All eyes are on China and the export markets as USDA reports continued growth in U.S. pork production. According to the 2019 fourth quarter Hogs and Pigs inventory report released on Dec. 23, as of Dec. 1, total inventory of all hogs and pigs set another record at 77.3 million head, up three percent from 2018.
“We don't get to see production numbers coming out of China, so we still don't know if the death is 30, 50, or 75 percent,” said Bob Brown, president, Bob Brown Consulting, during the recent Ag Media teleconference call hosted by the National Pork Board. “I'm looking at this chart that has European Union (EU), USA, Canada and Brazil exports combined in the month of October, and again it’s old data, but it just blew the doors off every other month in history.”
The U.S. hog industry has been on an upward trend of expansion since inventory numbers bottomed out in 2013. On top of that, gains in production and efficiency have sped growth.
The September-November pigs saved per litter jumped three percent from last year to 11.09, a record for this quarter.
“USDA continues to, it appears to me, to be under accounting farrowings and the pig crop by a bit, so we continue to get more hogs,” Brown said. “Looking at the last 28 weeks of hog slaughter, starting in June of this year through last week (week of Dec. 16), FI hog slaughters totaled 70.7 million head.”
That is an increase of 5.5 percent or 3.7 million hogs for the same time period last year.
An increase of this size in slaughtered pigs for 2019 suggests that producers started holding back more gilts for breeding and increased their expansion plans in 2018 or around the time news broke of African swine fever (ASF) spreading in China.
When ASF first impacted China, pork flooded their markets as Chinese producers worked to clear their herds. Now, at the start of 2020, China has been using up the pork they have in cold and freezer storage, increasing exports and the price of pork is on the rise.
“Pork prices have come off a little bit from where they were back in November, but they're still running about 150 percent higher than they were at the beginning of 2019, so they're quite high,” said Altin Kalo, senior analysist with Steiner Consulting Group.
Pork makes up over 60 percent of the Chinese diet, so even though they are trying to diversify by importing more chicken, consumers will still want pork.
For the upcoming year, China has taken steps to increase pork imports. They have lowered their broad tariffs on pork, this is tariffs on pork coming from any country, from 12 percent to eight percent.
“I'm tracking not only USA exports to China, but also the other countries and entities that have exportable surplus, primarily the EU, Canada and Brazil,” Brown said. “In the month of October, which is the last actual data we have for all four of those entities, pork exports to China just exploded, I mean they were all over 275,000 metric tons.”
That set a new record and was 126 percent of the October 2018 exports. The EU made up a majority of the amount, 2.5 times the combined volume of the three other countries.
The USDA Foreign Agriculture Service tracks growth in other countries. For the EU, hog production in 2020 will remain flat to even slightly down. The only European country expanding production is Spain.
EU pork prices are also at a record high right now, as well as Brazil’s pork prices. Going forward, the U.S. is going to have a favorable position exporting to China should some sort of trade agreement be reached.
“We're seeing this increase in production that we're forecasting here, but also keep in mind that that's in parallel with what we're forecasting as far as per capita consumption increases in the U.S.,” said Tyler Cozzens, agricultural economist with Livestock Marketing Information Center. “We're going to export more, but we’re also going to be consuming more, we're seeing that demand remaining strong here domestically.”