Highlights

Consumer demand up 2.3 percent   Packer demand up 6.4 percent    Weekly slaughter up 12.5 percent   Live hog prices down but better than expected

 

March 5, 2008

 

Demand for US pork remains strong despite increased production

 

 

Domestic demand for pork at the US retail level and for live hogs from packers remains strong, based on calculations from November to January data.

 

From November through January, consumer demand domestically was up 2.3 percent from the same period a year ago. Packer demand for live hogs was up 6.4 percent from a year ago, according to Glenn Grimes and Ron Plain, agricultural economists at the University of Missouri.

 

Market analysts and livestock dealers said large weekly slaughter rates, which have averaged about 12.5 percent above a year ago through the first two months of 2008, reflect packers' desire to maintain their large and most efficient slaughter rates plus their individual share of the market.

 

Cash hog prices are well below the calculated break-even levels. The supply of slaughter-ready hogs continues to run well above projected levels. Analysts said cash hog prices would have been even lower if demand had fallen short of a year ago.

 

In their weekly Hog Outlook report released Friday, Grimes and Plain said live hog demand has remained strong despite a 10-percent increase in production throughout that period. Live hogs prices in November through January were down about 16 percent, but based on historical data, that type of increase in output would normally cause hog prices to decline by 30 percent to 40 percent, they said.

 

Retail pork prices for January were at US$2.85 per pound, which was down 0.1 percent from December 2007 but up 1.9 percent from a year earlier, Grimes and Plain said.

 

Dan Vaught, analyst with Wachovia Securities in St. Louis, said domestic demand has remained relatively strong. He said Chinese buying interest in US pork may have recovered in January after dropping sharply in December. Vaught also suspects that a rebound in Mexican buying of U.S. pork in December continued and/or accelerated in January.

 

USDA data on pork exports in January will not be available until the middle of March.

 

Jason Roose, analyst with US Commodities in West Des Moines, Iowa, said due to the large supplies, wholesale pork prices have been relatively cheap compared with beef. Overall, demand for pork has been holding up pretty well, he said.

 

Hog slaughter rates continue to run very heavy and near capacity. In tougher economic times, consumers tend to buy the cheaper products, and the pork sector is positioned well price-wise for demand to remain good, analysts said.

 

The demand figures for beef and fed cattle from November through January were also up from a year ago but the growth rates were not as large as for pork. Grimes and Plain show choice beef demand up 1.8 percent and for live cattle up 2.6 percent from a year ago. Demand for broilers in the latest three months was down 6.9 percent from a year ago.