Looking at the details, however, the picture is a bit more complicated. It is important to note what econ professors never get tired of repeating: higher sales do not mean higher demand. The law of demand says that consumers will take more quantity at a lower price. We simply move down the demand curve as supplies change.

US pork producers continued to ship big quantities of pork to the rest of the world in March of 2012, however, prices had to adjust lower in order to keep up this level of shipments. Case in point are ham exports to Mexico, the largest export market for this item. Shipments of ham to the Mexican market in March were some 50 per cent higher than a year ago while ham prices in the US market in March declined some 15 per cent from the previous year.

In the last quarter of 2011, we saw a real increase in demand for US pork from China. Exports to China/Hong Kong have slowed down in recent months, reflecting both the seasonal decline in demand in China (post Chinese new-year in Jan) but also increasing pork supplies and lower prices in the Chinese market. Shipments of fresh/frozen pork to China/Hong Kong in March were 23,340 MT, about 63 per cent higher than the comparable month a year ago but still about 46 per cent smaller than what they were in November (see chart).

Exports to Mexico have picked up as lower prices have encouraged higher shipments. Total US pork exports to Mexico in March were 34,535 MT, 8 per cent higher than a year ago. Monthly US pork exports to Mexico in Q1 on average were 18 per cent higher than a year ago. Exports of fresh/frozen pork to Japan in March were 40,870 MT, about 8 per cent lower than a year ago. The current level of shipments remains in line with the overall average that we saw from a year ago.

The Japanese market is quite mature and while it accounts for about a quarter of all US pork sales, it does not represent a source of growth. Exports to S. Korea were about 46 per cent lower than a year ago when an Foot and Mouth disease outbreak caused supply shortages and increased demand for US pork. However, the current level of shipments (+15000 MT) still represents a 60 per cent increase from the volume shipped in the second half of 2011.

Beef exports in March were lower, largely due to the reduction in shipments to S. Korea. US exports of fresh/frozen beef and veal to S. Korea in March were 9,912 MT, 55 per cent lower than a year ago. Still, at around 10,000 MT a month, current shipments are in line with the volume that was exported in the second half of 2011.

Exports to S. Korea will benefit from the Free Trade Agreement but could be hampered in the short term by a surging US dollar. Total beef and veal exports for the month were 64,601 MT, 20 per cent lower than a year ago. The reduction in exports to S. Korea accounted for about 75 per cent of the decline. Exports to Mexico remain weak, with shipments down 19 per cent from a year ago.