We have previously contended that stunningly strong demand powered the February-March spike in hog and pork prices.  The fact that the greatly reduced production experienced at that time still substantially exceeded normal summer lows represented the best evidence in that regard.

That still appears to have been the case, but we must admit to having at least partially misjudged the source of that buying.  That is, we argued that domestic processors had apparently been panicked into buying much more aggressively than was usual for late winter and early spring, which held negative implications for the spring-summer outlook.  However, this week’s trade news suggested export demand was stunningly strong during March and probably played a big role in the price surge.  The following chart illustrates this point. 

As the chart shows, U.S. pork export surged to 483.3 million pounds in March, which represented monthly and annual increases of 15.2% and 21.7%, respectively. Indeed, it was the largest monthly export total posted since October 2012 and fell only about 22 million pounds below the all-time record from November 2011. 

Moreover, the buying wasn’t confined to a single nation.  Chinese buying rose 61.9% annually, while Mexico and South Korea boosted their respective purchases 43% and 72% above year-ago levels. 

One could certainly argue that buyers from those countries were panicked into buying much more actively than planned, but the fact that exports grew so strongly while price soared 20% beyond the former record suggests that demand strength may prove more sustainable than previously thought.  Nevertheless, the persistent cash and wholesale weakness experienced since early April has continued weighing upon spring and summer futures. 

We harbor suspicions that the downtrend will lose momentum at lower levels, but would warn that it may persist much longer than many currently believe.