Pig outlook: Lean hog futures bulls gain late-week momentum

Analyst Jim Wyckoff shares this week's global pig news

1 September 2023

4 minute read

By: Jim Wyckoff

North America

Asia

October lean hog futures on Wednesday posted solid gains and hit a three-week high as the near-term technical posture improved. Fundamentally, seasonal cash hog weakness is bearish. The latest CME lean hog index is down another $1.74 to $90.67, marking the biggest daily decline since prices started their seasonal drop in late July. During that span, the cash index has fallen $15.33.

Bullish elements for the hog market include the weekly report on Iowa-southern Minnesota pig sales and weights showed last week’s average market hog weight dropped 4.0 pounds from the week prior to 274.3 lbs. per head. The drop likely reflected last week’s extreme heat over the region but may also indicate the industry was pulling hogs ahead. The sharp weight drop and implication of reduced market-ready supplies may put in a bottom in the cash hog market soon.

Weekly USDA export sales for US pork

Pork: Net US sales of 36,900 MT for 2023 were up 12 percent from the previous week and 45 percent from the prior 4-week average. Increases were primarily for Mexico (12,000 MT, including decreases of 500 MT), China (7,800 MT), South Korea (5,500 MT, including decreases of 600 MT), Japan (4,200 MT, including decreases of 300 MT), and Canada (1,900 MT, including decreases of 1,200 MT). Total net sales of 400 MT for 2024 were for Japan. Exports of 31,300 MT were up 24 percent from the previous week and 16 percent from the prior 4-week average. The destinations were primarily to Mexico (13,000 MT), Japan (4,400 MT), China (3,000 MT), South Korea (2,700 MT), and Canada (2,700 MT).

USDA: United States and Canadian Hog Inventory Down Slightly

USDA reports United States and Canadian inventory of all hogs and pigs for June 2023 was 86.2 million head. This was slightly lower than June 2022 and down 2 percent from June 2021. The breeding inventory, at 7.39 million head, was slightly lower than last year and down 1 percent from 2021. Market hog inventory, at 78.8 million head, was slightly lower than last year and down 2 percent from 2021. The semi-annual pig crop, at 80.0 million head, was up 1 percent from 2022 but down 1 percent from 2021. Sows farrowing during this period totaled 7.06 million head, down 1 percent from last year and down 2 percent from 2021.

United States inventory of all hogs and pigs on June 1, 2023 was 72.4 million head. This was up slightly from June 1, 2022 but down 1 percent from March 1, 2023. The breeding inventory, at 6.15 million head, was down slightly from last year, but up 1 percent from the previous quarter. Market hog inventory, at 66.2 million head, was up slightly from last year, but down 1 percent from last quarter. The pig crop, at 32.9 million head, was up 1 percent from 2022 but down 1 percent from 2021. Sows farrowing during this period totaled 2.90 million head, down 2 percent from 2022 and down 5 percent from 2021.

Canadian inventory of all hogs and pigs on July 1, 2023 was 13.8 million head. This was down 1 percent from July 1, 2022 and down 4 percent from July 1, 2021. The breeding inventory, at 1.24 million head, was down slightly from last year and down 2 percent from 2021. Market hog inventory, at 12.5 million head, was down 1 percent from last year and down 4 percent from 2021. The semi-annual pig crop, at 15.0 million head, was up 1 percent from 2022, but down 2 percent from 2021. Sows farrowing during this period totaled 1.25 million head, up 1 percent from last year, but down 2 percent from 2021.

FSA updates LIP payment rate for Midwest livestock producers

USDA’s Farm Service Agency (FSA) is updating the Livestock Indemnity Program (LIP) payment rate to support livestock producers in the Midwest who have lost cattle to the extreme heat and humidity experienced this summer. To help indemnify ranchers to reflect a trend towards higher cattle weights in feedlots, the 2023 LIP payment rate for beef calves over 800 lbs. will increase from $1244 per head to $1618.

LIP provides benefits to livestock owners and some contract growers for livestock deaths exceeding normal mortality from eligible adverse weather events, certain predation losses and reduced sales prices due to injury from an eligible loss. Indemnity payments are made at a rate of 75% of the prior year’s average fair market value of the livestock. The updated LIP payment rate is effective immediately and will be applied retroactively starting Jan.1, 2023, for all eligible causes of loss including excessive heat, tornado, winter storms and other qualifying adverse weather.

Producers who have already received LIP payments for 2023 losses will receive an additional payment, if applicable, commensurate with this updated rate.

China’s sow herd inches lower in July

China’s sow herd in July fell 0.6% against the prior month to 42.71 million head, ag ministry data showed. The sow herd was also 0.6% smaller than last year. Hog slaughter in July jumped 26.7% from last year.