BSE improved U.S. pork market in 2004

Cattle Market & Farm Reports, Editorials
Jan 3, 2005
by WLJ
— Export, domestic demand both helped.
While the Dec. 23, 2003 confirmation of BSE being found in a cow located in Washington-state turned the U.S. cattle industry on its ear, the U.S. pork industry found the ramification from that situation much more to its liking.
According to Chris Hurt, livestock economist at the University of Purdue, that single case of BSE was almost singlehandedly responsible for one of the biggest pork market turnarounds in U.S. history. Hurt remembers that the U.S. hog market started out 2004 with cash prices mostly in the $30 range. By April, prices had risen significantly as export demand kicked in. The last few weeks of the year, market hog prices have stayed above $50 per cwt, with some instances of 55 reported.
Hurt said U.S. pork producers enjoyed a major boost in export sales this year because of the BSE case that closed most foreign markets to U.S. beef. Japan, the largest customer for U.S. pork, increased sales by 10 percent in 2004 according to Hurt. Mexico, however, was the big surprise increasing their purchases of U.S. pork by over 70 percent.
“The Mexicans stopped buying U.S. beef and replaced it with large amounts of pork,” Hurt told Brownfield.
Hurt said U.S. consumer demand also played a role. Faced with record high retail beef prices, consumers turned to pork.
“Retailers also featured pork more this year as an alternative to high price beef,” he said. As a result U.S. pork prices have remained at profitable levels most of the year and Hurt predicts they will continue to remain high well into next year.
He also said he expects consumer demand cooling a bit in 2005 but remaining strong enough to keep cash hog prices at profitable levels. He is predicting a buildup in hog numbers by the end of the third quarter of the new year and that may result in the first serious downturn in hog prices.
He also expects trading relations between the US, Canada, and Japan to normalize in the new year which will lessen export demand for pork.
A couple of other meat market analysts however, said that prospective third quarter market pressure might not be as great as once thought, particularly with USDA’s most recent hog report showing Dec. 1 sow numbers at a very similar level to last year.
“We didn’t appear to expand the number of producing sows at the end of this year, and that means the number of pigs to be born this spring for marketing later in the year won’t be as large as once thought,” said David Logan, analyst with LL Ag Commodities, Indianapolis, IN. “Not having as large of a supply as expected should be more than enough to keep the (live cash) market in the $50s, at least. There could still be some residual hesitance in beef demand also, and that could keep pork demand and prices both elevated.” — WLJ