Better market outlook for American swine sector

US pork exports are expected to increase from last year amid tighter inventories, with the effect of shoring up prices.

A large part of the reduction in the 2010 US hog slaughter will be due to significantly fewer Canadian live-animal imports, according to livestock economist Erica Rosa.

Smaller herds, expectations for a better world economy and some growth in export sales are expected to trim the amount of pork available to the US domestic market. Supply reductions of just a few percentage points should be sufficient to push up by several cents a pound the weekly supermarket offerings to US consumers of pork, according to market analysts.

This is expected to benefit both pork producers and investors in hog futures.

Futures traders at the Chicago Mercantile Exchange have built premiums of 11 to 13 cents a pound into the summer-month contracts, versus the December 2009 futures expiration of 64.57 cents a pound. February contract CME hogs rose 2.5% on the week to close Friday (Jan 8) at 67.25 cents a pound.

Early in 2009, hog prices and pork demand were affected by the global recession and the AH1N1 outbreak. Wholesale prices in mid-August then fell to the lowest level since January 2003 following some key international markets temporarily banned imports of US pork owing to flu concerns.

USDA forecasts of the consumer-price index for pork expenditures in 2010 are up 1% to 2%, which would put the index level near 2008 levels.