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US Pork Outlook Report - May 2008

by 5m Editor
19 May 2008, at 12:00am

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

Total Red Meat and Poultry Production Down Slightly Next Year

Contents

USDA expects commercial pork production to be 22.9 billion pounds next year, 2.4 percent below the 2008 production forecast. Lower hog supplies next year should result in prices ranging between $46 and $50 per hundredweight (cwt) for live equivalent 51-52 percent hogs, more than 9 percent above expected prices in 2008. The 2008 pork export forecast was raised to 4.3 billion pounds, more than 37 percent above export volumes last year. The export forecast for 2009, at just under 4 billion pounds (3.985 billion), is 7.5 percent below export expectations for 2008, reflecting the assumption that China will succeed this year in bringing its swine disease problems under control.

Lower Pork Production Expected in 2009

Continued negative returns from record-high feed costs will likely mean lower pork production in 2009. USDA expects commercial pork production to be 22.9 billion pounds next year, 2.4 percent below the 2008 production forecast. Lower 2009 pork production is the likely outcome as producers begin to trim breeding herd numbers and to farrow fewer sows. Year-over-year lower quarterly farrowings are expected in the second half of 2008, and are likely to extend through 2009. Litter rates for the balance of 2008, and through 2009, are expected to reflect accelerated productivity trends that began in early 2007. Dressed weights are expected to average near those of 2008. Lower hog supplies next year should result in prices averaging between $46 and $50 per cwt for live equivalent 51-52 percent hogs, more than 9 percent above expected prices in 2008.

Slower Live Swine Imports from Canada Push 2008 Pork Production Down Slightly

USDA’s forecast for 2008 commercial pork production was lowered fractionally — 52 million pounds — due to lower estimated imports of Canadian slaughter hogs in April, and expectations of somewhat slower imports for the remainder of the year, compared with 2007. Pork production this year is expected to be 23.5 billion pounds, 7 percent above 2007. Second-quarter 2008 prices of live equivalent 51-52 percent lean hogs will likely average between $46 and $48 per cwt. For the year, prices are expected to average between $43 and $45 per cwt, almost 7 percent below last year.

US Swine Imports Expected To Peak This Year, Turn Downward in 2009 US packers and feeder pig finishers are expected to set another record by importing 10.4 million head of swine this year, 5.4 percent above the previous record number—10 million head—achieved in 2007. Year-over-year increases in 2008 are expected to take place in the first half of the year, before turning year-over-year lower in the second half and continuing to decline through 2009. Live swine imports next year are expected to be 9.6 million head, almost 9 percent below the import forecast for this year.

Lower swine import forecasts for the second half of 2008 through 2009 are largely due to the contraction of the Canadian inventory. Reductions in the breeding herd appeared just recently to develop some traction. Agriculture Canada reported 4.58 percent fewer sows and bred gilts on April 1, 2008, a continuation of a slow contraction that began in Canada in April 2005. The biggest difference in Canadian breeding herd changes between April 2005 and April 2008 was the very large decline last month of almost 8 percent in the major pork-producing province of Ontario. The rate of breeding herd reduction also accelerated significantly in Alberta.

Three factors likely tipped the over-capitalized, export-dependent Canadian pork sector into a downsizing mode: the appreciation of the Canadian dollar, high feed costs, and the pending Country of Origin Labeling (COOL) law in the United States, which is scheduled to be implemented on October 1, 2008. The concerns and uncertainty surrounding the potential costs of identifying Canadian-origin pork are likely contributing to retrenchment in the Canadian hog sector. (For more COOL Information, see http://www.ams.usda.gov)

Pork Retail Prices To Edge Up in 2009

Retail pork prices finished the first quarter of 2008 at $2.84, 1 percent above the same period in 2007. The April price was $2.86 per pound, 1.6 percent above last year. For the second quarter—and for the balance of 2008—retail pork prices are expected to average in the low $2.90s per pound, bringing the year-over-year change to less than 1 percent above 2007. Strong increases in first-half 2008 pork production are likely helping to moderate retail pork price increases, even as retailers attempt to recoup some of their increased costs of doing business by pushing them through to the consumer. Also, competition from plentiful broiler supplies in the first half of 2008 probably limits retailers’ ability to boost pork prices, with relatively cheaper substitutes so readily available.

Although lower pork supplies next year are reflected in 2009 retail pork price forecasts, prices will still likely average in the low-to-mid $2.90s per pound, amounting to a year-over-year increase of about 1 percent.

First-Quarter US Pork Exports Surge on Strong Demand from China and Hong Kong

US exporters shipped more than 1.1 billion pounds of pork products to foreign markets in the first quarter of 2008. What makes this year so different from the past is that 22 percent of US exports in the first quarter went to China and to Hong Kong, effectively making this market combination the second-largest importer of US pork products after Japan. Moreover, exports to Russia more than doubled in the first quarter, compared with the same period a year ago. The table below sets out the top 10 destination countries for US exports in the first quarter.

U.S. pork exports: 10 largest destination countries, first-quarter 2008, 2007

While US pork exports to China are expected to be highly variable—in March, they were year-over-year lower, at 4.8 million pounds—based on observations from the US Agricultural Attaché in Beijing, http://www.fas.usda.gov/gainfiles/200804/146294362.pdf. Chinese demand for US pork products is likely to maintain a strong pace through 2008. As the main factor driving the increase in Chinese pork import demand, the US attaché cites recent PRRS (known sometimes as Blue Ear disease) outbreaks, which have reportedly led to losses of 40-million head of hogs (out of a total inventory of almost 490 million head in January 2008). In February, China’s National Bureau of Statistics reported that pork prices jumped 69 percent above year-earlier prices, perhaps suggesting how serious the pork supply situation in China could be.

In response to strong Chinese demand, a low valued dollar, and plentiful US pork supplies, USDA raised its 2008 total pork export forecast to 4.3 billion pounds, more than 37 percent above export volumes last year. The export forecast for 2009, at just under 4 billion pounds—3.985 billion—is 7.5 percent below export expectations for 2008, reflecting the assumption that China’s ability to bring its disease problems under control will reduce the need for import flows at rates established in 2008.

Further Reading

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