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Pork exports drive demand, pricesDecline in production expected in 2009 By Jennifer Bremer
Hog and pig numbers showed a substantial increase over last year's numbers according to the recently released USDA Quarterly Hogs and Pigs report. The third quarter report came in very close to trade estimates according to Ron Plain, University of Missouri livestock marketing specialist. The estimate of total inventory was 102 percent of a year ago. The average of the trade estimates was 102.1 percent. USDA's breeding herd estimate was 97.4 percent and the trade estimate was 97.3 percent of 2007. The market herd estimate was the same for both at 102.5 percent. "USDA's estimate for the breeding herd relative to a year earlier was a little larger than our gilt and sow slaughter data indicates," said Plain. "Their estimates for both 2007 and 2008 showed extremely large productivity growth. We believe the breeding herd for both years was underestimated." The report showed record numbers for hogs in Iowa--the nation's number one pork producing state. The inventory is recorded at 19.8 million head-up 900,000 head from the same month last year. The total number of hogs and pigs in the U.S. was 68.7 million head on Sept. 1--a 2 percent increase from the same time in 2007 and 1 percent over the June 1, 2008 report. The domestic demand index for pork at the consumer level for January through August was down 4.9 percent from last year. However, exports continue to drive the hog market, with demand for live hogs for the first eight months of the year being up 7.6 percent despite a weakened demand in September. "There is also a decrease in beef demand. We believe these significant declines in consumer demand for both beef and pork are due to a weak general economy and high energy prices," said Plain. Consumer demand for broiler and turkey meat was up some during January through July, which makes him believe consumers are shifting to lower priced protein. Exports continue to be the redeeming factor for pork producers and continue to be high. July exports were up 84.7 percent from a year ago, according to Plain. Exports for the first seven months of 2008 were up 70.8 percent compared to the same period in 2007. Exports to Japan were up 21.8 percent, to Mexico up 37 percent, to Canada up 25.7 percent, to South Korea up 23.2 percent, to Russia up 144.2 percent, to China-Hong Kong up 376 percent, to Taiwan up 20.5 percent, to Australia up 25.1 percent and other countries up 119.7 percent. "For January through July 2007, the value of pork exports per hog slaughtered in the U.S. was $24.60 per head. For the same seven months in 2008, that amount grew to $35.89," he said. The total value of pork and pork variety meats exported per head slaughtered in 2007 was $28.11. For 2008, that amount had increased to $41.29. Total commercial slaughter in 2008 is expected to exceed 117 million head, up nearly 7.5 percent from the previous record in 2007. "Slaughter in the first quarter of 2009 is forecast to be down a little over 2 percent based on the light weight market hog inventories. The second quarter of 2009, shows a slaughter decline of 5 percent," said Plain. "We are a little apprehensive that this much decline will actually occur." Farrowing intentions for the first quarter are estimated to be down only 3 percent. "If demand does not fall too much in 2009, hog prices in both the third and fourth quarters are expected to be near breakeven to somewhat positive for the average cost producer, assuming a normal corn crop in 2009," he concluded. Plain estimates terminal market barrow and gilt prices for the last quarter of 2008 will be $41 to $44 per cwt. Estimates for 2009's first quarter are $43 to $47 per cwt. with a strengthening to $52 to $56 per cwt. for the second quarter. Iowa State University livestock economist John Lawrence said, "Producers have been cutting back inventories and adjusting their farrowing plans in an attempt to improve the market prices and potentially preferable market timing." Lawrence said even though the average production in the fourth quarter will be higher than last year, there will be a tapering down of hog supplies until December when slaughter levels will be very near last year's levels. He believes production in 2009 will start out at levels similar to those of last year, but will continue to decline throughout the year. While pork trade has been a bright spot for producers, the past year has been difficult. "Higher feed and energy prices have caused cost of production to increase 27 percent from August 2007 to August 2008," he said. "During that time selling prices ranged from their lowest level since 2003 in November to a record high price in August followed by the largest one week drop in prices since the early 1970s." Pork producers have operated at a loss in nine of the past 11 months and Lawrence said the losses are forecast to continue until April or May of 2009. Jennifer Bremer can be reached by phone at 515-833-2120 or by e-mail at jbremermaj@hotmail.com. 10/6/08 Date: 10/1/08
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