Glenn Grimes & Ron Plain
University of Missouri - Columbia
The demand for all major meats in the first quarter of 2006 was down at the consumer level. Pork demand at the consumer level was down 3.5 percent, beef 2.0 percent and broiler 0.5 percent.
The broiler industry has become accustomed to broiler demand growth most years. For the first three months of 2004 broiler demand growth was 5.8 percent.
For the same three-month period in 2005 growth for broiler demand was 3.4 percent.
The growth in supply of meat in January-March is a bunch. Pork production was up 3.6 percent, beef 6.2 percent, broilers up 8.7 percent and turkey up 3.6 percent from 12 months earlier.
The good news about demand for hog producers is that the demand for live hogs at the producer level for the first three months is that demand is only down 0.7 percent from a year earlier.
Pork producers can thank pork exports for most of this difference between consumer demand and live demand. We believe live hog prices in the first two months of 2006 would have been around 10 percent lower than they were if pork exports would have held at the 2005 level in 2006.
In fact, pork export growth has been a part of the U.S. pork industry for the last 20 years. The value of pork and pork by-products exports has grown from $1.97 per hog slaughtered in 1986 to $25.44 per hog slaughtered in 2005.
These changes in trade have permitted the pork industry to grow at an additional rate of about 0.8 percent per year on average since 1986. In other words, the U.S. pork industry was about 16 million head larger in 2005 than it would have been had pork imports and exports remained at the 1986 levels.
Income to pork producers has grown about 6.3 billion dollars in the past 20 years, in our opinion.
This has amounted to $1.40 per cwt. for all hogs slaughtered in the U.S. for the past 20 years.
In fact, this increase in income of $3.59 per head for this period is probably a conservative estimate because we assumed producers would react to the higher prices by increasing production enough so that the benefits of the growth would only occur in the year of the growth.
Some observers do not believe producers will react this quick and some benefits would occur after the first year of the pork export growth.
Barrow and gilt prices ended the week mixed. Live top prices Friday morning were steady to $0.75 lower compared to seven days earlier.
The weighted average carcass prices for negotiated hogs were sharply lower in the western Corn Belt but close to a week earlier in the eastern Corn Belt. These prices for Friday morning for top live hogs for select markets were: Peoria $42 per cwt., St Paul $45 per cwt. and interior Missouri $44.75 per cwt.
The weighted average carcass prices for negotiated hogs Friday morning were $1.26 higher to $4.95 per cwt. lower compared to seven days earlier. These prices were: western Corn Belt $62.84 per cwt., eastern Corn Belt $62.84 per cwt., Iowa-Minnesota $62.12 per cwt. and nation $62.62 per cwt.
Slaughter this week under Federal Inspection was estimated at 1,809,000 head, down 2.6 percent from a year earlier.
This farm news was published in the May 10, 2006 issue of Farm World.