26 August 2023

4 minute read

By: Sarah Mikesell

October lean hog futures are in a fledgling downtrend on the daily bar chart and the bears have the near-term technical advantage. The path of least resistance for prices at present is sideways to lower. The steep discount October lean hogs hold to current cash prices has done little help the weaker futures markets recently. The latest CME lean hog index is down 67 cents to $97.37 as of Tuesday, August 22. Wholesale pork prices continue to slide as well. The weakness is surprising given the continued high volume, suggesting there is substantial inventory to sell. Bellies continue to lead the way lower in the fresh pork market. The anticipation of increased hog and pork supplies as well as dwindling summer grilling demand have encouraged the hog futures bears.

Weekly USDA US beef, pork export sales

Beef: Net US sales of 11,400 MT for 2023 were down 25 percent from the previous week and 28 percent from the prior 4-week average. Increases primarily for South Korea (4,200 MT, including decreases of 200 MT), Japan (2,300 MT, including decreases of 100 MT), Hong Kong (1,300 MT, including decreases of 100 MT), China (1,000 MT), and Mexico (800 MT, including decreases of 100 MT), were offset by reductions for Chile (200 MT). Exports of 11,800 MT were down 25 percent from the previous week and 28 percent from the prior 4-week average. The destinations were primarily to South Korea (3,000 MT), Japan (2,500 MT), Mexico (1,600 MT), China (1,400 MT), and Canada (1,100 MT).

Pork: Net US sales of 33,000 MT for 2023 were up 15 percent from the previous week and 40 percent from the prior 4-week average. Increases were primarily for Mexico (18,000 MT, including decreases of 100 MT), South Korea (5,800 MT, including decreases of 500 MT), Colombia (3,300 MT), Japan (1,800 MT), and Canada (1,300 MT). Total net sales of 100 MT for 2024 were for Chile. Exports of 25,200 MT were down 12 percent from the previous week and 5 percent from the prior 4-week average. The destinations were primarily to Mexico (12,100 MT), China (3,100 MT), South Korea (2,300 MT), Japan (1,900 MT), and Canada (1,500 MT).

USDA reports on China hog industry: swine production to decline slightly

Swine production (pig crop) in 2024 is forecast to decline slightly more than one percent to 695 million head due to a lower sow inventory in 2023 compared to 2022. In 2023, low swine and pork prices caused losses across the swine breeding industry. Some large swine breeding companies have high asset to liability ratios and sources report that many companies needed to sell swine to supplement cash flow. Some smaller producers are also accelerating swine sales as they exit the market.

Since early 2023, industry members have been reducing production capacity (i.e., sow inventory)1 and this is expected to last through the third quarter (Q3) owing to weak consumption driven by consumer tendencies such as reducing pork demand in the summer. The average sow inventory in 2023 is expected to be lower than 2022 and Post forecasts even lower swine production in 2024. In 2023, low prices and culling as well as concerns over persistent and endemic animal disease occurrences, including African Swine Fever (ASF), contributed to “panic” sales that resulted in animals going to slaughter before ideal market weights.

The disease situation is expected to persist in 2024 and will continue to influence slaughter numbers and slaughter weights. In 2024, large-scale producers intend to continue vertical integration efforts to manage costs and capture greater profit across the value chain. A “swine cycle2 ” will continue to exist, but with less fluctuation as larger producers smooth out the volatility in the sector created when smaller producers exit or enter the market.

Hog confinement in the US: Question 3 update

On Sept. 6, pork producers will present their case in front of Senior Judge William Young of the U.S. District Court for the District of Massachusetts regarding the state law regulating sow confinement requirements. This lawsuit was brought by Triumph Foods and other plaintiffs. The hearing comes after the implementation of the Act to Prevent Cruelty to Farm Animals, also known as Question 3, which goes into effect on Aug. 23. Question 3 will make it illegal to sell uncooked whole pork meat that doesn't adhere to the state's sow housing standards and will also prohibit the transshipment of such pork through Massachusetts. Some exceptions are permitted over the next six months during the law's rollout.

The next week’s likely high-low price trading ranges:

October lean hog futures--$76.00 to $82.50 and with a sideways-lower bias

September soybean meal futures--$397.20 to $437.00, and with a sideways-higher bias

December corn futures--$4.81 3/4 to $5.20 and a sideways-higher bias

Latest analytical daily charts lean hog, soybean meal and corn futures