US pig prices squeeze processors profit
The US pig market has been constantly lifted hog prices since the beginning of the year but processors are seeing margins narrowing, as demand overseas declined in the last couple of months. In July, China's pork imports have dropped 14.8% compared with the same month last year, and that forced processing units to buy fewer pigs, reduce slaughter levels, and rely more on their own company supplies. These actions reduced pig prices and supported both wholesale pork prices and processor margins.
However, US prices may still be too high to stimulate demand overseas. As an example, US fresh/frozen pork exports to that market have fallen by around a third in the year to date. By contrast, EU pork exports to the Chinese market have increased by 20% compared with the first half of 2020.
"High prices, and tariffs into China, are expected to impinge further on US competitiveness as China’s demand for imported pork continues to fall. US export volumes are therefore expected to go to markets both elsewhere in Asia and closer to home (such as Mexico) to offset declines to China," commented Duncan Wyatt, Lead Analyst - Red Meat, AHDB.
The USDA has recently revised down its forecast for total US pork exports for 2021 by 65,000 tonnes, to 3.4 million tonnes. This would be a 1.8% increase over 2020 export volumes. Export volumes in 2022 are expected to decline by 1.5% compared to 2021.
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