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.

Highlights

  • Hog slaughter beat estimates at +2.3 million head, +3.6% above year ago levels. Expectations are for slaughter to ramp up in the coming weeks. Last year weekly slaughter between mid-September and early October averaged 2.57m head/wk. Given current growth trends, we could see weekly slaughter at or above 2.6 million in the coming weeks.

  • Futures were lower towards the end of the week. In part this reflects a more negative outlook about the broader economy but also a recognition that with ample pork in the pipeline lower prices are needed to move product through domestic and export channels.
  • Exports in July were strong, mostly due to robust sales to Mexico. Share of US exports to Mexico was as high as 45% in July. Sales have slowed down more recently and outstanding pork export sales by the end of August were 14% lower than a year ago.

Report

Pork exports were higher than expected in July, which helps explain the rally in pork prices, especially ham prices during the time. Shipments of fresh/frozen and cooked pork in July were 194,818 MT, 14% higher than a year ago. This brought the total of US pork exports through July up 5% vs. a year ago. Mexico remains the top market for US pork and this was especially evident in July. Shipments to Mexico for the month were 88,124 MT, almost 20k MT (+29%) higher than a year ago. Mexico accounted for 45% of all US pork shipments in July. So far this year the Mexican market has taken over 40% of all US pork exports (does not include variety pork). Strong as US pork exports were in July, however, it is far from certain that the trend will persist in the fall. Sales to Mexico have slowed down considerably and we think August shipments were closer to year ago levels. More importantly, the volume of pork sold but not yet shipped (outstanding sales) is currently 14% lower than at this time last year. While outstanding sales to Mexico are up 5% vs. a year ago, sales to several other key markets are down substantially. Shipments to Japan in July were 9% lower than a year ago and so far, this year are running 3% lower than a year ago. Outstanding sales to this market are currently 54% lower than a year ago.

High prices for loins and lack of frozen inventory has significantly hampered exports to the Japanese market, opening the door to more Brazilian pork entering this market. Brazilian pork shipments to Japan in August were 177% higher than a year ago and up 130% for the year. Brazilian pork exports steadily increased in 2019-21 thanks to robust demand from China. With sales to China steadily drifting lower, Brazilian packers have pushed more aggressively in markets that traditionally bought pork from the US. Brazilian pork exports in August were 106,018 MT, 6% more than a year ago even as exports to China were down 49% y/y. Where is Brazil sending its pork? Exports to the Philippines were near 25k MT in August, 86% higher than a year ago. Brazil has also resumed shipping pork to Mexico although the volume is still relatively small vs. what US is exporting. August shipments to Mexico were near 5,700 MT. Brazil has also resumed exporting pork to the Dominican Republic and other smaller markets.

US pork production is expected to be up as much as 5% y/y in Q4. Last year US pork exports in Q4 were up 10% y/y but for that to happen lower prices were needed. Mexico was a key contributor to that increase. Export demand will need to be just as strong this year, a high bar considering that other pork suppliers (Brazil, Canada, EU) are vying for the same business.

Price Chart

Forecasts

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.