Just weeks after the World Health Organization's announcement linking cancer to processed meat, Purdue economist Chris Hurt says there's a possibility the significant media coverage it received has had an impact on the recent decline in wholesale pork prices.
Hurt explained the situation on Monday in a farmdoc daily post, Weekly Outlook: Hog Prices Drop to 6 Year Lows:
Live hog prices fell below $40 per hundredweight last week. This means hog prices are at their lowest level since November of 2009 when the U.S. was just beginning to pull off the bottom of the great recession. The source of the current downturn in prices seems to have components from both supply and demand.
Abundant supplies of pork are easy to find. Pork production this year is up 7% with the number of head processed up 8% and weights down 1%. There is more competition as well with per capita chicken supplies up nearly 7% and even per capita beef supplies are up near 1%.
Pork and beef trade are additional culprits added to the poundage of meat in the U.S. market this year. Total pork imports are up 15% so far this year and that is primarily due to Canada sending more pork southward. The reason is the strength of the U.S. dollar which tends to stimulate more imports and reduce U.S. Ag exports.
Over the past year the U.S dollar has appreciated 18% relative to the Canadian dollar. In addition to more pork coming from Canada, the strong U.S. dollar has also stimulated Canadian producers to ship nearly 550,000 head more live hogs in the January to September period, 15% higher than the same period last year.
So, while domestic pork production is up 7%, there is about 10% more pork available when the added imports and less exports are considered. A similar impact is occurring for beef where imports are up sharply this year and exports are down.
Weakness in demand has apparently been affected by the World Health Organization's announcement around Oct. 26 linking bacon and processed meats to cancer in humans. That announcement generated considerable media coverage in the weeks following.
Just prior to that announcement, live hog prices were about $52 per live hundredweight and are currently about $38, just four weeks later.
Over this short period, wholesale prices for hams fell 6%, loins were down 12% and the wholesale bacon price is down 32%. I also heard reports from packers that pork product sales and shipments began to immediately drop causing pork product inventories to grow at packers and thus encourage packers to drop hog bids.
Continue reading the full article on farmdoc daily: Weekly Outlook: Hog Prices Drop to 6 Year Lows