October 26, 2021
Limited labor availability and plant disruptions due to operational issues contributed to a 3.6% year-over-year (YOY) decline in September pork production, according to Rabobank’s recently released Agribusiness Review.
At the current pace and given projected holiday slaughter, Rabobank expects a slightly larger 2% YOY drop in 2021 pork production. For 2022, the bank expects hog supplies will remain constrained during the first quarter but will gradually improve.
Analysts for the bank reported that while pork carcass values have declined from the previous season, they still remain 17% ahead of year-ago levels, at $1.08/lb., on strong belly and ham values remain supportive. Belly prices are up 28% YOY due to strong foodservice demand for bacon and very low cold storage inventories. Ham values are also higher because of strong demand but also because of labor issues at deboning facilities, they said.
“Even with the seasonal decline, strong retail demand for pork during the October Pork Month and smaller supplies of competing proteins are likely to limit downward pressure.”
On the export front, Rabobank said U.S. pork exports and year-to date shipments were down slightly in August. Sharply higher August exports to Mexico, up 50.3% YOY, reflected peak herd shortfalls, but Rabobank said that should dissipate over the balance of the year.
Exports to Japan, Columbia, and the Caribbean were also higher, more than offsetting the weaker shipments to China, which were down 49%, the bank reported.
“We expect negligible improvement in exports to China through year end, given the sharp decline in pork prices witnessed in recent weeks and strong competition from Brazil and Spain. But we should see steady shipments to most other top markets,” Rabobank noted.
While higher pork imports in August are putting additional pressure on the domestic market, Rabobank said they remain a relatively small share of total supply.
Regarding prices, Rabobank said they remain higher than year-ago levels, up 17%, but are still well below peak summer levels. A 16% YOY increase in imports has more than offset smaller domestic supplies, the report added.
“Overall demand remains disappointing due to weaker economic conditions, but it is beginning to stabilize. We expect further improvement in pork demand as prices normalize, thanks to a better balance between supply and demand.”
Hog prices have also fallen from highs seen earlier this year but are still up 38% YOY, according to Rabobank. “We expect hog prices to continue to normalize through year end as pork production rebounds following earlier herd health challenges.”
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