August 16, 2007

 

June US pork exports disappoint hog market bulls

 

 

June export data for pork released Tuesday (August 14) was considered disappointing by analysts and livestock/meat traders who had been expecting an upturn from sluggish sales the first five months of the year.

 

The US Meat Export Federation's Web site shows pork and pork variety meat export sales for June at 94,755 tonnes, down 5.5 percent from a year ago. Year-to-date sales internationally also are down about 5.5 percent from the record-high level of a year ago.

 

Analysts said the hog markets had built in higher expectations for exports for June on ideas that sales to China and other countries would grow and more than offset declines to Mexico.

 

Total pork sales to Mexico in June were reported at 18,996 tonnes, down nearly 10,000 tonnes, or 34 percent, from a year ago. Year-to-date sales to Mexico are off 28 percent. Shipments to China and Hong Kong combined in June were up 9,744 tonnes from a year ago, with the year-to-date increase at 40 percent.

 

Rich Nelson, an analyst with Allendale Inc. in McHenry, Ill., said "there is no doubt that overall, the export picture remains bearish." He said declines in sales to Mexico are easily outweighing the gains made in China.

 

Through the first six months, sales to Mexico declined by 52,566 tonnes, compared China/Hong Kong's gain of 17,119 tonnes.

 

Nelson said even though exports to China were up in June and expectations are for more growth in the July and August data when the figures become available, some people were hoping for more growth in June than what occurred.

 

He said in order for exports to support the prices seen two weeks ago when October and December lean hog futures hit contract highs, sales to China "would have to equal those of our number one customer Japan." Sales to China/Hong Kong in June were slightly more than half the volume shipped to Japan.

 

Dan Norcini, an independent livestock trader, said the additional month with total pork exports below a year ago "is becoming a serious issue for the pork market." He said hopes have been pinned on China taking up the slack on sales but unless it is a "consistent" importer of US pork, the market could be "headed for trouble" this fall with production on the increase.

 

"People were very disappointed at the export figures because whatever China is going to do regarding buying US pork is probably done for the year, and pork shipments to Mexico and Russia are down," a hog futures broker said. "Plus, we're looking at a seasonal supply buildup this fall, which means we're going to have hogs coming out of our ears."

 

October lean hog futures Tuesday fell 160 points, or 2.2 percent, and closed at 69.80 cents per pound. December lost 185 points, or 2.6 percent, Tuesday and closed at 68.67. Their respective contract highs hit Aug. 3 were 77.70 cents and 74.70.

 

As of 11:40 EDT (1540 GMT) Wednesday, October hogs are down 15 points from Tuesday's close at 69.65 cents while December is down 37 points at 68.30 cents.