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Promising Outlook for Pork Prospects

Hog inventory reductions remain fairly small relative to the magnitude of losses pork producers have suffered over the last 2 years.

For 2010, pork producers intend to farrow 2.3% fewer sows during December-May. However, with expected pigs per litter growth at just over 2%, the first half 2010 pig crop will be about 57.4 million head, only slightly smaller than last year.

In the second half of 2010 producers are forecast to farrow about 2% fewer sows, but with expected pigs per litter growth of about 2%, the second half pig crop will be about even with 2009. This second half pig crop will be slaughtered during the first half of 2011, comparable to slaughter during the first half of 2010.

Live hog imports down. "One key difference for hog slaughter this year and heading into 2011, is that imports of Canadian hogs are expected to be significantly lower," Joel Greene, economist with USDA's World Ag Outlook Board, told participants at USDA's annual Outlook Forum in Washington Friday. For 2010, U.S. hog imports are forecast at 5.7 million head, down from about 6.4 million head in 2009. About 80% of hog imports are expected to be feeder pigs.

"Fewer hogs are available for import from Canada as the Canadian herd has significantly declined over the past several years," explains Greene. "The Canadian hog inventory was 11.6 million head on Jan. 1, 2010, down 4.5% from a year earlier, and is expected to continue to decline this year. With fewer hogs and a weak U.S. dollar, Canadian producers are likely to send fewer hogs and pigs south."

Pork exports should improve. USDA projects 2010 exports will rise 9% to 4.5 billion pounds. Pork exports were 4.1 billion pounds in 2009, 12% below the record setting exports of 4.7 billion pounds in 2008.

"A majority of the decline in exports was due to lower shipments to China and Hong Kong, where shipments were very strong in 2008 because of an outbreak of blue ear disease in the China pig herd and the Beijing Olympics," explains Greene. "Global economic recession also slowed demand for U.S. pork. Exports to Japan totaled nearly 1.3 billion pounds, down about 4%."

Pork exports began to regain some strength in the fourth quarter of 2009, rising nearly 7% over fourth quarter 2008, after falling sharply through the third quarter. The relatively weak U.S. dollar helped support U.S. pork export demand towards the end of 2009.

H1N1 impact muted. Greene sees little evidence that H1N1 had much of an impact on total exports. "Shipments to Mexico did slip below year ago levels in May following the H1N1 influenza outbreak there," he notes. "But exports experienced double-digit increases in every other month of the year. Shipments to Mexico jumped 33% to a record 899 million pounds."

Greene expects continued recovery in the global economy and the relatively weak dollar to support exports.

Imports to rise. Pork imports for 2010 are forecast at 900 million pounds, 8% higher than 2009. Pork imports rose fractionally to 834 million pounds in 2009. Canada provides about 80% of all U.S. pork imports. Canada's shipments rose about 5%, to 678 million pounds, last year.

However, shipments from other markets, primarily Denmark and other EU-27 countries, were lower last year, primarily as the weak U.S. dollar hampered shipments.

Price prospects. U.S. hog prices, on a national base, 51% to 52% lean, live equivalent, are forecast to average $46 to $49 per cwt for 2010.

In 2009, hog prices averaged $41.24 per cwt, down 14% from the previous year, and were the lowest since 2003.

Greene expects hog prices to improve as production tightens and export demand picks up. Retail pork prices for 2010 are expected to average slightly below last year's $2.92 per pound.