The U.S. pork industry will continue to grow steadily through 2025 with increased exports determining the extent of the expansion according to a report from Rabobank.
The report, by the bank’s RaboResearch Food and & Agribusiness group, also said growth should be boosted by increased production efficiency, through carcass weights and by the number of pigs per female.
“To remain in a profitable expansion mode through 2025, the U.S. will need to increase pork exports by 400,000 metric tons,” the report said. “By 2025, we anticipate exports to increase by about 100,000 metric tons to China, more than 200,000 metric tons to Mexico,” according to the researchers. “The challenge will be to find an additional 100,000 metric tons of export in the global market.”
DOMESTIC GROWTH INSUFFICIENT
Exports are projected to become the most important growth category of U.S. pork usage through 2025. That’s because of the lack of sufficient growth in domestic use.
Total exports grow by nearly 900 billion pounds during the projection period, and increase from 22% of total production to reach 23.5% in 2025.
The report U.S. pork industry’s growing reliance on export has important implications, the report said. “It introduces volatility to the market and highlights the ongoing need to improve competitive positioning in the key export markets of Mexico and North Asia,” according to the researchers.
RaboResearch analyst Sterling Liddell said exports are necessary for future expansion but are not guaranteed. “Mexico continues to grow its sow inventories and slaughter plants, making it only a matter of time before Mexico boosts domestic production,” Liddell said in a news release.
SUPPLY, DEMAND AND VOLATILITY
Rabobank said it is critical for producers to understand supply, demand and the potential for increased market volatility.
“Geopolitical issues affect the global pork trade,” analyst Justin Sherrard said. “Specifically, U.S. pork meat exports to certain markets such as Mexico and China are likely to face domestic competition as production in those certain countries is expected to increase.”
The report said growth in exports over 2017-projected levels of at least 900 million to 1 billion pounds, or 10% to 15%, will be needed to keep the pork industry in a balanced growth mode. With China and Mexico continuing to expand domestic pork production, U.S. producers will need to improve the competitiveness of its export products, the report said.
NEW EXPORT MARKETS NEEDED
“If production expansion is going to be profitable over the baseline period, exports into current markets will need to grow and new export markets will need to be developed,” according to the researchers.
China’s import demand in coming years should remain relatively stable. But there is scope for the U.S. to increase its share based on its more competitive cost of production compared with Europe, which is China’s major trade partner in pork, the report said.
CATTLE, BEEF RECAP
Boxed beef cutout values were firm on moderate demand and light offerings. Select and choice rib, chuck, round, and loin cuts were steady to firm. Beef trimmings were moderately to sharply higher on good demand and heavy offerings. Choice was up 59 cents at $198.81 while select was $190.57, up 52 cents. The choice/select spread was $8.24 and 97 loads of fabricated was sold into the market.Negotiated cash trade was mostly inactive Monday in light demand in all feeding regions. There were not enough purchases for an adequate market test. The latest established market in any feeding region was last week at $111.00 in the Southern Plains. Last week, trades in the Northern Plains and the Western Cornbelt ranged from $110.0 to $111.00 and $111.50. Dressed trades last week were at $175.00.
The CME Feeder Cattle Index for the seven days October 13 was $155.23. That compared to the October feeder cattle futures close of $154.125, up 75 cents.