Rising pork production around the world, particularly in China and the US, could cut into US hog prices as supply outweighs demand.
The extra meat on world markets then could cut into beef and cattle prices and could even back up chicken markets.
China is building its hog production capacity with very large farrow-to-finish operations to capitalize on economies of scale and to feed its rising middle class’ demand for meat. Reuters reported that some in the hog industry estimate China could build several hundred such facilities that hold about 5,000 to 8,000 head this year, accelerating pork production dramatically.
While the USDA lists Mexico as the primary export market for pork and pork variety meats at 801,887 tonnes last year, Hong Kong/China with 495,637 tonnes is next, according to USDA data compiled by the US Meat Export Federation. The value of Mexico’s US pork imports came to $1.514 billion, compared with $1.078 billion for Hong Kong/China.
Many of China’s traditional, backyard farms are being closed as China tightens environmental standards, opening the way for the large, integrated facilities. The increase in controlled production methods could keep China’s pork price volatility in check and improve food safety.
US PORK PRODUCTION UP
At the same time, US pork production continues to edge higher. Weekly slaughter is running slightly above a year ago and the 2012-2016 average with a preliminary count of 2.389 million head last week, up 29,000, or 1.23%, from 2.360 million a year earlier and up 205,000, or 9.39%, from the previous five-year average of 2.184 million.
But what really sets US pork production apart from last year and the 2012-2016 average is the average weight of the hogs slaughtered. USDA weekly data have average weights at 212 pounds each week in January, up one pound, or 0.47%, from 211 through January last year.
Compared with the 2012-2016 average of 209.4 pounds the last week of January, slaughter hog weights were up 2.6 pounds, or 1.24%.
That brought US pork production for January to 3.014 billion pounds, up 64.0 million, or 2.17%, from 2.950 billion in January 2017, according to USDA Market News.
The data also show that hog weights have held steady at a time of year when they usually decline, accelerating the market’s perception of pork production.
STRONG DEMAND MAY NOT LAST
While some say pork cutout values have shown more firmness than expected because of strong belly prices, such demand may not be enough in coming weeks or months.
The USDA’s monthly Cold Storage report listed belly supplies as of Dec. 31 at 39.675 million pounds up 5.511 million, or 16.1%, from 34.164 million a month earlier and up 38.689 million, or 215.1%, from 17.986 million a year earlier.
CATTLE, BEEF RECAP
Only 126 head of fed cattle were sold Wednesday on the Livestock Exchange video auction at $126 per cwt.
Cash sales last week in the Plains were at $126.17 to $127 per cwt on a live basis, mostly $126, mostly steady to $1 from the previous week, and a steady $200 on a dressed basis.
The USDA’s choice cutout Monday was up $1.72 per cwt at $208.24, while select was up $1.23 at $203.97. The choice/select spread widened to $4.27 from $3.78 with only 69 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday, was $147.63 per cwt, up $0.04. This compares with Monday’s Mar settlement of $147.67, up $1.47.