More and Heavier Hogs in the First Quarter

More and Heavier Hogs in the First Quarter

USDA raised first-quarter U.S. commercial pork production by 30 million pounds, as hog slaughter and average dressed weights in February were both higher than earlier anticipated. Estimated federally inspected hog slaughter in February—9 million head—was more than 4 percent above a year ago, while average dressed weights will likely finish the quarter more than 2 pounds heavier than animals slaughtered a year ago. First-quarter commercial pork production is expected to be 6.2 billion pounds, almost 7 percent greater than a year ago. Prices for live equivalent 51-52 percent lean hogs will likely continue to reflect expectations for continued rebound from the effects of Porcine Epidemic Diarrhea (PEDv) last year, that is, from larger supplies of hogs. Hog prices are expected to average $49-$50 per cwt, about 28 percent below first-quarter prices a year ago.

USDA will release the Quarterly Hogs and Pigs report on March 27. The inventory and hog production information in the report will aid efforts to discern the extent of hog industry’s rebound from PEDv.

January Exports Sharply Lower

January U.S. pork exports were 348 million pounds, a volume more than 21 percent below a year ago. With the exception of South Korea, shipments of U.S. pork to all major foreign destinations were lower than a year ago. Most of the decline was clearly centered in Asia, to which exports have been hampered recently by labor disputes at U.S Pacific ports. The dispute has reportedly been resolved, but freight backlogs are likely to hamper resumption of smooth export flows well into the first quarter.

For the Third Consecutive Month, Exports to Mexico Lower 

While labor problems at U.S. West Coast ports likely contributed to declines in January exports to Asia, shipments to Mexico—not much affected by Pacific port labor disputes—were marginally lower than a year ago. Last year, Mexico was the largest foreign market for U.S. pork, in terms of volume. Lower shipments to Mexico in January could be attributed in part to the high exchange rate of the U.S. dollar; as the value of the U.S. dollar increases, more pesos are necessary for buying U.S products, leading to lower demand. The figure below shows the recent history of this key exchange rate, which affects buying decisions of a country that is an important source of growth for U.S. pork exports.

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Source: USDA