Pork Profit Maximizer – Retail Edition


Low pork prices in May and early June likely will mean robust pork features post-July 4th. And yet futures traders remain nervous. Higher tariffs on US pork going to China have caused shipments there to go to zero. China may not be as important as Mexico for US pork, but it’s still a significant buyer. In the four weeks ending June 15 last year China purchased an average of 2100 MT of pork per week. This year it has averaged 75 MT and for the last reported week shipments, there were zero. Exports to Mexico have been quite robust so far. Despite a 10% tariff on US pork that went into effect in June, exports to the Mexican market in recent weeks are higher than a year ago (see chart on page 1). However, net sales have tumbled in the last few weeks and this likely means a notable slowdown in shipments in July and August. Net pork sales in the last three weeks have averaged a little under 11,000 MT compared to a weekly export pace of around 20,000 MT. For the last reported week net sales were just 9,562 MT. Net sales to Mexico for the week were only 919 MT compared to weekly exports of around 8,336 MT. Over 20% of all the hams produced in the US go to Mexico. At this time Mexico does not have very good options to source hams and will likely continue to come to the US for product. The 20% tariff on US pork will come into effect July 6. Additionally, Mexican buyers have to deal with the effect of the weaker peso. Since April the Mexican peso has declined by 11% vs. the USD and it is worth 15% less than it was last summer. Bone-in hams (23-27#) averaged around $66/cwt between August and October 2017. Ham prices in the US would have to trade in the mid-40s in order to offset the additional cost of the tariffs and exchange. That will likely not be the case and we could see the additional cost be shared by both US packers and Mexican processors. The reality is that US pork production this fall will be around 3% higher than it was last year. There will be more hams available to sell and suddenly the costs for our customers are some 35% higher than a year ago (25% tariff and 15% currency).