While U.S. pork producers have been selling increasingly more pork to overseas markets each year, it means there is less pork for the domestic market. For 2011, pork sales to other countries claimed more than 23 percent of the United States’ annual production. In the year ahead, exports are expected to mirror that level.
Consequently, the U.S. per capita pork consumption has trended downward in the past several years. The U.S. per capita pork consumption averaged 50.1 pounds in both 2006 and 2007 when $2-per-bushel corn was still the rule. That dropped to a low of 45.8 pounds by 2011, a 9 percent decrease, says Chris Hurt, a Purdue University agricultural economist.
However, that may change should pork producers increase production. “In the next several years, not only will pork exports stay strong, but U.S. domestic per capita consumption is poised to recover as the pork industry expands production,” Hurt says. “That pork expansion will be brought on by strong profits that began in the spring of 2011 and by moderating feed prices. A third supporting force will be the very low levels of beef available into 2015, due to drought-induced culling, which spiraled last year.
The downside moderation of feed prices holds the key and is still dependent on a return to a “normal” growing season and yields this year. For that reason, the pork industry should still view 2012 as a transition year, Hurt says, as more moderate feed prices still depend on rebuilding corn and soybean inventories.
“Limited competition from beef in the meat case, however, is now locked in for several years,” Hurt notes. “The current small beef-cow numbers mean small calf crops for several years, and the retention of heifers as expansion begins means small beef supplies until at least 2015. The pork industry is well positioned to quickly take advantage of this uptick in market opportunity that is beginning to present itself.”
From 2006/2007 to 2012, grew by 8 percent, yet less pork ended up in U.S. meat cases. Today, U.S. consumers have new competition from foreign buyers for limited pork supplies.
In 2006, China was the sixth largest U.S. pork buyer, representing 5 percent of U.S. exports. In 2011, it moved to the third largest buyer, claiming 15 percent of U.S. exports.
While the Chinese have a huge pork appetite—it’s their No. 1 consumed protein—the country has a history of inconsistent and unpredictable purchasing patterns. “As recently as 2004 to 2006, China was a net pork exporter, selling more to the world than they purchased from the rest of the world. Since 2007, however, they have been a net importer, but an inconsistent one,” Hurt notes.
For example, the Chinese buy large amounts of pork when they need it, such as in 2008 due to internal disease issues and the Olympics. They returned in 2011 when pork prices were driving the country’s inflation rate higher, and officials needed to quickly increase pork supplies and quell inflation.
The future direction of pork exports to China remains unclear. “The preference within China has been to raise their own pork and buy only from the world market when their internal production runs short,” Hurt says. “They are rapidly increasing domestic production, so the race is on to see if they are able to increase it as quickly as internal demand is rising.”
While China garners much attention out of its mere size and changing social trends, Japan remains the No. 1 U.S. pork importer, with a consistent 30 percent to 35 percent of U.S. exports. Mexico comes in second with 20 percent of U.S. exports in 2011, Hurt adds.
While nearly 80 percent of U.S. pork remains in the domestic market, the most dramatic growth opportunities lie outside of the United States. There are two driving growth components-- population growth and increasing per capita consumption. Mexico is near the top of pork’s growth opportunities.
In the last decade, Mexico averaged population growth of 1.6 percent and per capita pork consumption growth of 2.5 percent annually. Combined, this means total per capita pork consumption growth rates in Mexico averaged 4.1 percent per year over the last decade. China’s annual growth rate in total per capita pork consumption has been 3 percent, South Korea has been 2.6 percent and Japan has been 1.3 percent. In contrast, the United States’ rate has held near zero as a modest population growth has been offset by declining per capita pork consumption.
In the next several years, Hurt believes the U.S. pork industry will benefit from strong growth in foreign per capita consumption and from some expansion in domestic per capita consumption as well.
Source: Purdue University