US pork exports rebound in September; aided by low prices

 

 

Pork muscle meat exports rebounded in September with the monthly total topping year-ago shipments for the first time since March, and that may set the trend for the balance of the year.

 

Market analysts and brokers said low wholesale pork prices encouraged international customers to purchase more US pork beginning late in the summer. On August 18, the pork carcass composite value, commonly known as the pork cutout, fell to US$51.33 per hundred pounds, the lowest since January 8, 2003. What's more, the period of very low prices may help push the sales volume up for later in the year as well.

 

Pork sales internationally suffered a setback from late spring through the summer, and the year-to-date total remains well below 2008. The discovery of the AH1N1 flu in the US and Mexico in late April led to some temporary bans on US pork. The ongoing economic crisis also contributed to slower sales during the summer but the biggest decline from a year ago was in sales to China.

 

Analysts also said clear evidence of reductions in the hog breeding herd in the US as well as in Canada by mid summer likely served as a buy signal to the international customers when pork prices fell to the multi-year lows. Hog production data by that time was pointing to a reduction in North American pork output into late 2009 and 2010, so acquiring more of it at cheap prices made sense to the international buyers, they said.

 

September sales of pork meat were at 120,232 tonnes, the third-largest of the year and nearly 6,300 tonnes above the year-to-date monthly average. The volume was up 3.2 percent from a year ago. The value of the September sales, however, was down nearly US$52 million, or 15 percent, from a year ago, reflecting the lower per-pound prices. Total pork shipments, including variety meats such as liver and kidneys, in September were below the year-ago pace.

 

Wholesale prices have rebounded significantly since mid August and in recent days have caught up with the year-ago levels. Monday's cutout value was reported at US$57.66, a gain of US$6.33, or 12.3 percent, from the August 18 low.

 

Some analysts and brokers said additional sales may have been completed during the time when prices were low for shipments to be made throughout the autumn. They said packers and other sellers may have hedged the sales via lean hog futures by selling the meat and buying futures. December lean hogs set a contract low of 43.50 cents a pound on August 7 and matched that low on August 19 before the market began to mount a rally to a cycle high of 58.25 on November 3.

 

Rich Nelson, director of research with Allendale Inc. in McHenry, Ill., said packers may not have sold as far forward as November or December at the low prices on a widespread basis but it is possible that some did through hedging in the futures markets.

Brokers and industry participants said October export data may show another strong sales volume total, but the report for that month will not be available until mid December. If the value of the shipments in October is well below a year ago as occurred the previous month, it would further support the idea that at least some of the sales were hedged, they said.