Pig outlook: Lean hog futures bulls power prices still higher

Lean hog futures prices reached contract highs this week on strong cash fundamentals.

4 February 2022

3 minute read

By: Jim Wyckoff

The pig traders’ perspective: Wholesale pork prices are rising but remain down from two-month highs seen in late January. Retail buyers may be unwilling to purchase pork when cutout values are near the $95.00 area, raising questions whether recent gains in futures can be sustained. Packers have ramped up slaughter rates as workers recover from Covid infections, which produced an early-week surge in hog slaughter, which is likely limiting wholesale pork market strength. However, such should also clean up market-ready hog supplies and seems likely to support hog/pork gains as winter passes, especially if USDA analysts are correct in projecting winter hog supplies 6.0% below year-ago levels.

Latest US Department of Agriculture (USDA) reports, and other news

Latest weekly USDA pork export sales data

Pork: Net sales of 30,400 MT for 2022, primarily for Mexico (20,700 MT, including decreases of 300 MT), Japan (6,000 MT, including decreases of 700 MT), Canada (1,500 MT, including decreases of 400 MT), Colombia (900 MT, including decreases of 100 MT), and Honduras (400 MT, including 100 MT switched from Guatemala), were offset by reductions for China (500 MT). Exports of 32,400 MT were primarily to Mexico (16,000 MT), Japan (6,300 MT), China (3,100 MT), South Korea (2,600 MT), and Canada (1,800 MT).

FAO world food price index rises to third highest level ever in January

Global food prices measured by the United Nation’s Food and Agriculture Organization (FAO) increased 1.5 points (1.1%) in January, led by gains in vegoils (to a record high) and dairy. The FAO food price index at 135.7 was the highest since April 2011 and only 1.9 points (1.4%) below the all-time high of 137.6 in February 2011. Compared to year-ago, prices are up 12.5% for cereal grains, 33.9% for vegoils, 18.8% for dairy, 17.3% for meat and 19.7% for dairy.

USDA plans to gather consumer input on ‘Product of USA’ label

USDA has released a notice covering the process they will use to gather input from consumers on the voluntary “Product of USA” label for pork and beef, seeking comments on the process to be used. USDA said this will be used to develop proposed changes to the effort, but this initial step still leaves some very important issues to be tackled.

Inflation is coming to a longtime refuge of price-conscious consumers: restaurant value menus

Burger King, Denny’s and Domino’s Pizza are among the chains that are reducing their menu of discounted items or shrinking portions to try to improve their profits, executives said. Some chain executives hope the trimming of discount menus and meal deals might bring less pushback from consumers than straight price increases. Prices for food away from home rose 6% in the year ended December, the biggest increase in nearly four decades, federal figures show. Many chains increased prices multiple times last year as they tried to compensate for rising costs for labor, food and materials, and have said that more increases could come in 2022 if the inflation persists, the Wall Street Journal reports.

Global food prices resume climb to near-10-year highs

The U.N. Food and Agricultural Organization (FAO) Food Price Index moved up to 135.7 in January, near 10-year highs and an increase from an upwardly revised December tally of 134.1. The rise in the index came on a 4.2% increase in the vegoil price index to a record mark on reduced export availability and supply constraints. Boubaker Ben-Belhassen, with the FAO Markets and Trade Division, also cautioned there was a “concern the impacts of these constraints will not ease quickly.” Also feeding the rise in prices was an increase of 2.4% in the dairy price index, a fifth straight monthly increase. Cereal prices, by contrast, were up just 0.1%.