Steiner and Company produces the Profit Maximizer report on behalf of National Pork Board based on information we believe is accurate and reliable. However neither NPB nor Steiner and Company warrants or guarantees the accuracy of or accepts any liability for the data, opinions or recommendations expressed.
- Prices should stabilize following the disruptions caused by the long Labor Day holiday weekend.
- Pork exports were lower than a year ago for much of the summer, a function of weak Chinese pork demand and tight US pork supply available. As production seasonally increases in the fall, pork demand will be critical to keep spot supply in balance.
- Pork trim prices are expected to trend lower as slaughter and hog carcass weights seasonally increase. Fat trim continues to trade far above historical levels, in part due to strong demand for fats overall. Whether butter, soybean oil, lard, or tallow, relative fat values are at multi decade highs.
- Pork belly prices have declined from early August due to increasing supply, end of retail features and processors working down their inventories. Current low prices could encourage another round of retail features in October, but we think any price increase will likely be short lived.
- Ham is expected to trade firm this fall due to robust demand from Mexico and tight supplies/high prices for turkeys during the holiday season. Loins, butts should be lower in Q4.
Pork exports were under 2021 levels for much of this year and July was no different. Tight supply availability and high prices have rationed out export sales year to date. Total exports of fresh, frozen, and processed pork in July were 162,675 MT, 6.1% lower than the previous year. The value of pork exports in July was $520 million, 4% lower than a year ago. Through July pork export value was $3.562 billion, $672 million or 15.9% lower than a year ago. The volume of pork exports for the year is down 17.2% from the same period in 2021.
In August, the USDA was projecting US pork exports for the year to be 6.4% lower than the previous year. Even if pork exports for Aug-Dec increase 5% from the year ago, total exports would still be down 9% compared to last year. Lower pork prices will be needed to move more product into export markets, especially considering the impact of a stronger dollar. Exports to Mexico remain key. The volume of exports to Mexico in July was near 61,000 MT, 6.3% higher than a year ago while the value of exports to this market was $153.2 million, 19% higher than a year ago. Through July export volume to Mexico was 21% higher than in 2021 and accounted for 39% of all shipments. That demand will need to be sustained in the fall as slaughter numbers seasonally increase.
Will Chinese pork demand recover?
An annual report from the USDA attaché in Beijing sounded a pessimistic tone about the potential for more pork sales to China in 2023. The report noted that a slowdown in the Chinese economy (less demand) and a recovery in the Chinese hog breeding herd (more supply) will result in fewer pork imports in the Chinese market next year. US pork producers have been hoping for a recovery in Chinese pork demand in the next 12 months following the collapse in sales in 2022. In the first half of 2021, US pork shipments to China were over 50,000 MT per month. In 2020, sales were as high as 80,000 MT. This year, however, monthly sales have averaged around 14,000 MT/month with few prospects of recovery in the second half of the year.
The decline in Chinese pork imports during 2022 has been broad-based. Imports from the EU, the top pork supplier to China, were 58,014 MT in July, down 70% from a year ago. From Germany and Italy, imports are non-existent as the country has been banned due to the discovery of ASF-infected wild boars. Imports from Spain, Denmark and other EU countries were down as well. Next year US producers will continue to compete with European suppliers in the Chinese market. They are already at a disadvantage due to higher tariffs for US pork in China and the strong US dollar. Indeed, it is a surprise that China has imported any pork from the US this year.
Steiner Consulting Group produces the National Pork Board newsletter based on information we believe is accurate and reliable. However neither NPB nor Steiner and Company warrants or guarantees the accuracy of or accepts any liability for the data, opinions or recommendations expressed.