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US Pork Outlook – August 2011

High feed prices will curb production next year, according to the USDA Economic Research Service in its Livestock, Dairy and Poultry Outlook for August 2011.

17 August 2011

4 minute read

Accelerating pork exports are expected to maintain hog and pork prices at or near record highs for the balance of 2011.

Exports Driving Prices Across the Pork Supply/Demand Space

Second-half hog and pork prices are expected to remain record-high, supported in large part by accelerating pork exports. USDA raised its forecasts for both third- and fourth-quarter 2011 pork exports, with shipments to Asia and North America expected to be particularly robust. Third-quarter exports are expected to be 1.2 billion pounds, more than 26 per cent higher than a year earlier. Fourth-quarter exports are forecast to be 1.3 billion pounds, more than 13 per cent above the same period last year. In total, US pork exports will likely exceed five billion pounds, both this year, at just over five billion pounds and in 2012, at 5.1 billion pounds.

Several factors are accelerating foreign demand for US pork products but the continued low exchange rate of the US dollar is probably foremost. The low-valued dollar translates into well-priced US pork products in foreign markets, particularly when compared with pork produced by international competitors such as Denmark and Canada. Additionally, pork product deficits in South Korea created by recent foot and mouth disease outbreaks continue to drive South Korean demand, while it also appears that Chinese buyers have contracted for late-summer/fall shipments of US pork as part of an effort to stem Chinese food price inflation.

While second-half US commercial pork production is anticipated to be slightly higher than a year ago, strong export demand is tightening domestic pork supplies, contributing to record prices for hogs and for prices of wholesale and retail pork. In fact, it is likely that 22.1 per cent of US pork production will be exported this year, an impressive statistic considering that in 2000, 6.8 per cent of US commercial pork production was exported. The flip side of strong exports this year is lower available pork per capita. This year, retail weight per capita pork disappearance is expected to be 45.9 pounds, down from 47.7 pounds last year and from 51.3 pounds in 2000.

Second-quarter 2011 prices of live equivalent 51 to 52 per cent lean hogs were record-high for that quarter, at $68.80 per cwt. Third-quarter hog prices are expected to average $69 to $70 per cwt, and in the fourth quarter, $60-$64. If realised, these prices would establish record highs for each quarter. Strong pork demand is also being reflected in pork wholesale prices. The USDA Wholesale Carcass Cutout averaged $99.27 in July, up 18 per cent from July of last year and almost 61 per cent more than in July 2009.

US consumers are paying higher retail pork prices for lower domestic supplies. July retail pork prices were $3.481 per pound, down just slightly from the all-time record-high retail price of 3.484 in June, and almost 9.3 per cent higher than in July 2010. Retail prices are expected to remain in the neighbourhood of the mid-$3.40s for the balance of 2010, with next year expected to average in the low-$3.40s per pound.