There is plenty of room in cold storage, as it remains at levels lower than a year ago when it was first drawn down during the Covid-19 pandemic. According to this week’s USDA cold storage report, cold stocks of pork on August 31 are up 4% from the previous month and down 1% from a year ago or about 24% from two years back. Beef stocks are up 4% from last month and down 8% from last year, while poultry stocks are down 3% from last month and about 20% from a year ago.
The USDA forecasts U.S. per capita pork consumption at 50.3 pounds per person in 2021, with the number rising slightly to 50.9 pounds per person in 2022, both of which remain lower than pre-COVID-19 levels around 52 pounds in 2019 and 2020.
The U.S. exported 508 million pounds of pork in July, or about 8.5% lower than in July of 2020. Higher exports to most other major markets were unable to offset 62% lower shipments to China and Hong Kong and 7% lower to Canada. These cuts reflect increased pork production in both countries, especially as China reportedly recovers from African Swine Fever.
Forecasted exports for the remainder of 2021 are trimmed based on expectations of continued lower Chinese demand. The USDA estimates U.S. pork exports to be 1.575 billion pounds in the 3rd quarter of 2021, or about 3.2% lower than last year, with 4th quarter exports revised 25 million pounds lower than last month’s forecast but still 3.6% higher than last year. The 1st two quarters of 2022 are forecast to be about 4% and 3% below 2021 levels, respectively. All in all, total pork exports for 2021 are expected to exceed 2020 levels by about 1%, and then drop by about 0.5 percent to 7.3 billion pounds in 2022. Hence, even with decreased Chinese demand, exports should remain fairly strong.
Even with currently high costs of production, hog prices should keep producers in the black for the remainder of 2021 and into 2022, depending on the corn harvest and if pork export demand holds out. The forecast presented here is for the national weighted average net price on a carcass basis for all transactions for producer-sold barrows and gilts, including negotiated and contract prices. This net price should be more reflective of what producers receive, on average, and normally averages a premium of more than $2/cwt over the base price, but for the period of high prices from June through August averaged $107.64/cwt compared to $111.79/cwt for the corresponding net prices for negotiated or spot transactions.
In general, hog prices tend to be higher in the 2nd and 3rd quarters, with lower prices in the 1st and 4th quarters. Consistent with that pattern, prices are forecast to drop to an average of $85.12/cwt for the 4th quarter of 2021, reflecting a balancing of expectations for supply and exports being revised lower for the near-term. For 2022, prices are forecast to average $81.20/cwt in the 1st quarter and then rise seasonally to $87.30/cwt and $89.60/cwt in the 2nd and 3rd quarters. However, if during that time, further setbacks are discovered for China’s recovery from African Swine Fever or Chinese producers otherwise pullback expansion, for instance due to rumored limited profitability, then greater export demand and higher prices may be realized.
Source : illinois.edu