energy prices and other costs are also increasing. "At some point in time the American consumer will have to start looking at their budget and how much they can afford to spend for meat, compared to what they're spending on other things," said Levitt.

"I can't tell you how high up is, and I can't say how long we will be able to ride the shoulders of this demand bull," said Levitt. As far as prices are concerned, Levitt thought the market could be close to establishing the highs for year.

However, the peak U.S. slaughter levels are over for the season and hog numbers will be tightening into the summer, said Levitt. Therefore, "even if the demand does slow down a bit, we may not get any real serious or substantial break in the market," he said.

In addition, beef is still very high priced, relative to pork. International customers are also importing more pork as U.S. and Canadian beef has largely been shut out of the international markets following bovine spongiform encephalopathy discoveries in the past year. With Canada and the U.S. out of the world export markets for beef, there is a shortage of protein, and a larger worldwide demand for pork, said Agriculture Canada red meat analyst Patti Negrave.

"(Hog) prices are great," said Negrave. However, she was also unsure how long the current market would last in Canada. She cited concerns over potential countervailing and anti-dumping duties placed on Canadian hog exports, which would have a negative effect on Canadian prices.

In 2004, the U.S. will most likely slaughter more than 103 million hogs commercially, said Levitt. Of the hogs, 8.5 million are expected to come from Canada. The U.S. imported 7.4 million Canadian hogs the previous year. "If we get all the hogs this year from Canada ... obviously that will limit the potential as far as the cash market," said Levitt.

The U.S. Commerce Department is currently considering the contentious trade issue of imposing countervailing and anti-dumping duties on Canadian hogs. If the U.S. Commerce Department votes to put on countervailing duties and it starts to have an impact on the flow of hogs into the U.S., it may hurt the Canadian market to some degree, said Levitt. However, the U.S. market would likely see some strength.

Levitt didn't think the increase in Canadian hogs was a price-depressing factor at this time. "Right now we need all we can get," he said. Levitt added that hog producers on both sides of the border are making money in the current situation. "We're absorbing more hogs than we ever have before, at prices 30% to 40% higher than last year."

Levitt was unsure how long the unprecedented level of demand could last and advised producers to "make hay while the sun shines." While he wasn't expecting demand to slow down overnight, Levitt thought the current levels were "almost too good."

Levitt said producers should think about contracting some hogs in the next few weeks "to take advantage of these kind of prices, before we encounter something else."

Source: eFeedLink - 10th May 2004

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