Why do pigs in the US trade at almost €2?

On Monday, August 2, prices paid for pigs (converted to euros) were approximately €1,88 per kilo of carcass weight, according to data from the United States Department of Agriculture (USDA). Even though this is a lot lower than the prices well above €2 that were paid in June, the price seems to have settled at decent levels in recent weeks.

China's export weakness absorbed
Although pork exports from the United States to China are declining, just like here, the US sector appears to have a good export position to other destinations. The volumes shipped to countries in North, Central and South America have increased considerably.

The total volume sold to China fell by approximately 22 tonnes in the period to July 150.000 compared to the same period last year. In 2020, approximately 22 tons were exported to China until July 450.000, the volume was approximately 300.000 tons in the same period this year. Exports to other Asian countries increased slightly, from 130.000 tons last year to 148.000 tons this year.

The biggest support for the export figures, however, is the increased volume that could be sold on markets closer to home. Until July 22, sales to countries on the American continent were considerably higher compared to last year. While approximately 2020 tons were shipped to these countries during this period in 400.000, this volume was approximately 25% larger in the same period this year and amounted to more than 500.000 tons.

The US seems less dependent on 1 specific export destination than, for example, the European Union. The result is that the total export figures for pork from the US are approximately unchanged this year. In total, the US has exported 1.085.000 tonnes of pork so far, up from 1.115.000 tonnes in the same period last year. 

Strong domestic demand
In addition to the stable export figures, domestic demand for pork appears to be strong this year. After a decline in pork consumption in the years 2000-2010, consumption has grown by more than 10% since then. Reopening the economy after the corona pandemic seems to give pork consumption an extra boost. Analysts expect consumption to rise to around 52,5 pounds per inhabitant (23,8 kilos), almost 1% more than last year. In addition, the total population size continues to increase slightly every year, which also affects the overall demand for pork.

Futures market firmly in the saddle
The supply in the near future is also likely to be slightly lower than initially anticipated, the USDA predicts. Relatively many sows were slaughtered in 2020 due to difficult market conditions and problems in processing capacity at slaughterhouses. This will affect the number of pig slaughters in 2021.

Although the futures market for pigs in the US is showing a decline in the coming months, this is mainly due to seasonality. For delivery in October, the quotations are around €1,68 per kilo of slaughtered weight. For American pig farmers, the prospects for the rest of the year appear to be very good, driven by solid exports and strong domestic demand. A situation that currently seems far away for the European pig farmer.