The largest American pig slaughterhouse Smithfield is terminating its contract with 26 pig farms in Utah. The company decided to scale back again due to the weak American pork market.
It is not the first time that Smithfield has scaled down. Earlier this year, the company decided to divest 35 pig farms in Missouri and in October the company closed a production facility in North Carolina. In addition, the Chinese parent company WH Group took the decision to list the company's shares on the American stock exchange sold.
Difficult market
Since the end of June, prices on the American pork market have fallen drastically. On July 26, the slaughter price was at its highest point since the summer of 106,56 at $2022 per CWT. On Monday, December 11, the price had fallen to $49,64. Although a decline in this period is in line with a normal seasonal pattern, the decline is more pronounced than in other years. On December 12, 2022, the American slaughter price stood at $82,32. The decline is also steeper than usual in relative figures. Compared to the top of the market, the price had fallen by 12% on December 2022, 38,4. On December 11, 2023, the difference with the highest quotation of the year was 53,4%.
It's not just slaughterhouses that are having a hard time. American pig farmers are also going through a very difficult year. Data from Iowa State University shows that pig farmers can expect an average loss of $32 per pig this year. If nothing fundamental changes in the market, pig farmers could again incur a loss of around $2024 in 18.
Weak question
Trade is currently difficult, especially due to a weak domestic market, as can be read in the American trade media. In total, demand will have fallen by about 2023% in 10. The lower demand is largely the result of higher consumer prices. In 2019, the average American paid $3,40 per kilo for their pork. By 2023, this will have risen to $4,34. Despite generous indexations, prices compared to salaries have also risen. Compared to salaries, the price of ham has increased by 11% since the period before the corona crisis. In addition, the price of pork chops increased by 12% and the price of bacon increased by 6%.
However, the weak domestic demand is compensated by exports. Recent data from the United States Meat Export Federation (USMEF) shows that US pork exports grew by 2023% over the first ten months of 9 to almost 2,4 tonnes. A total of $6,66 billion worth of pork was exported during this period. Strong growth in demand from Mexico in particular drives US exports. In total, the United States' southern neighbors imported almost 900.000 tons, an increase of no less than 13%. In addition, exports to South Korea were strong. The United States exported about 150.000 tons to the Asian country.
This strong exports is directly related to weak domestic demand. The value of exports increased less strongly than the export volume. In total, the value of exports increased by 6%. The value of exports to South Korea even decreased by 4% despite the higher volumes. For a long time, exports to Mexico were an exception to this trend. In total, the value of exports grew by 16%, compared to a growth in export volumes of 13%. Although the price of these exports also appears to be under pressure. In October, export volumes grew by 19%, while value growth remained at 9%.