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Wednesday, September 26, 2012

Sow Slaughter Does Not Support Rumors Of A Bacon Shortage



 

National headlines are proclaiming a bacon shortage and grocery stores and bacon-burger restaurants may already be raising prices.  While public demand for bacon has certainly shown a disregard prior health concerns about pork, the headlines may push consumers away from even checking prices in the meat case, assuming that bacon is too expensive to afford for a family trying to survive the recession.  But what is the real situation with regard to the availability of pork products?

 

“Hog Producers Appear To Be Holding Onto Their Sows.”  That is the headline on USDA’s latest Livestock Outlook , where USDA economists say sow slaughter has not increased over year ago levels despite the drought that has pushed corn and soybean meal prices higher.  In fact the rate of sow slaughter for June was 9% below June of 2011.  That is when the drought conditions became apparent and when most producers would have reacted by sending breeding stock to market and cutting back on production expenses.  For July, sow slaughter was 5.7% above 2011 levels, but 3.2% below the three year average for July. 

 

For August the slaughter rate was 4% higher than August of 2011.  However, some of that increase may have been spurred by higher pork prices than the desire to liquidate breeding stock, says USDA.  In fact USDA says higher sow prices suggest that pressure may have eased, and if a large scale liquidation was underway, it is unlikely prices would have bottomed out as they did, “Moderate summer sow slaughter suggests a scenario in which, despite record-high prices for corn and soybean meal, the current price environment will persist through only the 2012-2013 crop year—a belief shared by most producers.”  Economist Rachel Johnson says keeping sows during difficult market conditions would leave hog producers prepared to accelerate production as prospects improve for feed prices.

 

Increased pork production in Q4

 

Johnson predicts fourth quarter 2012 production will be nearly 6.3 billion pounds, 1.6% more than 2011 levels.  But she says feed cost will be an issue in early 2013, “Next year however, record-high feed costs are expected to gain traction, and pull dressed weights in the first three quarters below those of the same period of 2012, as producers push to minimize feed costs while avoiding packer discounts for low-weight animals. Prices of live equivalent 51-52 percent lean hogs are expected to average $57-$59 per cwt in the fourth quarter, more than 10 percent below a year ago, and $60-$66 per cwt in the first quarter of 2013.”

 

One dynamic that is keeping pork prices high for consumers is the continued high level of exports.  US consumers have to compete with pork lovers around the world whose currency goes farther when they are buying products priced in dollars.  July exports were nearly 400 million pounds, 3% above July 2011.  Japan purchases 27% of pork exported by the US, followed by 22% for Mexico, 14% for China, then lesser amounts for Russia and Canada. The meat from about one of every four hogs produced in the US is exported.

 

Summary:

Headlines have forecast a bacon shortage, but according to the latest USDA statistics that is not in the cards.  Pork producers, through the height of the drought, did not reduce the sow herd indicating they are planning to increase production in 2013, when there is hope for lower feed prices.  Currently US consumers may feel a shortage of pork, but that is caused by international demand, not by the drought.

  

Posted by Stu Ellis on 09/26 at 10:30 PM | Permalink

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