December 20, 2004

 

 

US Hog Outlook: Pork Checkoff Pays Huge Dividends

 

US pork exports continued very strong in October. Total pork exports for October were up nearly 40% from a year earlier. Exports to Japan in October were up 28% from September and up nearly 35% from a year earlier. Pork exports to Japan for January to September were up only 9.1% from a year earlier.  For January to October, pork exports were up 11.3% to Japan, up 24% to Canada, up 64.3% to Mexico, up 198% to Russia, down 26.8% to South Korea, down 11.5% to Hong Kong, up 78.2% to mainland China, up 63.5% to Taiwan, and up 61.6% to the Caribbean.

 

Pork exports for the first 10 months of 2004 exceeded the total for 2003 by 2.5%. Thus US has had 13 consecutive years of record pork exports. For the first 10 months of 2004, pork exports amounted to 10.4% of US pork production and net pork exports amounted to nearly 5% of production.

 

Remember that 1995 was the first year for net exports by the US in over 40 years. Exports have grown at something less than 1% of production a year in the last 10 years, and net exports have grown at about 0.5% of production a year for the last decade.

 

The growth in pork exports has added over 4 billion dollars in gross income to producers since 1987.  A significant portion, possibly 1/3 or more, of this pork export growth is due to efforts by the pork industry through the pork checkoff.

 

Assuming the industry was responsible for 1/3 of this growth in exports, the return per dollar of checkoff dollars spent is nearly 81 to 1. This foreign trade effort by the industry through the Pork Board has more than paid back to producers the total checkoff paid during this period.

 

Hog imports from Canada during October were down 12% from a year earlier. Feeder pig imports for October were down 10% from 12 months earlier and slaughter hog imports were down 15% compared to October of 2003. However, live hog imports for January through October were up 17.7%, feeder pig imports were up 16% for these 10 months, and slaughter imports were up 21% compared to a year earlier.

 

Cash hog prices continued under pressure this week with top cash live prices down $3.50 to $6.00 per cwt on Friday compared to 7 days earlier. Top live prices per cwt for select markets this Friday morning were: Peoria $43.50, St. Paul $45.00, Sioux Falls $48.00, and interior Missouri $45.00.

 

The average weighted price for 185-pound carcasses with 0.9-1.1-inch back fat, 6-square-inch loin, 2 inches deep, was down $6.79 to $8.27 per cwt for the week. These carcass prices per cwt by area were: western Cornbelt $64.70, eastern Cornbelt $65.53, Iowa-Minnesota $64.78, and nation $65.12.

 

Pork product prices also were pushed lower for the week. Loins were up a little, but all other cuts were lower.

 

If live prices can stabilize, packers' margins should be back in a livable level.

 

The estimate of the December 1 hogs and pigs herd is in total inventory 101%, breeding herd 100%, and market herd 101% of a year earlier.

 

Slaughter this week under Federal Inspection was estimated at 2,041 thousand head --- up 0.2% from a year earlier. This is the second largest weekly slaughter in the US of record.

 

Even though hog prices have been pushed sharply lower during the last two weeks, this Friday's cash prices were still 37-40% above a year earlier.