April 22, 2013

 

US hog industry continues to grow despite high feed costs

 

 

The USDA March 2013 Quarterly Hogs and Pigs Report showed that producers had larger inventories of hogs and pigs than industry experts had estimated and are saving more piglets, a record 10.08 per litter.

 

"I think it is a commendation for the industry. The (hog) industry has risen to the top and is doing better, and is doing more with less," said Victor Aideyan, HISGRAIIN Commodities senior risk management consultant, London, Ontario.

 

Of the 10 categories highlighted in the March report, trade analysts had anticipated smaller numbers for eight of those. Only the breeding herd and June-August farrowing did not increase as much as the pre-report estimates.

 

The number of pigs in the 120-179-pound category was significantly larger than pre-report estimates, said Jim Robb, Livestock Marketing Information Centre, director.

 

"Near-term, we have some larger hog supplies than we had anticipated pre-report," he said. "We have pulled down slightly our price forecast as we look ahead, based on this report."

 

With high grain prices through much of 2012 and continuing into 2013, analysts had expected pork producers to cut their numbers. However, pork producers were able to at least break even through the winter of 2012-13. They also increased efficiency.

 

Aideyan noted that the 10.08 pigs-per-litter number allowed expansion even though the breeding herd did not expand.

 

"Looking forward, we can expect larger numbers going into the second quarter for sure, and beyond," he said. "The industry is positive, it's efficient and getting better at what it's doing, but it is a situation where the result is we are facing tougher pricing and increased supplies."

 

With over 7.076 billion people in the world as of early April 2013, the population is expected to grow by about 74 million people this year, according to the US Bureau of the Census. The growing number of people suggests that more pork will be needed around the world. There are additional factors, though, that will affect pork consumption, pointed out Robb.

 

"The world is not only population, but even more importantly is the growth of incomes in other countries," he said. "It is income potential that drives the demand for animal-based protein products, and that is a key here."

 

As a major feed grain-producing country and very efficient hog-producing country, the US will continue as a world pork supplier, he added. Keeping trade open can help pork products reach consumers around the world, echoed Aideyan. He expects more US/North American pork production in 2014 than beef production, although US beef consumption is expected to remain higher than US pork consumption.

 

The World Ag Outlook Board reported that pork exports in January 2013 were lower due to fewer shipments to China, Mexico, South Korea and Japan. The USDA lowered its 2013 first quarter export forecast to 1.3 billion pounds - a 10% reduction in exports from a year earlier.

 

"Pork has a great opportunity, through product development, to fill in some of the reduced supply of beef that is out there," said John Nalivka, president of Sterling Marketing in Vale, Ore. "At the same time, we are looking at ham prices that are well below where most of us thought ham prices would be in March."

 

Nalivka said that pork has an opportunity to grow globally, through processing and exporting pork products.

 

The economists suggested that lower prices in US grocery stores could increase domestic consumption of pork. US consumers may also choose pork as a substitution for beef or turkey, although US chicken production is increasing. They also expect US pork production will thrive as long as demand remains strong for pork around the world.