Source: Rita Jane Gabbett, MEATINGPLACE, 9/26/16


Strong second-half U.S. pork production, coupled with increases in beef and poultry supplies, is expected to result in lower hog prices, pressuring producer margins despite lower feed costs.

While lower hog prices tend to favor processor margins, added competition from beef and poultry could constrain those as well, USDA warned in its latest Livestock, Dairy and Poultry Outlook report.

Third-quarter commercial pork production is expected to be 6.1 billion pounds, 1.9 percent above third-quarter 2015, and 6.6 billion pounds in the fourth quarter, 2.6 percent over a year ago.

Prices of live equivalent 51-52 percent lean hogs are expected to average $49-$50 per hundredweight (cwt) in third quarter, more than 9 percent below a year ago.

Fourth-quarter prices are expected to average $39-$41 per cwt, about 10 percent lower than a year earlier.

China, dollar value keeping pork exports afloat
U.S pork exports in July were 403 million pounds, almost 2 percent above July 2015. Positive year-over-year exports were made possible largely through shipments to China/Hong Kong, which helped offset lower shipments to Japan and Mexico.
China/Hong Kong accounted for 15 percent of U.S. pork exports in July, versus 9 percent a year ago. Data from the Global Trade Atlas show that China has imported almost 2.1 billion pounds (product-weight basis) through July of this year. More than two-thirds of China’s imports come from the European Union. European pork products have an advantage over U.S. pork due to the depreciated value of the euro and to the generally low level of pork prices in Europe since the imposition of the Russian ban on European pork products in January 2014.

Due largely to strong exports, European pork prices have tightened, creating opportunity for U.S. pork products in Asian markets in particular, USDA noted.

As the U.S. pork industry enters the seasonal period of highest production, the value of the U.S. exchange rate appears to be trending lower vis-à-vis the currency values of its major trading partners.

Attractive late third-quarter and fourth-quarter pork prices, together with an improved exchange rate, should support pork export volumes, USDA predicted. Pork exports in the third quarter are expected to be 1.3 billion pounds, almost 7 percent higher than a year ago. Fourth quarter exports are expected to be 1.4 billion pounds, almost 10 percent above fourth quarter 2015.

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