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Pork Commentary: USDA Projects Lower Meat Production

by 5m Editor
24 March 2010, at 7:59am

CANADA - This week's North American Pork Commentary from Jim Long.

The USDA US meats supply and use is showing a remarkable decline in red meat and poultry supplies.

USA Annual Meat Production
Million Pounds
Beef Pork Poultry Total Poultry and red meat
2008 26663 23367 36511 86541
2009 est. 26065 23013 35131 84209
2010 March projection 25747 22450 35565 83762

USDA is projecting 2010 US total meat and poultry production to decline almost 2.8 billion lbs compared to 2008. A huge decline. In our farmer way of looking at things, 2.8 billion lbs is about 85,000 tractor-trailers of meat and poultry, or about 250 loads each and every day.

Why is the supply coming down matter? There are over 6 million more Americans than two years ago, pushing demand. Pork demand in itself is stronger than last year. Iowa-Minn lean hog price last week was 68.79... a year ago the same week – 54.92. A cool 25 per cent higher. Anyone who says pork demand is not better check the prices. Also remember a year ago now H1N1 (swine flu) had not hit (came late April). The stronger US economy and stronger exports are pushing prices. The demand for hams from Mexico due to their massive herd liquidation there has pushed hams up 50 per cent from a year ago (2010 - 67¢, 2009 - 44¢).

The demand equation will be only enhanced by Russia and China’s announcement last week to re-open their markets to US pork (H1N1 is over?). Hogs are $1.50 US lean in Russia. China’s prices are about 80¢ lean. In our opinion any pork to either country is price supportive. If Russia and China because of the borders opening take only 2 per cent more of US production (500 million lbs), this would be tremendously hog price enhancing. Enhanced exports and USDA predicting about one billion lbs less pork produced in 2010 compared to 2008. You can see why we remain bullish.

We are not the only ones. June lean hogs at 83¢ are life of contract highs. For everyone’s sake, we all need some luck. Two and a half years of losing our rear ends has been bad for everyone, including bankers.

Credit remains tight and we expect it to remain as such. Not only have losses been in the billions, it’s more than that – it’s personal. It’s one thing to talk in industry numbers, but each and everyone has their personal circumstances. Some have lost their farms, some have had their family lives crushed by day upon day of financial pressure and the collateral damage of scrambling to pay the bills, equities have eroded not only from the cash loss, but also from the equity loss from decreased inventory and fixed assets real value. It’s a grim reality of our industry. Many are hanging on by their fingernails to get to higher prices. If one thing we have come to appreciate, it is the ‘can do’, no surrender attitude of our industry. There is no quit. It’s made this thing drag out. Few have left our industry easily or quickly. No question, if you want a team of fighters with a no quit attitude, take hog producers. We are glad we are associated with an industry with such character.

Summary

June lean hogs life of contract highs. China and Russia are opening borders to US pork. USDA is projecting less pork, less beef, less poultry. The economy is recovering domestically and globally. A combination for strong hog prices for the next year. We believe there are dynamics in place for lean hogs to hit 90¢ lean this summer.