Where Will All The Pork Go?

Semi hauling pigs
( National Pork Board and the Pork Checkoff )

With all the pork entering the market, where will it all go? Scott Brown, associate Extension professor at the University of Missouri, says we need both strong exports and strong domestic demand to keep prices at a reasonable level for producers.

The numbers came in as economists expected in the September Quarterly Hogs and Pigs Report. (See coverage from the March 2018 and June 2018 reports.) According to USDA’s inventory of all hogs and pigs on Sept. 1, 2018, total inventory was 75.5 million head, up 3% from a year ago, and up 3% from June 1, 2018.

The market hog inventory on Sept. 1 was 69.2 million, up 3% from last year, and up 4% from last quarter.

The number of pigs kept for breeding came in at 6.33 million head, the largest herd size since June 1999, and 3.5% more than a year ago. The number of pigs per litter came in at 10.72, a 22% increase from June of 1999, Brown says.

“If you look at the number of pigs per sow, we’re 34% higher now, so a lot more productivity,” Brown says. “For 2019, we’re going to grow pork production on an annual average somewhere in that 3.5 to 4% range. This report confirms to me that we’re going to see larger supplies of pork coming on the marketplace in 2019.”

It All Comes Down To Exports

With the projected increase in pork supply, exports make a big difference in where the industry will go in terms of prices in 2019.

"We believe exports will pick up next year from about 22.3% of the production in 2018 to 22.8% in 2019,” says Len Steiner, president of Steiner Consulting Group in Merrimack, N.H. “If our numbers are right, that will help fix a lot of things.”

However, the tariff war and African Swine Fever (ASF) could swing the export market either way.

“If exports drop down to 18%, it will be a debacle,” Steiner says. “ASF is a major problem in China. If China decides to come to the U.S. for extra pork, there's a bull argument there. If this just continues along, and China sticks to their guns that they don't want to budge on these economic issues for the tariff war, then that's a little bit bearish.”

David Miller, director of research and commodity services at Iowa Farm Bureau in West Des Moines, Iowa, says the fluctuating export markets make things interesting.

“Historically, we’ve sent 3 to 4% of our pork to China – that market is in flux right now,” he says. “Europe is shipping more pork to some places we’ve been shipping it to and we’re shipping more pork to places where Europe was shipping it. At the base of it all, it really depends on what happens with our major markets of Japan, Korea, and Mexico, and what’s taking place with hams, loins, short ribs, and those things.”

Domestic Demand Still Drives Price

Brown says domestic demand is an important piece of the puzzle.

“We’ve seen strong domestic demand across the board for all meats,” Brown says. “However, if the economy were to turn south, or we talked about the ‘R’ word in 2019, I’d be worried about what happens on the domestic use side—that could be troubling to hog prices as we look ahead.”

The market demand for beef is strong, Steiner says, but that competitor is certainly not depressing pork prices. However, the poultry industry has had significant problems, especially with boneless, skinless breast meat prices.

“We’re seeing a little pullback in poultry production numbers to get some profitability back into their plants—that should be supportive to pork prices,” Steiner says. “Consequently, we're probably a little more bullish than some other people in the market at this point in time.”

The September 2018 Quarterly Hogs and Pigs Report is available online at http://usda.mannlib.cornell.edu/usda/current/HogsPigs/HogsPigs-09-27-2018.pdf.