Pork Profit Maximizer – Food Service Edition

Highlights

Mexico was a much larger export market for US pork in 2017 than in the first half of this year. Pork exports to Mexico during Jul-Dec 2017 were 917.5 million pounds (cwe), representing 7% of all US production. For the week ending July 12, USDA reported pork export sales to this market at 6,289 MT, 11% lower than the same week a year ago. What concerns market participants is the slowdown in pork export sales to this market and the outlook for exports this fall when pork supplies blow out previous records. In the first two weeks of July net pork export sales to Mexico have averaged 1,431 MT/ week compared to a weekly average of 7,893 MT in the first six months of the year. Looking at the first chart to the right, it appears that Mexican buyers rushed to buy as much pork as they could ahead of the tariff. Weekly pork exports between mid-April and mid-June averaged 22% above year-ago levels. It certainly helped that ham prices at the end of May were around 47 cents per pound. For now, it appears that Mexican buyers have decided to sit on their hands. US hog slaughter this week should be around 2.275 million head but by the end of August it should surpass 2.4 million and by the end of September, it should be at 2.6 million. By their very nature export sales tend to be quite volatile, a big order is booked and then it takes a while for product to ship out. December hogs are now priced at almost 46 cents, implying among other things ham prices in the 40 cent area. Last year the ham primal on December 1 was around 64 cents. A 20% tariff would put hams at around 51 cents.