Domestic U.S. pork consumption plus thriving pork exports are expected to lead to rising hog prices through the summer and fall, according to industry analysts. For their part, U.S. pork exports have already set a robust pace for the year. Volume of U.S. pork shipments to foreign markets have increased by 18 percent and have surpassed $1 billion for the first time in just the first two months.
“Seasonally, hog prices should rise between now and the end of May and traders are looking for any sign that the increase in prices is finally beginning,” according to Rich Pottorff, Doane analyst. “If we get the seasonal increase in cash hog prices that people expect, the summer and fall hog contracts should continue to strengthen.”
Meanwhile, deferred hog contracts have fared a little better than nearbys. “The October contract has gained about $4 per hundredweight since the end of March.” Pottorff says
CME Daily Livestock Report (DLR) authors Steve Meyer and Len Steiner expect continuing demand for U.S. pork in China and Hong Kong due to domestic herd problems and food inflation. Exports of variety meats will be a key challenge, however. “Those need to average 17,180 tons or so this year and February’s total was just 11,488 tons,” according to the DLR report. “For both pork muscle cuts and variety meats, Mexico appears to be the better bet for 2012 — if the peso can gain, or at least maintain, its value.”
With U.S. consumers buying less hamburger due to the lean finely textured beef controversy, and broiler production declining, Pottorff expects to see domestic demand for pork improve. If demand factors remain favorable, the analyst expects the October contract could get back to the $90 target level that was just missed by a few cents back at the beginning of March.
U.S. pork consumption may depend to some extent on maintaining a price advantage over beef. University of Missouri agricultural economist Ron Plain expects domestic pork prices to increase but only slightly over the coming months. “USDA’s latest estimate is that the 2012 domestic per capita pork supply will be 46.1 pounds, up 0.9% percent from last year,” said Plain.
However, USDA also estimates that the 2012 domestic per capita meat supply will be 200.5 pounds, down 2.0 percent from last year. “Combine the two effects and you should have a 1.5 percent higher retail pork price than in 2011,” Plain says. “Higher beef prices are obviously good for pork demand and pork prices.”