Spend Matters welcomes this guest post by Mark Kozlowski of Mintec.
With favorites such as pulled pork, chops and ribs, not to mention bacon, sausages and ham, it's little surprise that the U.S. is the third-largest consumer of pork after China and the EU. However, 2014 has been a roller coaster of a year for the U.S. pork industry, with hog prices hitting record highs earlier in the year before falling to more normal levels recently.
After reaching a record high in the middle of July, the live weight price of hogs in the U.S. has fallen sharply. Prices rose to record levels due to Porcine Epidemic Diarrhoea virus (PEDv), a disease that led to millions of piglets dying and reducing the number of hogs available for slaughter. However, the effects so far have not been as severe as originally feared. Total hog slaughtering was expected to fall by 6-8 percent, but so far in 2014, the figure has been just 2-3 percent. In addition, low feed costs have led to an increase in carcass weights, partly offsetting the lower slaughter numbers.
The Russian ban on a wide range of food imports, which started in August, has further reduced prices to a small extent. The U.S. is the world’s largest exporter of pork, annually exporting over 2 million tonnes of pork, with Russia previously accounting for roughly 10 percent of total U.S. pork exports. However, in March 2013, Russia banned the import of pork products due to the use of the growth hormone Ractopamine. This ban lasted until March 2014, when some slaughter plants were again allowed to export to Russia once they had met strict criteria. The exports of pork products from the certified plants into Russia were initially low but were growing when the new import ban came into effect.
Although PEDv continues to affect U.S. hog slaughtering, the low feed prices and consequential higher carcass weights should continue to dampen its effects. A seasonal increase in demand, common at this time of year, can be seen in the recent price rises. If demand continues to increase, prices could follow the same upward trend.