USDA’s March 27th Quarterly Hogs and Pigs report showed larger March 1 inventories of market hogs and breeding animals, pointing—when taken with stated farrowing intentions and rebounding litter rates—to larger supplies of pork and lower hog prices for the rest of 2015.
The March 1 inventory of market hogs, at 60 million head, was 7.7 percent larger than in last March when the industry struggled with Porcine Epidemic Diarrhea (PEDv) and 1.2 percent larger than spring 2013 inventory. Larger March 1 numbers compared with pre-PEDv inventories suggest that the industry’s rebound has gained traction. The increase in breeding herd numbers—the third in as many quarters—likely indicates the industry is expanding its capacity to produce pigs. Litter rates reported in the March 1 report also showed a rebound. Pigs per litter in the December-February quarter were 10.17, a 6.7-percent increase over the yearearlier PEDv-reduced rate of 9.53 pigs per litter. The dark trend line in the figure below suggests that winter-quarter litter rates did not return to pre-PEDv growth trends; that is, the industry may not have fully recovered from PEDv. Nevertheless, the 10.17 rate reported is record-high for the quarter and will contribute to pork production increases in the summer of 2015.
USDA revised its forecast for 2015 commercial pork production to 24.2 billion pounds, an increase of 6.1 percent over a year ago and 4.5 percent above 2013—a year whose production was largely uncompromised by PEDv and that is perhaps a better basis for comparison. Higher 2015 production rates, together with lower net exports, are expected to depress 2015 hog prices to levels below a year earlier and below prices in 2013. Second-quarter average prices of live equivalent 51-52 percent lean hogs are expected to average $49-$51 per cwt, about 42 percent below second quarter 2014 and 24 percent below second-quarter 2013. For 2015, hog prices are expected to average $48-$51 per cwt, 35 percent below 2014 and 23 percent below 2013.
High-Valued Dollar and West Coast Port Slowdown a Drag on February
Pork Exports
U.S. pork exports in February were 377 million pounds, more than 10 percent below a year ago. Lower exports were a likely consequence of the high exchange rate value of the U.S. dollar, along with labor issues at West Coast ports—which have since been resolved—that slowed inbound and outbound flows of cargo. Although the export picture has been dreary since the beginning of the second half of 2014, there were two important positive aspects of the February trade data: exports to both Mexico and Canada were year-over-year higher in February. This is important because Mexico was the largest foreign destination of exported U.S. pork in 2014, and together, Canada and Mexico accounted for nearly 40 percent of U.S. pork exports last year. Increased February shipments to NAFTA partner countries suggest that U.S. pork prices have fallen to a point that partially offsets the effects of high U.S. dollar exchange rates. Exports to most Asian countries were lower again in February, due in part to competition from European pork, denominated in low-valued euros, and shipping delays out of West Coast ports.
USDA anticipates first-quarter exports of 1.125 billion pounds, more than 16
percent lower than exports a year ago. The exchange-rate drag is expected to slow
second- quarter exports to 1.175 billion pounds, more than 8 percent below a year
earlier. Second-half exports are expected to exceed same-period 2014 shipments
that were depressed by the PEDv market environment in the United States. U.S.
pork exports for 2015 are expected to total 4.75 billion pounds, more than 2 percent
below exports last year.
High-Valued U.S. Dollar Likely Fueled Imports in February
U.S. pork imports in February were about 84 million pounds, 32 percent more than a year ago. The exchange rate value of the U.S. dollar reduces the effective prices of pork shipped to the United States from countries whose currencies have depreciated against the dollar. Canada and several member States of the European Union shipped more pork to the U.S. in February. Exchange rates of the Canadian dollar and the Euro are depicted below.
First-quarter imports are expected to total 305 million pounds, almost 44 percent above a year ago. Imports for 2015 are expected to be 1.2 billion pounds, an increase of almost 22 percent over last year.
Calculated year-over-year percent changes appear large because the United States typically imports relatively modest volumes of pork. But, in 2015, a year where imports are expected to be relatively “large,” imported pork is expected to constitute about 5 percent of U.S. commercial pork production. By contrast, Japan—a major pork-importing country—typically imports volumes that amount to upwards of 80 percent of pork production.
Source: USDA