Better Pork - October 2016

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36 Better Pork October 2016
MOE’SMARKET MINUTE
Will there be more pork on
the menu in 2017? USDA’s
(United States Department
of Agriculture) latest demand and
supply estimates point to a year-on-
year increase in U.S. pork demand
of 557 million pounds for 2017. U.S.
pork production, though, is expected
to outscore demand and rise by 603
million pounds next year. Pork seems
to have been replacing beef on the
dining table due to lower prices.
USDA forecasts U.S. hog pro-
duction to hit record highs in 2016,
and multi-month lows in wholesale
pork prices suggest that grocers are
struggling to sell the pork already
on hand and adjust to the reality of
big hog numbers. The key June 2016
Hogs & Pigs report showed U.S. hogs
inventory had expanded more than
expected and has since been weigh-
ing on prices.
U.S. inventory of all hogs and
pigs on June 1, 2016 was 68.4 mil-
lion head, up two per cent from June
1, 2015. This is the highest June 1
inventory of all hogs and pigs since
estimates began in 1964. Breeding in-
ventory, at 5.98 million head, was up
one per cent from last year. Market
hog inventory, at 62.4 million head,
was up two per cent from last year.
This is the highest June 1 market hog
inventory since estimates began in
1964.
The Canadian hog herd, com-
pared to July 1, 2015, was up 1.9 per
cent (at 13.5 million head) at mid-
2016. The breeding herd was up one
per cent (at 1.24 million head) and
market hog inventory was up two per
cent (at 12.2 million head). The Ca-
nadian hog herd is 20 per cent of the
size of the U.S. herd. Canada is the
source for about three-fourths of U.S.
pork imports plus about six million
live hog imports each year.
After seeing steep price rises dur-
ing the initial half of 2016, lean hog
futures fell below $60 per pound
in August as investors continued
liquidating their long (buy) positions.
U.S. Commodity Futures Trading
Commission (CFTC) data shows that
speculative managed money funds
have been reducing their net long
position (buying exposure) since late
June due to plentiful supplies.
Lean hogs – net speculative managed
money positions
According to U.S. Meat Export
Federation, which based its calcu-
lations on USDA data, U.S. pork
export volume was up two per cent
to 1.1 million tons for the first half
of the year but value was down four
per cent to $2.77 billion. Exports to
China/Hong Kong finished the first
half of 2016 at 80 per cent higher
than a year ago in volume (284,900
tons) and 63 per cent higher in value
($540.5 million). Rabobank estimates
China will see a supply gap of two
million tons in 2016 owing to floods
and production issues. The country
will likely maintain a similar level of
imports even when local production
recovers in 2017.
Due to China’s pork prices being
nearly twice that of competing coun-
tries, pork imports are going strong.
The European Union, though, is the
main exporter of pork and variety
meat to China. Although the United
States has increased its pork exports
to China, the lack of eligible U.S.
pork production plants has hindered
the United States from capturing
more of the market.
Canada looks most likely to
increase its trade with China as it
has one of the largest supplies of
ractopamine-free pork. The decline
in the value of the Canadian dollar is
another advantage. Though
Chinese import prospects are a
strong boost for U.S. and Canadian
pork exports, it is important to rec-
ognize the swings in Chinese demand
and realize that growth in other key
markets is essential.
USDA forecasts 2016/17 will pro-
duce the United States’ first 15-bil-
lion-bushel corn harvest and the first
four-billion-bushel soybean harvest.
These record harvests will help lower
feed costs as we go into 2017. This
decline is not likely to be sufficient to
keep hog profits up, as it doesn’t do
much to boost hog prices. Demand
and exports will have to tick up to
boost hog prices.
Swine dining in 2017
Pork demand is expected to rise in 2017 and so is production.
by MOE AGOSTINO and ABHINESH GOPAL
U.S. Pork Supply and Use
Item
Beginning Stocks Production Imports Total Supply Exports Ending Stocks Total Use Per Capita
Million Pounds
Pork
2015 559 24,517 1,111 26,187 4,941 590 20,656 49.8
2016 590 24,923 1,150 26,662 5,218 625 20,819 49.8
2017 625 25,526 1,160 27,311 5,300 635 21,376 50.8
Source: USDA