Smaller hog supplies provide better outlook for US pork prices    

Smaller-than-expected hog supplies so far in 2010 and a rebound in US pork exports during the final quarter of 2009 are contributing to a firmer outlook for cash hog and wholesale pork prices ahead.

Analysts and livestock market managers said based on weekly slaughter data so far in 2010, around 2% fewer hogs have been available than had been projected by the December quarterly hogs and pigs report. Fewer hogs and lighter carcass weights are reducing the amount of pork available to be sold.

In addition, a rebound in export sales during fourth-quarter 2009 suggests that more of the pork produced will be shipped to international markets, resulting in less left to be consumed domestically.

The USDA's export sales data as compiled by the US Meat Export Federation show total pork exports, including pork variety meats, in December were 165,711 tonnes, an increase of 7.8% from a year ago. The higher valued pork muscle meats showed an increase in volume for December of 14.2%.

For the fourth quarter, total pork exports averaged 166,450 tonnes a month, down just 3.2% from the same period in 2008. From January through September last year, the total pork sales volume averaged 151,822 tonnes, down 11.1% from the previous year.

Market analysts said concerns about the world economy were more heightened during the first half of the year and spilled into the summer as well. By the fall, the outlook for the economy began to improve, which, along with a weak US dollar and multiyear lows for hog and pork prices hit in August, contributed to the rebound in exports during the final quarter. With a weak dollar and cheaper wholesale prices, international buyers were looking at some real bargains, analysts said.

The USDA projects pork export sales for 2010 to be up 9% from 2009. If achieved, that would put sales just slightly below the record set in 2008.

The USDA forecasts 51%-52% lean-hog live-equivalent prices to average between US$46 and US$49 per hundred pounds for the year. That is up US$3 from the government's projections for 2010 prices that were made in November. Some market analysts look for hog prices to be higher still than the USDA's estimates, due in part to a stronger-than-expected rebound in the market to begin the year.

Live-equivalent prices during January and February have averaged US$48.70, and the seasonal trend into the spring and summer is higher. Lean-hog futures prices at the Chicago Mercantile Exchange for April through December currently project a live price average of around US$52-US$52.50. If these prices are achieved, producers should make a modest profit unless feed costs move higher, analysts said.