Source: Susan Kelly, MEATINGPLACE, 6/22/18


Slower processor demand for hogs, soft domestic demand for pork, and adjustments to Mexican tariffs are likely to weigh on second-half hog prices, USDA said in the latest “Livestock, Dairy and Poultry Outlook.”

Slower-than-expected plant startups, relatively weak wholesale pork prices and lower margins have created a drag on aggregate processor demand for hogs, likely limiting seasonal increases in hog prices, USDA said.

Processors’ gross margins in May averaged about $15/cwt, almost 29 percent lower than a year ago. Processors this year may have reduced weekly slaughter recently in an effort to keep gross margins from going negative, given weak wholesale demand for increased volumes of most pork cuts, USDA said.

Prices of May live equivalent 51-52 percent lean hogs averaged $46.86/cwt, 7.1 percent below prices in May 2017. While year-over-year lower hog prices are typically good news for processors, May prices were not enough this year to offset sharply lower prices received for most pork products, according to the report.

Third-quarter hog prices are expected to average 19 percent below a year earlier, and fourth-quarter prices are expected to be almost 17 percent below prices in the same period of 2017, USDA forecast.

Exports
On June 5, Mexico imposed retaliatory tariffs on U.S. pork products that comprise the majority of U.S. pork exported to Mexico. Ten percent duties are assessed on the value of products classified under the announced tariff codes. On July 5, the assessed tariff increases to 20 percent.

Total pork exports in 2018 are expected to be almost 6 billion pounds, 6.4 percent more than a year earlier. The forecast for 2019 was increased by 40 million pounds to 6.2 billion pounds, 3 percent above exports forecast for 2018. It is anticipated that the low relative prices expected to accompany increased U.S. pork production and strength in demand among important importing countries will provide strong incentives for all foreign buyers to purchase U.S pork.

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