Export demand is driving hog prices
For perspective, U.S. pork production this year is expected to total 10 mmt, thus the expected Chinese production decline equals more than half of U.S. production.
Ron Plain, National Hog Farmer
Apr 15, 2019
It has been a remarkable six weeks. Last week’s national negotiated hog carcass price averaged roughly $75.50 per hundredweight. That is $30 per hundredweight (67%) higher than at the start of March and the highest for any week since mid-July. Although a price increase at this time of year is not unusual, this year’s rally was both extreme and mostly unexpected. Last Friday the April lean hog futures contract expired at $79.30 per hundredweight. That was $22.90 per hundredweight higher than the contract’s close on March 1.
The rally in hog prices was not caused by a shortfall in hog slaughter. Actual slaughter has been higher than expected. USDA’s last Hogs and Pigs report estimated the March 1 inventory of heavy weight market hogs to be 1.6% larger than a year ago. Since March 1, barrow and gilt slaughter has been up 3.7% compared to the same weeks last year.
As often is the case, heavier weights are pushing up pork production. Thus far in 2019, hog slaughter has been up 2.7%. Because of heavier weights, pork production is up 2.9%.
Optimism about export demand has been the prime driver for the rally in hog prices. U.S. pork exports in 2018 were a record 5.87 billion pounds, up 4.2% from the year before. Pork exports are expected to set another record this year even though exports did not start 2019 on a strong note. January pork exports were down 1.8% year-over-year.
Each April and October, the USDA’s Foreign Ag Service updates their forecasts of world pork production and trade. The big changes in their April 2019 predictions from their October 2018 forecasts are in Chinese pork numbers. Because of African swine fever in China, the USDA is forecasting a 10% (5.54 million metric tons) drop in Chinese pork production this year. For perspective, U.S. pork production this year is expected to total 10 mmt, thus the expected Chinese production decline equals more than half of U.S. production. Most of the decline in Chinese pork production (4.858 mmt) will be absorbed by reduced pork consumption in China. But, the FAS is predicting a big jump, 639,000 metric tons in Chinese pork imports over 2018. FAS expects each of the major pork exporting countries to see an increase in their 2019 pork exports. They are predicting a 316,000 mt increase in European Union pork exports and a 170,000 mt jump for Brazil. Their forecast for U.S. pork exports is up 138,000 mt over 2018. A 60,000 mt increase in Canadian exports is predicted for this year.
Because of disagreements concerning trade issues, shipments of U.S. pork to China have been lagging in recent months. U.S. pork exports to China in 2018 were down 11.8% from the year before. January 2019 pork exports to China were down 21.8% year-over-year. However, exports to China appear to be strengthening. The weekly data on exports of fresh, chilled or frozen pork muscle cuts to China were up nearly 200% during the first 14 weeks of the year.
Hog prices, pork cutout value and retail pork prices each increased in March. The live price of 51-52% lean hogs averaged $42.46 per hundredweight in March, up $4.77 from February, but down $3.01 from a year ago. This was the highest monthly average hog price since October.
The pork cutout value last week averaged $84.10 per hundredweight, up $23 per hundredweight since early March and the highest since the week ending on July 6.
The average retail price of pork in grocery stores during March was $3.799 per pound, up 6.8 cents from the month before, up 4.6 cents from a year ago, and the highest for any month since August.
The USDA’s April World Agricultural Supply and Demand Estimates forecast 2019 pork production to be...
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