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US Pork Outlook - February 2010

by 5m Editor
24 February 2010, at 12:00am

Pork production in 2010 is expected to be 2.1 per cent below last year but prices could be up to 16 per cent higher, according to the USDA Economic Research Service (ERS) February 2010 Livestock, Dairy and Poultry Outlook.

Summary

Lower pork production, current stock levels, and expected acceleration of US pork exports are together likely to sustain hog prices at above break-even levels for most producers this year. US 2010 commercial pork production is expected to be 2.1 per cent below last year, with average 2010 hog prices averaging at $46 and $49 per cwt, almost 16 per cent above 2009.

First-Quarter Pork Disappearance Forecast Lower Than a Year Ago; Hog Prices Increase

USDA lowered its first-half 2010 pork production forecast by 115 million pounds to 11 billion pounds, from 11.1 billion pounds last month. Over half of the reduction came out of the first-quarter production estimate. First-quarter 2010 pork production forecast was lowered to 5.6 billion pounds, based on lower-than-expected slaughter numbers and lighter dressed weights in January. When lower first-quarter production (-3.1 per cent) combines with reduced cold stocks and anticipated first-quarter increases in exports (+6.5 per cent), pork quantity available for domestic consumption – typically referred to as ‘disappearance’ – will likely be about six per cent below a year ago. Lower quantities of pork available for domestic consumption set the stage for higher prices of wholesale pork and live hogs. USDA forecasts the average first-quarter price of live equivalent 51 to 52 per cent lean hogs at $47-$49 per cwt, about 14 per cent greater than a year earlier. For 2010, the average hog price is expected at $46 to $49 per cwt. Given forecast hog prices and corn and soybean meal price forecasts reported in USDA’s February WASDE, most hog producers will likely more than break even in 2010.

December pork export data closed out 2009 at a total of 4.1 billion pounds, 11.6 per cent below 2008 but more that 31 per cent ahead of 2007. Of the top five export markets last year – Japan (-3.8 per cent), Mexico (+33.4 per cent), Canada (-3.6 per cent), Hong Kong (-39.7 per cent) and Russia (-32.6 per cent) – only Mexico was year-over-year higher. Larger exports forecast for 2010 are premised on continued strong demand in Mexico for US pork products. Key risk variables for 2010 centre on Russia and the EU. Continuing trade disputes with Russia raise concerns due to its status as a major export destination for US pork. Currency instability in Europe will likely affect the exchange rate of the US dollar, and thus the price of US pork in foreign markets. First-quarter pork exports are expected to be 1.1 billion pounds, 6.5 per cent above the same period in 2009. For the year, exports are expected to be 4.5 billion pounds, 8.4 per cent above 2009.

Total US pork imports in 2009 were slightly larger – +0.02 per cent – than imports in 2008. Shipments from Canada increased 5.2 per cent, while imports from other important exporters to the United States – Denmark, Poland and Mexico – were all lower last year. Pork imports in 2010 are expected to be seven per cent above last year. Most imports will likely come from Canada, and will come in to ‘plug’ holes created by lower pork production in the United States.

US imports of live swine declined almost 32 per cent last year, with breeding animals, slaughter hogs and feeder pigs all down by more than 50 per cent. Segregated early-weaned pig imports were down ‘only’ 23 per cent last year. Persistent negative producer returns continued to bring about breeding herd reductions in Canada last year. However, recent elevated hog prices in the United States suggest that imports could stabilise this year.

Further Reading

- You can view the full report by clicking here.

February 2010