2011 Starts off Bullish
Commodity markets began 2011 on a bullish note with Chicago futures predicting a record year for hog, cattle, corn and soybean prices. For pork producers this is both good news (hog prices) and bad news (feed costs).
In mid-January, all lean-hog futures contracts were trading above $80 per hundredweight, a level not often reached by the cash market. Unfortunately for the livestock industry, all corn futures contracts through December 2014 were trading above $5.25 per bushel. That price strength is driven by tight supplies and optimism that better days lie ahead for the U.S. economy. If the economy doesn’t improve, consumer resistance to record meat prices will likely mean that those who are currently trading livestock futures are too optimistic.
U.S. Pork Exports Still a Bargain
USDA is predicting a 9 percent increase in pork exports for this year. That is a big jump and will take pork exports close to 2008’s record. If we do set a new record in 2011, the primary reason will be the weak U.S. dollar. Pork production is expected to be up less than 1 percent from 2010 levels. U.S. retail pork prices in 2010 were record high when valued in U.S. dollars, but they were the lowest since 1996 when valued in Japanese yen. That’s important because Japan is our biggest foreign customer and U.S. pork looks to be a bargain this year.
Meat Supplies Cut Consumption
During the last 60 years, per-capita meat consumption has grown at an average rate of more than 1 pound per year. High feed costs and weak meat demand during the last few years have produced a lot of red ink on livestock farms and mandated a smaller livestock and poultry sector. Add in increased meat exports, and the result is a smaller meat supply on the U.S. market.
U.S. meat consumption per person this year is expected to be down for the fifth consecutive year and the lowest since 1998. On a per-person basis, this year’s pork supply is forecast to be the tightest since 1997, with the beef supply the lowest since 1952.