Slump in Domestic Pork Demand May Be Turning

Lower fuel prices and slower inflation boost pork consumption.

Preliminary data suggest October's retail demand index for pork was positive. "This is the first positive month for pork demand since May 2005," says Ron Plain, University of Missouri economist.

October's average retail price of pork was $2.866 per pound. That was 2.6% higher than a year earlier, or up 1.3% after adjusting for inflation.

"This is the first time the inflation adjusted price of pork has been above year-earlier levels since May 2005," says Plain. "The higher October retail price is especially good news since it appears that per capita pork supply and consumption were both above year ago levels."

One month does not make a trend. "We'll have to wait for the October pork trade data to know for sure about pork consumption," says Plain. "But consumers buying more pork at a higher price would indicate They're serious about wanting to eat pork.

"The reason of the improvement in domestic demand last month probably has little to do with pork," cautions Plain. "Falling unemployment rates and falling gasoline prices are two items which historically have been positive for pork demand. Both dropped sharply this fall."

Low inflation is another positive for pork demand. The consumer price index was only 1.3% higher in October 2006 than in October 2005. This was the smallest year-over-year hike in inflation since June 2002.

"Given the current strength of the U.S. economy, these factors will likely continue being positive for pork demand this winter," says Plain.

Long term demand appears promising. Plain sees the pork industry doing several things that are enhancing the demand picture.

This year will almost certainly be the 15th consecutive record year for pork exports. The pork industry's successful effort to expand foreign markets has kept the growing U.S. hog industry from swamping the domestic market.

Enhanced packaging makes pork more attractive in the meat case and extends shelf life, making pork a better buy.

Distribution of pork recipes, both in grocery stores and over the internet, gives consumers new ideas on how to avoid the blahs.

"However, the rapidly expanding ethanol industry and higher corn prices are giving pork producers things to worry about," cautions Plain. "Hopefully, weak demand won't be one of their worries in 2007."

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