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International pork trade disappoints

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Chinese pork production is forecast to be up 9.1% while the rest of the world is forecast to be down 2.0%.

It has been a disappointing year for pork trade. Through May, U.S. pork exports were down 20% and pork imports were up 48%. 

The increase in imports is due to more pork from each of our major suppliers – Canada, Denmark, Mexico and Poland. The decline in exports is due to less U.S. pork being shipped to every major buyer, except for Mexico and the Caribbean.

USDA's Foreign Agriculture Service predicts 2022 world pork production to be up 2.9%, due to China. Chinese pork production is rebounding from an outbreak of African swine fever first reported in 2018. Chinese pork production is forecast to be up 9.1% while the rest of the world is forecast to be down 2.0%. Pork production in China and Mexico are up. The other major producing regions are estimated to be even or lower than last year. U.S. pork production is forecast to be down 1.9% this year, but up 1.3% in 2023.

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World pork imports are taking a big drop this year (16.2%). As expected, less pork going to China is the primary reason. Chinese pork imports are pegged to decline 50.3% from 2021. If China held steady, world imports in 2022 would be up slightly. U.S. pork shipments to China have nearly returned to their pre-ASF level. 

U.S. hog imports in 2022 are predicted to total 6.679 million head, up a small 0.2% year-over-year. Over 99% of U.S. live hog imports are from Canada.

Hog slaughter during the last eight weeks has been down 0.77% from the same period last year. The June Hogs and Pigs report predicted a decline of 0.76%. So, USDA is off by 0.01% when a miss of 1% is considered well done. If USDA continues to nail hog slaughter, it will be down roughly 0.6% in August-September and down 1.3% in October-November. Lower production should slow the seasonal decline in hog prices.  

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Summer weather is having its normal impact on hog weights. Hot weather slows rate of gain and thus reduces slaughter weights. For the week of July 16, the Iowa-Minnesota-South Dakota average hog weight was 277.5 pounds, 11 pounds lighter than the average for April. This was the first week since January that weights were below the year-ago level.   

Inflation is pushing up retail prices. The average grocery store price for pork was $4.9314 per pound during June. That was record high for the fourth consecutive month. The farm-to-wholesale price spread was 68.3 cents per retail pound, the lowest since December 2020. The wholesale-to-retail price spread was 289.5 cents per retail pound. The large live-retail price spread decreases the farmers' share of the consumer dollar.

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Thus far in 2022 domestic retail pork demand has been strong and export demand weak. Live hog demand has also been weaker than last year.

The average live price for 51-52% lean hogs averaged $79.19/cwt during June. That was the highest month since last July. The record high is $95.17/cwt in July 2014.

USDA's World Agricultural Supply and Demand Estimates is predicting the third quarter 51-52% lean live hog price will average $76/cwt and the fourth quarter will average $66/cwt. WASDE forecasts this year at $70.80 and next year a fraction lower at $70/cwt. The futures market also indicates 2023 hog prices will be lower than this year.

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Cold storage stocks of pork are way up. On June 30 there were 541 million pounds of pork in cold storage, up 22% year-over-year and the third consecutive month above 500 million pounds.  

In the 24 months prior to Covid, stocks of frozen pork didn't drop below 500 million pounds. At the end of April 2020 there were 611 million pounds of pork in cold storage. A month later there was only 468 million pounds. That was a 23.4% decline in one month. Frozen pork stocks then remained under 500 million pounds for 23 consecutive months. They have been above 500 million pounds for the last three months. Increasing pork stocks may be a sign of weakening pork export demand.

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Cash corn prices have declined more than $1 in the last two months and the futures market is expecting further decline as we move into harvest season. Corn futures contracts for the next two years are currently trading at $5.60/bushel give or take 15 cents. High corn prices have brought high production costs for hog farms.

Lee Schulz at Iowa State University calculates the cost of production for hogs marketed in June at $100.18 per carcass cwt. That breaks the old record high set in January 2013. Dr. Schulz estimated June hog profit at $29.11 per head marketed. June was the fifth consecutive profitable month for farrow to finish hog operations. Lower corn prices will add to hog profits between now and December; but lower hog prices will offset most of the benefit of a lower feed bill. 

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The July cattle inventory survey estimated the 2022 calf crop at 34.6 million head, down 1.4% compared to last year, down for the fourth consecutive year and the smallest calf crop since 2015. Declining calf crops eventually lead to less beef on the market. That should be good news for future pork demand.

Later today USDA will release the Crop Progress report for July 24 and the Poultry Slaughter for the month of June.

Source: Ron Plain, who is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. The opinions of this writer are not necessarily those of Farm Progress/Informa.

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