May 23, 2007

 

US Q1 2007 packer hog demand strong

 

 

US pork industry analysts and traders, puzzled that packer demand for hogs has remained strong so far this year, will monitor the markets closely in coming months to try and root out the reasons.

 

Industry observers say the demand side of the hog market is more difficult to measure than the supply side. All commodities are affected by supply, production costs, consumer demand and competition. Livestock markets, however, have other factors to consider-such as seasonal demand, producer resistance to prices and the numerous outlets for sales. All can create a constantly changing demand picture.

 

"It's almost impossible to accurately estimate demand for meats and poultry," said Glenn Grimes, agricultural economist at the University of Missouri. Grimes said consumer attitude surveys are too expensive, and the factors that drive demand are constantly shifting. Measuring demand takes longer because several weeks to a few months can pass before all the pieces of the puzzle become available, he said.

 

Grimes and fellow University of Missouri economist Ron Plain calculate packer demand for live animals and consumer demand for each of the meat categories on a regular basis. Grimes said packer demand for hogs during the first quarter--the latest data available--was up 2 percent from a year ago.

 

Pork muscle meat exports were strong in January and in February were only slightly below a year ago. Grimes said that early in the year, the export growth appeared to be driving the stronger packer demand.

 

Exports in March, however, were down from 2006 by about 9 percent--which pulled the first-quarter total back to only slightly larger than a year ago. Demand for live hogs still was up for the quarter, so the support was coming from some where other than exports, he said.

 

Analysts have an abundance of theories to examine in the demand mystery, including the possibility that more pigs may have died from porcine circovirus associated disease. Another idea is that consumers may be buying more pork than higher-price beef and chicken.

 

Some analysts think the change in the industry production-slaughter patterns could be having an effect on the packer demand. They speculate that with more hogs owned and processed by vertically integrated and producer-owned companies, there is a smaller pool of animals available for the other packers to buy. They say this may, at times, force the non-vertically integrated packers--those packers who do not own their own hog producing units--to compete more aggressively for the hogs that are available.

 

Bob Brown, a private analyst in Edmond, Oklahoma, said the figures may look better in the first quarter because meat demand overall at the same time a year ago was not strong.

 

For example, he said, wholesale prices for pork loins during Q1 2006 were off 16 percent from the same period in 2005, while ham prices were down 18 percent and bellies were off 11 percent. Chicken breast and leg-quarter prices also were very low.

 

However, January-March prices for loins this year were up 8 percent, hams were up 4 percent and belly prices were up 20 percent from the 2006 levels while chicken prices have rebounded sharply from a year ago, he said.

 

Product demand, Brown said, is back to normal or better this year.