July 15, 2008
US pork exports, growing demand key for hog producers
US pork producers are struggling with overproduction and record feed prices but a growing US demand and exports could be the key to their problems, according to Fiona Boal, animal protein analyst and executive director for Rabobank's Food & Agribusiness Research and Advisory group.
Hog slaughter at the end of June climbed about 10 percent on-year, with pork production increasing by similar amounts and recent reports indicate that the situation will continue in the second half of 2008., Boal said.
Aside from feed cost, rising transportation and energy costs are also cutting deep into the pockets of pork producers. Pork demand is also moving up, as consumers are also caught up with food inflation therefore they are switching from the more expensive beef to the less costly pork and chicken, Boal said.
Pork demand is likely to remain strong as chicken and beef prices are expected to increase. Pork products are also less used in the food service sector at a time when consumers choose not to patronise the restaurants.
Boal said another positive is the growing US pork exports.
"US pork exports have reached record levels in each of the last 16 years: a really impressive feat for any industry. And, the good news is that pork exports are on pace to set new records this year," said Boal.
Boal warned that hog producers should not underestimate the importance of export demand in the current market dynamic, as hog prices have held up very well despite the huge supply and exports have played a vital role in that respect.
The average producer is losing about US$50 per head in early 2008 but exports have kept the US industry from incurring further losses. US pork exports (excluding variety meats) in the first five months of 2008 were up 60 percent on-year and exports could exceed US$4 billion for the year.
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