US pork exports to support strong hog prices in 4Q

by Meat&Poultry Staff
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WASHINGTON – Strong domestic and foreign demand will likely support US hog prices at very healthy year-over-year levels for the rest of the 4Q — a time when producers typically face the lowest yearly prices, according to the US Department of Agriculture’s Economic Research Service.

Prices for live equivalent 51-52 percent lean hogs in October were $68.44 per cwt, almost 31 percent higher than one year earlier, at the same time that estimated weekly federally inspected pork production during the month was about 1-percent above that of one year ago.

Higher hog prices, concurrent with increased production, indicate pork demand may have increased compared to a year earlier. Although hog prices by themselves are not indicators of producer profitability, hog producers’ estimated 4Q 2011 feed cost spread will likely be positive. More typically, fourth-quarter feed cost spreads are negative, largely due to seasonal increases in hog supplies and, consequently, lower hog prices.

Fourth-quarter hog prices are expected to be $64-$66 per cwt, about 30 percent above the same period last year. Commercial pork production is expected to be about 6.1 billion lbs., about one-half percent below last year’s 4Q production.

One result of strong US pork exports can be a lower level of pork products available for domestic consumption, and higher commensurate retail pork prices. Third-quarter domestic pork availability, measured on a per capita basis at 11 lbs., was more than 6 percent below the same period last year. Fourth-quarter availability is expected to fall by more than 3 percent below a year ago, to 12.4 lbs. per capita.

With foreign demand bidding US pork away from domestic markets, lower availability of pork for domestic consumers most likely explains the string of record-high retail prices that continued into September. September retail pork prices averaged $3.56 per lb., almost 8 percent higher than in September 2010. Retail pork prices should continue to average in the low-to-mid $3.50s in the fourth quarter.
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