Last week brought two more pieces of positive news for the U.S. pork industry: September exports exceeded year-earlier levels, and Oct. 31- frozen pork stocks were smaller than both year-earlier and month-earlier levels.
The September export data marked the first month since March that U.S. pork exports have exceeded year-earlier levels. September exports of 352.5 million pounds, carcass weight equivalent, were 3.8% larger than one year earlier but 46% larger than in September 2007 (Figure 1). The September total puts monthly exports above the 2004-2007 trends for the sixth time this year, again making my point that 2009 exports have been remarkably good when compared to anything but 2008 exports.
Year-to-date exports are still 17% lower than last year, but they are 4.7% higher than the 2004-2007 trend.
When we look at individual export markets, Mexico is the shining star in spite of all the H1N1-related difficulties that have been encountered there (Figure 2). September shipments to Mexico were 60% larger than last year and bring the year-to-date (YTD) total back to +38% for 2009. Exports to Mexico remained just over 12 million pounds smaller than Japan in September. That marks the second straight month that Mexico has been that close to becoming our largest export customer in terms of tonnage. Japan remains the clear leader in terms of value, however.
Shipments to Canada increased 9%, year-on-year, in September primarily due to Canada’s stronger dollar.
Exports to China-Hong Kong were 13% larger than last year, but remember that exports to China-Hong Kong had returned to earth by August and September 2008. Shipments to Taiwan were nearly 200% larger this year as well.
China’s recent announcement that they would resume imports of U.S. pork is a curious one since the data from USDA’s Foreign Agricultural Service indicate that China actually never stopped importing U.S. pork. Shipments dropped below 2 million pounds, carcass weight, in June and July, but had grown to 4.3 million and 6.6 million pounds in August and September, respectively. And these shipments are for China only. They do not include Hong Kong. We aren’t sure why the trade suspension was really not a trade suspension.
Anecdotal evidence from packers points to good export trade in October, but readers should be aware that the October data will likely show 2009 exports lower than those of October 2008. The reason: A huge spike back to over 392 million pounds last year. Whatever October exports were, they have already played a role in our market – and may well have been one of the drivers of the cutout value rally that I wrote about two weeks ago. Just don’t be surprised if the number comes in lower than last year’s total.
Cold Storage Recap
Friday’s Cold Storage report says Oct. 31 total frozen meat and poultry inventories were 11.5% lower than one year ago and 5.3% lower than on Sept. 30. The biggest contributor to the year-on-year decline was chicken, whose stocks were almost 20% smaller than last year.
Frozen pork stocks were down 1.5% from last October and 1.6% from Sept. 30. The biggest contributor to these reductions was ham inventories, which were 16% lower than last year and 13% lower than in September. Frozen pork belly stocks were sharply higher (+70.6%) than last year, but down slightly from last month, while ribs in freezers jumped 20.7% from last year and 26.1% from last month. The bellies and ribs increases are, I believe, symptoms of continued sluggishness in the U.S. foodservice sector.
While the amount of pork in cold storage is high relative to historical freezer inventory levels, it is about normal relative to production (Figure 3). Oct. 31 stocks totaled 520 million pounds or 24.9% of October U.S. pork production. That figure compares to 24.9% last year, 23.1% in 2007 and 25.2% in 2006. October usually marks the seasonal low for the stocks:production ratio, primarily because October almost always marks the year’s high for monthly pork production. The reasons is simple – lots of hogs, no holidays.
Count Your Blessings
Though the year has been difficult (there’s an understatement), there are many things for which to be thankful. Take a few minutes to “count your blessings, name them one by one.” You’ll be surprised at how long the list will be. I know I always am. Best wishes for a Happy Thanksgiving!
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Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com