US Swine Economics Report: Domestic demand for pork is strengthening

Regular report by Ron Plain on the US Swine industry.
calendar icon 18 November 2006
clock icon 3 minute read
Ron Plain
Ron Plain

It looks like domestic demand for pork is strengthening. Based on preliminary data, the retail demand index for pork was positive last month. This was the first positive month for pork demand since May 2005.

The average retail price of pork during October was $2.866 per pound. That was 2.6% higher than a year earlier (1.3% higher after adjusting for inflation). This was the first time the inflation adjusted price of pork has been above year-earlier levels since May 2005. The higher October retail price is especially good news since it appears that per capita pork supply and consumption were both above year ago levels. We will have to wait for the October pork trade data to know for sure about pork consumption, but buying more pork at a higher price would indicate consumers are serious about wanting to eat pork.

The reason of the improvement in domestic demand last month probably has little to do with pork. Falling unemployment rates and falling gasoline prices are two items which historically have been positive for pork demand, and both have dropped sharply this fall. Low inflation is another positive for pork demand. The consumer price index was only 1.3% higher in October 2006 than in October 2005. This was the smallest year-over-year increase in inflation since June 2002. Given the current strength of the U.S. economy, these factors are likely to continue being positive for pork demand this winter.

Looking at the long term, the pork industry is doing a number of things which are enhancing the demand picture. It looks certain that 2006 will be the 15th consecutive record year for pork exports. The pork industry's successful effort to expand foreign markets has kept the growing U.S. hog industry from swamping the domestic market. Enhanced packaging makes pork more attractive in the meat case and extends shelf life, making pork a better buy. Distribution of pork recipes, both in grocery stores and over the internet, gives consumers new ideas on how to avoid the blahs.

The rapidly expanding ethanol industry is giving pork producers something new to worry about. Hopefully, weak demand won't be one of their worries in 2007.

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