So far 2006 has been a real disappointment for hog producers. Rather than trending higher as prices normally do at the start of a year, they have moved lower, says University of Missouri economist Ron Plain.
Current cash hog prices are $4 lower than at the start of 2006 and the June lean hog futures contract is trading $8 below its level of early January.
"Pork isnâ€™t alone on this," Plain says. The June live cattle futures contract is off $12 from its January highs. "The drop in livestock prices appears to be primarily due to burdensome supplies of meat. USDA is forecasting a record per capita supply of meat in 2006, 3 pounds more than last year," he adds.
The one bright spot for the U.S. hog industry is pork exports, Plain says. Every month since August 2003, pork exports have been above the year-earlier level. February exports were up 23.3% compared to 12 months earlier. This follows a 27% increase in exports during 2004 and a 22% increase last year. During the first two months of 2006, the U.S. exported more than twice as much pork as any January-February prior to 2001. During the first two months of 2006, 14% of U.S. pork production was exported.
Plain says U.S. pork imports have been fairly steady in recent months. February imports were up 1.1% compared to 12 months earlier. This follows a 6.9% decrease in imports last year. During the first two months of 2006, 4.8% of U.S. pork has been imported.
"The growth in pork exports is due to many factors. The quality of U.S. pork and the efforts the industry has made to be the supplier of choice are certainly key factors," he says. "The problems the beef industry is having with BSE and the poultry industryâ€™s battle with avian influenza has probably benefited U.S. pork trade. Another factor helping pork exports is the weakness of the U.S. dollar. A weak dollar makes buying U.S. pork less expensive for foreign customers."
During the first two months of this year, the U.S. imported about the same number of Canadian slaughter hogs as during January-February 2005, but 13.7% more feeder pigs from Canada. Canadian hog slaughter has been consistently below year-earlier levels for the last 10 months.