The U.S. pork industry has had a great start in 2022 despite uncertainty from a resurgence of COVID-19 cases that have slowed pork slaughter in some areas. However, hog producers remain cautious in response to this uncertainty, says Chenjun Pan, a senior analyst-animal protein with Rabobank.
U.S. hog prices rose in early 2022, up 15% year over year, despite disappointing weekly slaughter volumes resulting from the COVID-19-related labor challenges and weather disruptions, analysts said in the latest Rabobank Q1 2022 Pork Quarterly report.
“Tight hog supplies remain supportive to the price outlook, with December USDA inventories suggesting a 4.8% year-over-year drop in slaughter through Q1 2022,” Pan says. “Hog supplies should improve through the spring/summer given current inventory and farrowing intentions.”
Rabobank predicts a 3.9% year-over-year decline in 1H 2022 production, with full-year volumes of less than 1% year over year.
Factors Limiting Expansion
Industry growth will be curtailed by the high costs of expansion and ongoing packer constraints, the report suggests. Reduced U.S. slaughter only amplified producer uncertainty, a situation that was made worse by the limited visibility around the implementation of Proposition 12 in California and volatile grain markets.
“Packers remain profitable on strong pork prices (cutout up 14% year over year), despite lower throughput and higher costs,” Pan says.
Consumer demand looks stable even with the higher retail prices. Pan says this is supported by good holiday demand and a return to breakfast traffic at foodservice.
Hard to Beat 2021 Pork Exports
November 2021 pork exports were down 7% year over year. Volumes to China were at only half of year-ago levels and exports to Japan were down 4% year over year on demand weakness, the report notes.
Still, strong exports to Mexico continued, up 36% year over year in November and up 31% year to date at 866,000 metric tons.
“We expect U.S. pork export volumes to Japan and South Korea to normalize as foodservice demand recovers, but do not anticipate any substantial increase in exports to China in 2022,” Pan says. “Although export volume expectations are limited, the value of pork exports is expected to rise sharply through 1H 2022.”
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