June 11, 2018

 

Higher US pork production in Jan - Apr pushes prices down

 

 

US pork production in the first four months increased 4.6% to nearly 4 million tonnes compared with the same period last year, and is on track to meet the USDA forecast of 12.2 million tonnes this year, compared with 11.6 million tonnes in 2017.

 

The increase is seen to be sustained based on reports that in the period from March to May, US producers intend to farrow 3.08 million sows, 2% more than during the same period last year, according to a report by the UK levy body AHDB Pork.

 

The increase in pork production, combined with slower domestic consumer demand, has resulted in lower pork wholesale prices, which are below both year-earlier and three-year average levels. 

 

According to the pork division of the Agriculture & Horticulture Development Board, the lacklustre domestic consumer demand may have boosted supplies available for export. Data from the US Department of Commerce showed that exports of fresh/frozen pork rose 5.9% year-on-year in the first quarter to 468,000 tonnes.

 

The USDA forecasts that exports in the third quarter will be nearly 6% higher than year-earlier levels and 9% higher in the last quarter. This coincides with the seasonal peak in pork production, it was noted.

 

Challenges

 

Achieving this growth will not, however, be without challenges including 25% retaliatory tariffs on US exports of pork and pig offal to China, which have been in place since April. This market accounted for around 10% of total US pork and pig offal exports in the January-March period.

 

Major market Mexico also recently announced a 10% tariff on effectively all chilled/frozen pork products, which rises to 20% by July 5. AHDB Pork said that if Mexico persists with this tariff, it could have a significant detrimental impact on the US pork industry, as Mexico typically receives around a third of all US pork exports.

 

Import demand in South Korea, also one of the largest overseas markets, is likewise expected to abate later this year, as its own domestic production picks up.

 

Because of these challenges, the US may find that further price discounts are necessary to achieve the export volumes anticipated this year as their production expands, according to AHDB Pork. 

 

The increase in production in the US could also keep the pressure on EU exports and pig prices for the rest of the year. The US is one of the EU's main competitors in pig meat trade.