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US Pork Outlook Report - February 2008

by 5m Editor
15 February 2008, at 12:00am

By U.S.D.A, Economic Research Service - This article is an extract from the February 2008: Livestock, Dairy and Poultry Outlook Report.

Pork/hogs: Larger-than-expected hog slaughter in January prompted USDA to raise its forecast for 2008 commercial pork production to 23 billion pounds, 5 percent above last year’s production. For the first quarter of 2008, hog prices are expected to average between $38 and $40 per cwt, more than 15 percent below a year ago. With costs of producing slaughter-ready hogs estimated in the low-to-mid $50’s per hundredweight (cwt), most hog producers are likely to operate in the red in 2008. Despite strong production increases, pork demand continues to be robust so far in 2008, as evidenced by modest increases in pork cold stocks and moderate declines in wholesale prices.

Pork/Hogs

Hog Slaughter Larger Than Expected

Larger-than-expected hog slaughter in the first quarter and expectations of higher imports of swine from Canada prompted USDA to raise its forecast for 2008 commercial pork production. The revised forecast—23 billion pounds—is slightly more than 5 percent above last year’s total. Large supplies of slaughter-ready hogs were reflected in January hog prices. Prices for live equivalent 51-52 percent-lean hogs were $36.77 per cwt, almost 17 percent below prices in January 2007. For the first quarter of 2008, hog prices are expected to average between $38 and $40 per cwt, more than 15 percent below a year ago. With costs of producing slaughterready hogs estimated in the low-to-mid $50’s per cwt, most hog producers are likely to operate in the red in 2008.

New Hog Industry Structure Makes Hog Cycle Changes Difficult To Gauge

In the past, persistent financial losses often prompted hog producers to liquidate breeding stock to reduce losses, or to exit the industry altogether. The structure of U.S. hog production industry has changed dramatically in the past 25 years.

The new structure of the industry makes it difficult to predict the timing and duration of hog cycle changes.

However, data point to increased sow slaughter in recent weeks. For the first 4 weeks of the year, weekly sow slaughter has averaged almost 4 percent above 2007.

Average U.S. slaughter sow prices in January fell 30 percent below the same period last year.

Anecdotal evidence suggests that operations cutting back now likely fall into categories such as smaller, older operations, undercapitalized operations, operations not handling price risk well, and/or operations without ready access to feedstuffs.

But it is also more than likely that U.S. sow slaughter numbers will be pushed higher by elevated numbers of breeding animals coming from Canada for slaughter, given limited sow slaughter capacity in Canada. The March Quarterly Hogs and Pigs Report, to be issued by USDA on March 28, 2008, will provide new information on changes in U.S. breeding herd numbers.

Cold Storage Stocks and Wholesale Prices Reflect Continued Robust Pork Demand

Despite strong production increases, demand—domestic plus foreign—for U.S. pork products continues to be robust so far in 2008. Given that fourth-quarter 2007 commercial pork production was 9.6 percent higher than the same period a year earlier, modest year-over-year increases in December 31 cold stocks (+5 percent), and measured year-over-year declines in the USDA Estimated Pork Carcass Cutout (-11 percent) in January, suggest that very large quantities of pork products are moving well through the U.S. pork industry’s supply chain.

Retail pork prices moved up moderately in 2007, with a similar rise expected in 2008. The farm-to-retail price spread widened last year, with most of the increase going to the wholesale-to-retail component of the supply chain. Retail pork prices for 2007 were $2.87 per pound, 2.2 percent more than a year earlier. For the first quarter, and for 2008, retail prices are expected to average in the high $2.80’s per pound.

U.S. import and export data for December 2007 will be posted to the ERS website on February 15, 2007 http://www.ers.usda.gov/Data/MeatTrade/. U.S. pork exports in the first quarter of 2008 are expected to be 900 million pounds, 14 percent higher than first-quarter 2007. For 2008, exports are expected to be about 3.7 billion pounds, 16 percent above 2007. Pork imports are expected to drop slightly in 2008, to about 965 billion pounds. U.S. hog finishers and packers are expected to import 10.8 million head of Canadian hogs in 2008. About 150,000 hogs are expected to be exported in 2008, mostly to Mexico.

Further Reading

More information - You can view the full report by clicking here.
February 2008