Strong Demand Pushes Lard Price to Record Highs

06 September 2004 00:01  [Source: ICB Americas]

Strong export and domestic demand has pushed lard prices for the past few months to the current record highs of around 33 cents to 34 cents per pound.

Domestic lard consumption for the first six months increased 6 percent to 145.3 million pounds compared to the same period last year, according to the US Census Bureau. From January to June, lard consumption in food use rose slightly to 104.1 million pounds versus 100.4 million pounds in 2003. Consumption in inedible products increased to 40.2 million pounds compared to 36.5 million pounds last year.

Meanwhile, lard exports for the first half of the year jumped 63 percent to 75 million pounds, according to the US Department of Commerce. Leading importers of US lard include Mexico, Canada, Honduras, El Salvador and Guatemala.

“Good domestic demand and even better export demand have driven lard prices to their current record high level,” says Bill Dieterichs, market analyst and editor at the Jacobsen Publishing Company, which provides oilseeds, oils and fats market analysis.

“Lard exports this year are up substantially on a percentage basis while edible tallow is down sharply. There must have been some switching to lard from edible tallow by some importing countries, and I see this trend continuing,” he adds.

Compared to lard, US exports of edible tallow for the first half of the year dropped 43 percent to 125 million pounds from 219.5 million pounds last year. Exports to Mexico alone dropped 38 percent to 73.8 million pounds while lard exports jumped 52 percent to 58 million pounds from January to June.

The same trend was seen from Canada, which is considered the second largest importer of US lard and edible tallow next to Mexico. Lard exports to Canada for the first half of the year jumped 46 percent to 7 million pounds while edible tallow exports declined by 45 percent to 15.6 million pounds.

Lard production, on the other hand, has been stable. Production from January to June just took a slight dip to 124.3 million pounds versus 125.2 million in 2003, according to the Census Bureau.

Lard production for the rest of the year and in 2005 could go up slightly, says Mr. Dieterichs, as the US Department of Agriculture estimates a 2.7 percent increase in the number of hogs slaughtered this year over the last year. “Hog production numbers are projected to be up slightly in 2005, so lard production could stay the same or slightly increase as well.”

As for pricing outlook, the market is said to be difficult to estimate as a large percentage of the lard traded is never revealed to the open market. “Very little of the lard produced in the US is actually traded in an auction situation like tallow or yellow grease,” says Mr. Dieterichs.

The average price for lard last month was 32 cents per pound, a 5 percent increase from the 21 cents level seen in May. Prices last year bottomed at 16.5 cents per pound in May and reached its peak at 27.5 cents in October.

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