Was it too good to last?
That’s what pork market analysts are wondering now that last year’s swell of demand seems to have broken and is slipping backward.
“That’s definitely the topic of the day,” said Tyler Fulton, the risk management specialist for Manitoba Pork Marketing Co-op.
In recent weeks, both U.S. domestic consumption and export sales have fallen below year-before levels. Usually these would be signs of a weak market and signal real troubles for the industry, but the recent losses are not causing panic because last year was unusual.
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“It’s pretty tough to come up and match a year like we saw last year, where we were seeing double digit gains in quantity moving to export,” said Fulton.
“Year over year it would have been impossible to see that again.”
University of Missouri hog market analyst Ron Plain said U.S. consumption of pork between January and March was down about 2.8 percent from last year. That gives back about half of last year’s exceptional gains, but still leaves overall consumption ahead of two years ago.
Plain credits the popularity of low carbohydrate diets for last year’s sudden surge in consumption, and blames the present slide on the waning of that diet’s popularity.
“That diet is fading and so we’re giving back some of that,” said Plain.
World pork demand is also weakening, Plain and Fulton said. The recent snarl with Australian imports has undercut world demand expectations. An Australian judge overturned that country’s food safety regulator’s decision to approve pork imports from Canada, Denmark and the United States.
Up to this point this year, Canadian exports to Australia have been surging, making Australia an increasingly important source of foreign meat sales.
Demand also seems mushy from other premium markets like Japan, Fulton said. Good trade statistics aren’t available yet, but traders and exporters sense that Asia’s high interest in pork is weakening.
“They stepped away from beef because of BSE, and they stepped away from chicken because of avian influenza, and pork was becoming the best option,” Fulton said.
“Maybe now some of those (fears) about beef are lifting, and competing meat prices are coming down, so there’s not as much rationale to drive pork.”
Fulton thinks that last month was a turning point in the pork market, but no one is predicting a severe slump.
The fourth quarter does not look perilous this year, even though that is when prices come under the most intense yearly pressure because of production surges and limited kill capacity.
“We’ll have a lot lower prices than we did last year. We did fabulously well in the fourth quarter of 2004, but I still think we’ll make money,” said Plain, adding that the large supply of corn is keeping feed costs down.
“Right now break-evens are pretty low because of last year’s record crops.”
The only factor that could drive hog production into losses at the end of this year would be short crops of feed grain this summer. A lower market price for pigs combined with higher feed prices would give producers problems.
