US Pork Exports Explode

Record setting pork exports to China led September U.S. pork exports up 23.6% in volume and 40.5% in value from last year. U.S. September pork exports equated to 26% of the total U.S. pork meat production up from last year’s 22% of total production. For the month, the U.S. exported 183,495 metric tons of pork valued at $537.6 million, which trails only March of 2011 as the second highest monthly export value on record.  For the year the U.S. has exported more than 1.6 million metric tons of pork valued at nearly $4.4 billion, increases of 16% and 25% respectively over the first nine months of 2010. Going forward the latest U.S.D.A. meat supply and use report projects pork exports will continue to increase in 2012 reaching 5090 million pounds up 2% from 2011.  We agree with this projection trend.  Currently the price points of pork in the major importing countries of the world are significantly higher than U.S.A. – Canada which indicates low supply and strong demand in the importing countries.  We expect pork to continually pull to China, Japan, Mexico, South Korea, and Russia over the next several months.  Record pork exports are the major reason U.S. market hogs are receiving $55.00 per head more than a year ago despite similar pork production.  Demand, pork demand, pork export demand – every producer in U.S.A. – Canada should be thankful for pork exports.  The benefit of having a dynamic packing industry with capital, scale, and expertise to export is a huge advantage. We are seeing a trend that packers are pushing to improve pork quality not only for export but domestic demand.  Recently Smithfield Foods the world’s largest hog producer and packer have for the most part stopped grading hogs.  They are now paying for carcass weight and measuring fat quality with iodine testing.  It is not hard to figure out they don’t want soft fat whether fresh, processing, domestic or export no one wants soft fat.  DDG’s and Pietrain boars have been the curse of pork quality and demand is limiting.  Pietrains can go away easy enough but DDG’s not so easy, the curse of corn ethanol goes on and on. We also heard this past week another major packer is looking at major changes in its grade system.  If we understand correctly this packers new grid will pay maximum grade premiums at 54 – 55% lean.  There will be discounts over 55%.  The discount level will be significant enough to really hammer the use of Pietrain boars and at the same time make the use of pay lean less desirable.  Pfizer will also be impacted; one of their major pushes for producers to use their chemical castration vaccine is to get hogs leaner.    Paying big money to get leaner with chemical castration won’t happen if you get discounted $4.00 per head for being over 55%.  Too bad for Pfizer, but as the world’s largest drug company they will survive. Bottom line: The industry is beginning to see some major packers realigning how and what they will pay for.  Hogs that are too lean, hogs that have soft fat are not what domestic consumer and export markets want.  Going forward smart producers will evolve to this market push.  To keep pork demand we must continually adjust to market requirements.

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This post was written by Genesus