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US Pork Outlook Report - August 2005

by 5m Editor
20 August 2005, at 12:00am

By U.S.D.A., Economic Research Service - This article is an extract from the August 2005: Livestock, Dairy and Poultry Outlook Report, highlighting Global Pork Industry data.

USDA Economic Research Service

Hogs/Pork:

Third-quarter U.S. commercial pork production is expected to be about 5.1 billion pounds, slightly increased from the same period a year ago. Third-quarter hog prices--51-52 percent lean live equivalent--are expected to range between $47 and $49 per hundredweight (cwt), about 15 percent lower than a year ago. U.S. exporters shipped more than 1.3 billion pounds of pork to foreign markets in the first half of 2005, almost 25 percent more than the same period last year. U.S. imports of both pork and live swine were each about 9 percent lower in the first half relative to last year.

U.S. Pork Exports Strong in First-Half of 2005

U.S. exporters shipped 205 million pounds of pork products in June, more than 18 percent higher than June 2004. In the 6 months ending on June 30, U.S. pork exports exceeded those of the same period last year by 25 percent. The major destination countries for U.S. exports so far in 2005 have been Japan, Mexico, and Canada. The “big three” together comprised 71 percent of U.S. pork exports. Japan alone accounted for 41 percent of exports, Mexico for 19 percent, and Canada for 11 percent.

A comparison of 2005 export shares for Japan, Mexico, and Canada, with shares for the comparable period last year shows that Japan and Mexico are accounting for a smaller share of U.S. exports. Although each of the “big three” pork export markets show a year-over-year volume increase on a cumulated basis--Japan +15 percent, Mexico +1, and Canada +33 percent--other smaller markets such as South Korea, China, Romania, and Australia grew rapidly in the first half, and consequently this set of smaller markets is together accounting for a significantly greater share of total pork exports than in January-June 2004.

Japan Imports More U.S. Pork, But Less Pork Overall

Japan’s first-half imports of U.S. pork were 15 percent larger than a year ago. However total Japanese pork imports so far this year--from all sources--are almost 6 percent lower than last year. A combination of factors could explain larger imports from the United States at the same time that total pork imports have declined. First, Japanese imports of both beef and poultry in the first half of 2005 are lower than the same period in 2003--before Japanese trade was affected by North American BSE discoveries, and avian influenza in Asia--but beef and poultry imports have increased over January-June 2004. So far this year, Japan’s beef imports have increased 15 percent, and poultry imports are 27 percent higher than the same period last year.


Higher available supplies of beef and poultry, all other factors remaining constant, could reduce import demand for pork products. Lower total Japanese imports could also be partly attributable to current ending stock levels. The figure below shows that Japanese monthly ending stocks of pork in the first 5 months of 2005 appear to be significantly higher than last year. Stock levels for all of 2004 and so far this year, are well above the 5-year average, also.


Japanese pork importers could also be trimming import quantities in an attempt to stave off the Safeguard. As part of the Uruguay Round Agreement on Agriculture, the Government of Japan can impose the Safeguard to protect domestic pork producers from adverse price effects, when cumulative pork imports exceed the average of three prior years by 19 percent. The Safeguard effectively increases the minimum import price of most fresh and frozen pork cuts by about 25 percent.

The World Trade Organization rules are such that the Safeguard can trigger this year if total pork imports between April and September exceed about 550,000 metric tons (MT). Japanese Government statistics indicate that the April-June imports were about 289,000 MT. When the Safeguard is in place, Japan typically imports less pork; the incidence of the higher import price falls disproportionately however, on frozen pork rather than on fresh products. With the United States and Canada major sources of fresh pork, Japan’s Safeguard typically impacts North American exports proportionally less than exporters of frozen pork--Denmark in particular.

Larger Japanese imports of U.S. pork could also be partially attributable to the favorable exchange rate between the U.S. dollar and the Japanese yen, relative to the currencies of other pork exporting countries. The trade data below showing lower Japanese imports from Denmark, whose currency is tied to the euro, and from other EU countries, suggest that the exchange rate volatility could be one factor in Japanese import decisions.

Pork Imports Continue Downward Slide

Pork imports in June continued to show a year-over-year decline which effectively began late in 2003. Since that time, the volume of pork imports each month has fallen below year-earlier levels--with just one exception, when August 2004 imports were almost 9 percent higher than August 2003 imports. Total pork imports for the January-June 2005 period fell 9 percent below the same period last year. It is likely that the weaker U.S. dollar has increased the cost of foreign pork products, thus lowering the quantity of imports. Market shares of major import sources are as follows:


Imports are expected to continue to decline through 2005, with an 11-percent reduction expected for 2005, relative to last year. In 2006, imports are expected to decline 2 percent over this year.

First-Half Live Swine Imports Down From a Year Ago

Monthly Canadian swine imports, which have lagged year-ago numbers since late last year, appear to be slowly picking up steam. For the second month in a row, June imports were larger than June of last year; imports in May were also slightly larger than May 2004. June import numbers for live swine--698,000 head--came in 3 percent larger than June of last year. First-half swine imports totaled almost 3.8 million animals, 9-percent lower than first-half 2004.

Trade numbers indicate that somewhat fewer slaughter hogs are being imported so far this year. Indeed, slaughter hogs accounted for 31 percent of imports in the first half, while in the same period last year they averaged 33 percent of U.S. imports. Lower first-half imports from Canada are probably attributable to some combination of several factors: weekly Canadian slaughter numbers are about 1 percent higher than this time a year ago, so more Canadian hogs are being slaughtered domestically. There is also some evidence that Ontario producers are shipping larger numbers of feeder pigs to Quebec, due to recently enacted laws which effectively restrict hog production there. Reports of disease problems in Ontario—PRRS—last fall and porcine circovirus this past spring and early summer could also account for smaller numbers of hogs and pigs for export to the United States.

If it can be assumed that swine entering the United States from Michigan are largely of Ontario origin, and those entering from North Dakota originate from Manitoba, then USDA weekly swine import data from Canada bear out much lower numbers from Ontario.


There were also likely restart-up costs following rescission of preliminary dumping penalties following the International Trade Commission determination in last April that the U.S. industry is not materially injured by Canadian live swine imports. In the second half of 2005, U.S. imports of live swine from Canada are expected to be about the same as the second half of 2004.

Links

For more information view the full Livestock, Dairy and Poultry Outlook - August 2005 (pdf)

Source: Livestock, Dairy and Poultry Outlook - U.S. Department of Agriculture, Economic Research Service - August 2005