MANCHESTER, N.H. — This year’s first-quarter U.S. pork net export projections are above 2016, due to year-overyear and quarter-on-quarter changes in supply and demand factors influencing slaughter barrow and gilt prices, according to economist Len Steiner, principal at the Steiner Consulting Group, LLC.

 

“In the first quarter of this year, the national average negotiated base hog price was $67.79 per cwt. (carcass price), as reported by the USDA’s Agricultural Marketing Service,” he said in his April 12 report, sponsored by CME Group. “That was up $5.64 per cwt. (9.1 perc ent) from a year ago and a seasonalincrease from 2016’s fourth quarter of $14.64 per cwt. (jumping up 27.5 percent).

 

In recent weeks, due to relatively large supplies, hog prices have drifted  lower; usually they are rather stable to slowly increasing.”

 

Based on preliminary data for March, Steiner said U.S. commercial hog slaughter in 2017’s first quarter is projected to be record large, at nearly 30.2 million head, a 3.1 percent increase compared to a year earlier.

  

“Average dressed weight was downslightly from 2016’s,” he said. “Pork production was 3 percent above a year earlier and record large for the quarter. In contrast, production was well below 2016’s fourth quarter. As a reminder, seasonally the largest hog slaughter and pork production months of the year are in the fourth quarter.”

 

Using data compiled and reported by USDA’s National Agricultural Statistics Service, Steiner said over the 10-year period from 2006-15, the average seasonal decline from the fourth quarter to the first quarter of the subsequent year in U.S. commercial pork production was 4.7 percent.

 

“The decline from the last quarter of 2015 compared to the first quarter in 2016 was 3.5 percent,” he said. “Most recently, the decline in first quarter of 2017 compared to 2016’s fourth quarter, also was 3.5 percent. Those quarterly production declines provide the normal seasonal supply basis for prices to increase.”

 

Most recently, Steiner said the decline in first quarter of 2017, compared to 2016’s fourth quarter, also was 3.5 percent. “Those quarterly production declines provide the normal seasonal supply basis for prices to increase.”

 

On a tonnage basis, he said projections put U.S. pork net exports well above ayear ago in the first quarter of 2017.

 

“Official data (compiled and published by USDA’s Foreign Agriculture Service) showed that compared to a year ago, in January and February of this year tonnage exported was up 18 percent, while U.S. imports declined by 14 percent,” he explained. “In the first quarter of this year, the year-over-year change in net exports was clearly a price supporting factor.”

 

A USDA May 18 report said expanded farrowings and continued strong increases in litter rates are expected to drive U.S. pork production in 2017 to nearly 26 billion pounds, a 2.6 percent increase over production this year. Prices of live equivalent 51-52 percent lean hogs are expected to average $42-$46 per cwt in 2017.

 

“These hog prices – combined with 2016\17 feed costs that are forecast to average $3.05-$3.65 per bushel for corn and $300-$340 per ton for soybean meal – will likely challenge many hog producers in covering production costs for most of next year,” the report stated. “Exports in 2017 are expected to be 5.3 billion pounds, about 2 percent above exports this year.

 

“A weaker U.S. dollar will enhance competitiveness of U.S. pork in foreign markets, particularly in Asia. Pork imports in 2017 are likely to be about the same as this year, 1.1 billion pounds, while live swine imports from Canada are expected to increase by almost 3 percent. However, these imports from Canada will be limited by constraints on expansion, particularly in western Canada.”

 

Chris Hurt, Purdue University professor of agricultural economics, said export demand remains a positive for the 2017 hog price outlook, with the USDA expecting a 4 percent increase in exports with little change in imports.

 

“Pork supplies are not the reason for higher hog prices in 2017,” he said. “So far this year, pork production has been about 3 percent higher than for the same period last year.

 

“Live hog prices are now expected to average near $51 for 2017, up from $46 in 2016. Live prices are expected to average in the very high $40s in the first quarter, then move to the low- to mid-$50s in the second and third quarters and then finish the final quarter in the mid $40s.”

 

Currently, the Livestock Marketing Information Center in Lakewood, Colo., forecasts U.S. commercial pork production in the second quarter of 2017 to be about 5 percent above a year ago. In the second half of this calendar year, Steiner said production is expected to rise 2 percent to 4 percent year-over-year, with April-June hog prices possibly averaging below a year ago (down 1 percent to 4 percent).

 

“Even though pork production will likely be well above 2016’s in the second half of this year, hog prices could post modest year-over-year increases, most likely during the fourth quarter,” he said. “If that happens, it will largely be the result of reduced packer margins, compared to 2016’s very high levels because of new slaughter plants coming online and increasing competition for animals.”