While the March Hogs and Pigs Report can be considered “ho-hum” in terms of market impact, there is one segment that requires watching—and that’s pork demand.
“Demand is in capital letters,” says Glenn Grimes, University of Missouri agricultural economist. “It’s still the big key for hog prices.” He expects to see domestic pork demand soften by the third quarter of this year.
In terms of overall pork demand, you have to look at the export and domestic markets.
Export demand has been solid, and for the most part will continue into this year. “Pork exports for January were up 25 percent from the previous year,” notes Jim Robb, director of the Livestock Marketing Center, Lakewood, Colo. “Add to that a 7 percent decline in pork imports and there’s a very positive story for this industry.”
Expect that trend and impact to continue, as the U.S. pork industry will increasingly depend on export sales. “Last year, exports were a $1-billion industry,” says Robb. “On a net basis, international trade will be key. We’ll be discussing it in our price forecasts especially through the next two years.”
Trade uncertainties for both Canadian and U.S. beef exports have allowed the U.S. pork industry to grow its exports. When that might change remains a question mark. “If the Canadian border opens this summer, we’ll see more beef come in and compete with pork,” says Grimes.
Robb looks for export sales of U.S. pork to remain robust for the year, but not on pace with past records. He estimates a year-end gain for pork at 7 percent to 10 percent over 2004 levels.
The weaker U.S. dollar will continue to help support export sales of U.S. goods. While the Federal Reserves’ recent actions to keep inflation in check will also lend some support the dollar, there’s likely more downside ahead, says Dale Durchhloz, senior market analyst with Agrivisor Services. Exactly when and how much the U.S. dollar will slide remains to be seen.
Questions also exist about how the U.S. economy will toy with pork’s domestic demand. What lies ahead for the U.S. economy and how consumers will react are tough equations to figure the analysts agree.
There are some points worth noting in terms of domestic pork demand. Among those was this past Tuesday’s USDA Cold Storage Report, which showed all meat supplies on the rise. For pork, 544 million pounds entered cold storage in February, compared to 498 million in January. What’s more important, in February 2004 pork storage supplies declined, not grew. “That puts into perspective demand’s potential fall off,” notes Durchhloz.
Last year proteins scored big thanks to the Atkins and South-Beach diets. “The fundamentals of the high-protein diets seem to have run its course,” says Robb.
So, while the March pig crop report shows few changes in terms planned productivity, supply is not the only thing for you to watch.