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US Pork Outlook Report - November 2007

by 5m Editor
22 November 2007, at 12:00am

By U.S.D.A, Economic Research Service - This article is an extract from the November 2007: Livestock, Dairy and Poultry Outlook Report, highlighting Global Pork Industry data.

Larger-than-expected hog slaughter numbers in October prompted USDA to add 75 million pounds of pork to the fourth-quarter 2007 pork production estimate. For 2007, total U.S. pork production is expected to be 21.8 billion pounds, 3.3 percent above a year ago. U.S. hog prices through first-quarter 2008 are expected to fall well below current break-even prices.

Large October Slaughter Kicks Up Fourth-Quarter Production, Takes Prices Lower

Larger-than-expected hog slaughter numbers in October prompted USDA to add 75 million pounds of pork to the fourth-quarter 2007 pork production estimate. The estimated federally inspected hog slaughter in October, at 10.6 million head, was almost 11 percent above October 2006. Fourth-quarter pork production is expected to be 5.975 billion pounds, more than 6 percent higher than a year ago. Part of the year-over-year increase in slaughter numbers was due to the additional slaughter day in October this year. But the stronger slaughter numbers are also likely attributable to three additional factors: first, to a large spring pig crop; second, to lower mortality rates from swine diseases that afflicted U.S. herds until recent introduction of effective vaccines; and finally, to increased numbers of imported swine from Canada, due to reduced profitability prospects all along the Canadian pork supply chain.

For 2007, total U.S. pork production is expected to be 21.8 billion pounds, 3.3 percent above a year ago. Next year, higher feed prices will likely limit year-overyear increases in average dressed weights. Average dressed weights both this year and next are expected to be about 201 pounds. Total pork production in 2008 is expected to be 22.3 billion pounds, 2.3 percent higher than this year.

Fourth-quarter prices for 51-52 percent lean live equivalent hogs are expected to range between $38 and $40 per cwt, almost 16 percent below the fourth quarter of last year. First-quarter 2008 prices will likely range between $40 and $42 per cwt compared with $46.04 per cwt a year earlier. U.S. hog prices through first-quarter 2008 are thus expected to fall well below current break-even prices in the high $40s per cwt, calculated for representative farrow-to-finish operations in Iowa. (http://www.econ.iastate.edu/faculty/lawrence/Lawrence_website/livestockreturns.htm)

September Pork Exports Higher on Strong Shipments to Asia

The U.S. pork industry shipped 241 million pounds of pork to foreign markets in September, 9 percent more than in September 2006. The year-over-year increase in September export numbers marks the third consecutive month of increases, following a 5-month string of lower exports earlier this year. The addition of September exports to those for July and August completes the third quarter, and pushes the quarterly total volume to 703 million pounds, 8 percent greater than the same period last year. The strong third quarter pulls total U.S. exports for 2007 to date just about even—0.21 percent below—with same-period exports last year. Going into the third quarter, 2007 pork exports lagged first-half 2006 quarter by almost 4 percent.

Exports to China and Hong Kong Help Offset Lower Shipments to Other Important Destinations

The table below shows how increased September exports to China and Hong Kong (line 8) provided an important counterweight to offset lower shipments to Mexico and South Korea, in particular (line 18). In September 2007, China and Hong Kong together imported 21.2 million pounds more U.S. pork than a year ago.

This increase was crucial in offsetting lower shipments to Mexico, South Korea, the E.U.-27, and Taiwan, whose imports of U.S. pork together fell 24.5 million pounds below those of September 2006. September is the third consecutive month this year in which shipments to China and Hong Kong have played an important role in helping to push U.S. exports ahead of year-ago volumes.

U.S. pork exports, September 2007 and September 2006: major countries and regions
Line no. September
2007
(1000 lbs.)
September
2006
(1000 lbs.)
Difference
(Sept. 2007-
Sept. 2006)
(1000 lbs.)
Percent
Change
(Sept. 2007/
Sept. 2006)
1 Total U.S. pork exports 240,619 220,051 20,568 9
2 Japan 79,155 74,730 4,426 6
3 Canada 36,023 31,684 4,339 14
4 Russia 20,074 11,573 8,502 73
5 Total Japan + Canada + Russia 135,253 117,986 17,266
6 China 21,685 9,553 12,132 127
7 Hong Kong 15,221 6,152 9,068 147
8 Total China + Hong Kong 36,905 15,705 21,200
9 Cen. & S. America 5,363 4,761 602 13
10 Australia 5,207 3,791 1,417 37
11 Caribbean 3,876 3,496 381 11
12 Other 7,461 3,275 4,187 128
13 Total C. & S. Am. + Austr. + Caribb. + Other 21,908 15,322 6,586
14 Mexico 29,557 44,164 -14,607 -33
15 South Korea 11,308 15,645 -4,337 -28
16 EU-27 4,323 7,319 -2,997 -41
17 Taiwan 1,366 3,909 -2,544 -65
18 Total Mex. + S. Korea + EU-27 + Taiwan 46,554 71,038 -24,484
19 Sum (5) + (8) + (13)+ (18) 240,619 220,051 20,568 9

