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US hog producers to enjoy late-2013 income bonanza

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US hog producers will see a late-2013 income bonanza thanks to rises in both slaughter rates and in prices, which are being supported by recovering pork exports and resilient beef values.

The fourth quarter, typically the period of highest slaughter rates, looks set to prove particularly bountiful for producers this year given that market dynamics indicate "increased demand for hogs and pork", the US Department of Agriculture said.

"The industry appears to be facing a situation where second-half slaughter numbers and hog prices are both expected to be year-over-year higher," USDA analyst Ken Mathews said.

Although slaughter rates have tumbled in recent weeks, a factor potentially linked to the August heatwave, they will end up higher than a year ago for the July-to-December period.

And animal weights are expected to rise, taking pork production for the four-quarter to 6.4bn pounds, a rise of 3% year on year.

'Generally declining supplies'

Meanwhile, hog prices will, at about $59-61 per hundredweight, be 2% higher than a year ago, if below the $67-68 per hundredweight averaged in the current quarter.

This is a reflection of elevated pork prices, which are being underpinned in part by values of beef, which set records in July and August and "are "likely to remain near current levels for some time", supported by "generally declining year-over-year supplies", Mr Mathews said

However, a revival in US pork exports is playing a role too, with shipments recovering in July to show their first year-on-year rise, of 2.1%, in 2013.

Exports to the major market of Japan have proved particularly encouraging, showing growth since May even in the face of a weakening yen.

'Key country for exports'

The resilience of trade with Japan, "the key country for pork exports", which imported nearly half its pork last year, appears down to US price competitiveness, Mr Mathews said.

Japanese importers, faced with a weaker yen, are targeting "a low-priced exporter among all pork-exporting countries.

"Larger US exports to Japan since May are thus likely a result of the US pork industry's competitive status vis-à-vis other major foreign suppliers of pork to Japan, such as Canada and Denmark."

Mr Mathews highlighted the US pork processing sector, which includes names such as Hormel Foods, Smithfield Foods and Tyson, as "likely what makes the US a lower cost supplier of pork to Japan".

By Agrimoney.com

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