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November 18, 2011

 

US pork exports to lift hog prices in Q4

 

 

Strong domestic and foreign demand will likely lift US hog prices at very positive on-year levels for the rest of Q4 during a period when producers usually experience the lowest yearly prices, says USDA's Economic Research Service.

 

Prices for live equivalent 51% to 52% lean hogs in October were US$68.44 per cwt, almost 31% higher than the year earlier. At the same time, that estimated weekly federally inspected pork production during the month was about 1% above that of a year earlier.

 

Higher hog prices, concurrent with increased production, indicate pork demand may have increased compared to a year earlier. Although hog prices are technically not indicators of producer profitability, hog producers' estimated Q4 feed cost spread will likely be positive. More typically, fourth quarter feed cost spreads are negative, largely due to seasonal increases in hog supplies and, consequently, lower hog prices.

 

Fourth quarter hog prices are expected to range between US$64 and US$66 per cwt, about 30% above on-year. Commercial pork production is expected to be about 6.1billion pounds, about 1.5% below last year's Q4 production.

 

One result of strong US pork exports can be a lower level of pork products available for domestic consumption, and higher commensurate retail pork prices. Third quarter domestic pork availability, measured on a per capita basis at 11pounds, was more than 6% below the same period last year. Fourth-quarter availability is expected to fall by more than 3% below a year ago, to 12.4pounds per capita.

 

With foreign demand bidding US pork away from domestic markets, lower availability of pork for domestic consumers most likely explains the string of record-high retail prices that continued into September. September retail pork prices averaged US$3.56 per pound, almost 8% higher than in September 2010. Retail pork prices should continue to average in the low-to-mid US$3.50 in the fourth quarter.

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