US pork outlook remains mixed

The downturn in the US poultry sector may benefit the US pork industry but the general outlook remains mixed, according to Steve Meyer from Paragon Economics.

 

The bankruptcy of major chicken producer Pilgrim's Pride and downturn in poultry numbers may benefit pork demand, pork prices and hog prices in 2009, said Meyer.

 

However, Meyer noted that the degree to which the pork industry will benefit depends heavily on the duration of the ongoing poultry production cuts which may not become worse than it is now.

 

Pork exports will not grow at the same pace as in 2008 but it is unknown whether shipments this year will grow at all, said Meyer.

 

Recent developments regarding pork exports had been a mix of good and bad news. Russia has doubled its 2009 pork import quota, but Mexico has disallowed shipments in combo containers and wanted only boxed products, a packaging that many US exporters were unfamiliar to.

 

 

Mexico was concerned that it could not effectively inspect product at the bottom of these large boxes and that importers may be hiding substandard product at the bottom or centre of the boxes. Some US analysts, however, have called the move retaliation against the US country-of-origin labelling rule, which Mexico is against to alongside Canada.

 

A meeting scheduled with Mexican officials was postponed, and the restriction on combos will go into effect at the end of January. US exporters and producer organisations have asked for a time extension to allow them to negotiate the issue.

 

The value of the US dollar will also continue to be a factor in export markets, as a weak US dollar was partly why US pork exports last year was going fast and strong.

 

Historically, pork demand has not suffered much in recessions. As restaurants sells more beef and chicken, these meats tend to be more adversely affected due to declining restaurant sales. In November 2008, the American Restaurant Association reported that restaurant traffic reached an all-time low.

 

Consumption of all three proteins has declined. The University of Missouri's demand indexes for beef, pork and chicken in 2008 stood at -5 percent, -5.6 percent and -2 percent, respectively.