The conclusion of the first half of 2016 is a good point in the year for taking the pulse of the U.S. pork industry. As the figures below illustrate, the industry appears to be doing well so far this year. While the first half was not a standout, slight supply increases, supported by solid product demand, created largely positive returns along the U.S. pork supply chain.
Federally inspected pork production through the week ending July 2, 2016, was about unchanged compared with the same period last year. Slaughter numbers were slightly larger than last year; unlike recent years, first-half 2016 production increases were not furthered by higher average dressed weights.
Weights were about 1 percent lower than in the same period last year. With lower first-half feed costs, lighter weights were probably attributable to some combination of weather, disease, and perhaps even to lower ractopamine usage by U.S. producers. There is anecdotal evidence that producers are dropping ractopamine from hog rations at the behest of some packers to enhance eligibility for product-export to China.
Despite largely unchanged pork production, wholesale prices were year-over-year higher in the first half. Higher pork prices for slightly-larger-to-unchanged supplies of pork suggest a positive shift in pork demand.
A large part of the demand increase was likely due to foreign demand for U.S. pork products; U.S. pork exports through May were about 1 percent higher than in the same period a year ago.
January through May exports to the 10 largest U.S. foreign markets, set out in the table below, show that shipments to China-Hong Kong have so far made the difference between a small year-over-year increase in exports—1.23 percent—and a sizable year-over-year decline.
Despite lower average hog prices (-3.3 percent year over year), lower feed costs, and solid pork demand—bolstered by strong shipments to China/Hong-Kong—allowed U.S. pork producers to surmount a tough beginning in January, to eke out largely positive returns in the first-half of 2016.