The second table (below) shows September 2007 exports, by destination country, sorted in descending order on the basis of export volumes, and provides some perspective on the first three quarters of 2007 pork exports. In the case of Mexico, it is worth noting that in September Mexico was the third biggest importer of U.S. pork products—although this volume was 33 percent lower (column 4) than a year earlier. On a cumulative basis (column 5), Mexico remains the second-largest importer of U.S. pork, but at a volume almost 30 percent lower than in the first three quarters of 2006 (cols. 5-7). Mexico’s share of U.S. exports in 2007, to date, is 15 percent (col. 8), considerably lower than the 21 percent of the same period last year. China and Hong Kong together account for 10 percent of U.S. pork exports so far this year, up from 8 percent in the same period of 2006. South Korea accounts for 1 percentage point less than a year ago—8 percent so far this year, versus 9 percent for quarters one to three last year. South Korea’s cumulative imports of U.S. pork are more than 7 percent below last year, but Korea remains the fourthlargest foreign market for U.S. pork products.

So far this year, Canada has gained 1 percentage point in export share. Increased cumulative 2007 imports of U.S. pork—up by more than 6 percent (col. 7) — suggest that the strong Canadian dollar is creating an incentive for Canada to buy U.S. products.

U.S. pork exports for major countries and regions: September 2007, September 2006, cumulative volumes and export shares
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Sept. 2007
(1000 lbs.)
Sept. 2006
(1000 lbs.)
Percent
Change
(Sept. 2007/
Sept. 2006)
Cumulative
2007 U.S.
Pork
Exports
Jan.- Sept.
Cumulative
2006 U.S.
Pork
Exports
Jan.- Sept.
Percent
Change
(Sept. 2007/
Sept. 2006)
Share of
2007 U.S.
Exports
(%)
Share of
2006 U.S.
Exports
(%)
Total Exports 240,619 220,051 9 2,179,463 2,184,154 -0.21
Japan 79,155 74,730 6 801,386 740,086 8.28 37 34
Canada 36,023 31,684 14 254,856 239,489 6.42 12 11
Mexico 29,557 44,164 -33 318,199 452,670 -29.71 15 21
China 21,685 9,553 127 142,960 78,436 82.26 7 4
Russia 20,074 11,573 73 146,182 155,438 -5.95 7 7
Hong Kong 15,221 6,152 147 67,634 31,581 114.16 3 1
South Korea 11,308 15,645 -28 181,764 196,403 -7.45 8 9
Other 7,461 3,275 128 46,031 35,660 29.08 2 2
Cen. & S. America 5,363 4,761 13 57,414 48,968 17.25 3 2
Australia 5,207 3,791 37 59,167 46,682 26.75 3 2
EU-27 4,323 7,319 -41 38,652 61,772 -37.43 2 3
Caribbean 3,876 3,496 11 35,979 48,108 -25.21 2 2
Taiwan 1,366 3,909 -65 29,237 48,861 -40.16 1 2

Lower Valued U.S. Dollar Likely To Fuel Exports Next Year

For 2007, higher second-half exports are expected to more than compensate for lower exports in the second quarter. Total exports this year are expected to reach 3 billion pounds, or about 1 percent above 2006. Next year, total exports are expected to be about 3.2 billion pounds, more than 5 percent above exports forecast for this year. In 2008, plentiful pork supplies, coupled with likely continuation of a lower valued U.S. dollar, are expected to enhance the competitiveness of U.S. pork in foreign markets. The lower valued dollar will likely enable U.S. products to gain market share, particularly in Asia, at the expense of competing exporters whose products are priced in higher valued currencies, particularly Canada and Denmark.

Further Reading

- You can view the full outlook report by clicking here.


November 2007