CME: Strength in Foreign Demand for US Pork a Major Surprise of 2017

US - Let us briefly take a look back at the hog/pork sector for the first half of 2017. For the first six months of this year, US pork production and hog prices averaged near expected levels, reports Steiner Consulting Group, DLR Division, Inc.
calendar icon 12 July 2017
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However, slaughter hog prices eroded counter seasonally and were lower than anticipated late in the first quarter and into the second quarter. Hog prices rebounded strongly as the second quarter progressed. Behind the hog price pattern were wholesale prices, particularly those for pork bellies, which were volatile and multiple times reached some lofty levels.

In the first quarter, the national average base carcass price for barrows and gilts averaged about 9 per cent above 2016’s. That price was down by about 3 per cent year-over-year in the second quarter. In the provided graphic (above), note that the last week of data is July.

In the first quarter of 2017, US commercial hog slaughter increased compared to a year earlier by 3.1 per cent. Using projections for June, slaughter in the second quarter was up 3.7 per cent compared to a year ago. On a quarterly basis, hog dressed weights have been declining year-over-year.

In the second quarter, the average hog dressed weight was down three pounds (dropped 1 per cent) from a year ago. US hog dressed weight has posted year-on-year declines for nine consecutive quarters. Changing production practices are likely pulling-down hog weights, including reduced use of feed additives (i.e. ractopamine) and antibiotics.

Quarterly US commercial pork production was up 2.9 per cent from 2016’s for both the first and second quarter of this year. Importantly, per capita US pork disappearance actually declined compared to a year ago because of strong exports.

Per capita disappearance slipped by 1.9 per cent and 0.6 per cent in the first and second quarters, respectively. The major surprise of 2017 has been the strength in foreign demand for US pork.

Looking ahead, the Livestock Marketing Information Center is forecasting year-over-year increases in quarterly US pork production of 2.0 per cent to 4.5 per cent for the balance of this year and throughout 2018. With production increasing, foreign demand for pork items will likely remain a key to hog prices.

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