Pig outlook: Lean hog futures bump up against strong chart resistance

Analyst Jim Wyckoff shares an update on the US futures market, USDA reports and global pig news

9 December 2022

4 minute read

By: Jim Wyckoff

Once again, February lean hog futures rallied right up to a strong technical resistance layer located between $92.00 and $93.30, and backed well down. Fundamentally, the CME cash hog index is still seeking a seasonal bottom. The latest CME lean hog index is down 16 cents (as of Dec. 6), signaling a seasonal low is not yet in place.

December lean hog futures finished Wednesday at a modest discount to the cash index, signaling traders aren’t yet convinced a seasonal bottom is at hand. This week’s hog slaughter will likely be large on a seasonal basis and the total for the following week likely will be the largest of the year. That would reflect a seasonal supply peak, as well as active packer operations as they prepare for widespread shutdowns and slowdowns during the year-end holidays. However, the market is unlikely to spend much time at such low levels as the industry gets back to full work schedules in the new year. The industry will also get a better look at the 2023 hog supply outlook when the USDA releases its quarterly Hogs & Pigs report Dec. 23.

Weekly USDA pork export sales

USDA Thursday reported US pork net sales reductions of 7,900 MT for 2022 resulting in increases for Mexico (3,100 MT, including decreases of 4,000 MT), China (900 MT, including decreases of 300 MT), Honduras (200 MT), the Dominican Republic (200 MT, including decreases of 200 MT), and Chile (100 MT), were more than offset by reductions primarily for Japan (4,400 MT), Australia (3,400 MT), South Korea (2,300 MT), and Canada (2,200 MT). Net sales of 2,400 MT for 2023 were primarily for Colombia (1,300 MT), Japan (500 MT), South Korea (200 MT), and Nicaragua (200 MT). Exports of 32,500 MT were primarily to Mexico (15,900 MT), China (4,700 MT), Japan (3,300 MT), South Korea (2,100 MT), and Canada (1,900 MT).

US beef, pork exports rise in October

The U.S. exported 301.1 million lbs. of beef during October — a record for the month. Beef shipments increased 25.3 million lbs. from September and 26.6 million lbs. from October 2021. Through the first 10 months of 2022, the U.S. shipped 2.993 billion lbs. of beef, up 5.1% from the same period last year, driven by a 26% increase in exports to China. U.S. pork exports totaled 539.7 million lbs. in October, up 26.7 million lbs. from September and 487,000 lbs. above last year. Through the first 10 months of this year, U.S. pork shipments totaled 5.198 billion lbs., down 12.1% from the same period last year as exports to China plunged 54%.

China’s meat imports increase but still below year-ago

China imported 670,000 MT of meat during November, up 6.4% from October but 1.0% less than last year. Through the first 11 months of this year, China imported 6.7 MMT of meat, down 23.2% from the same period last year.

US pork checkoff rate adjustment

Effective Jan. 1, 2023, the Pork Checkoff rate will drop a nickel to 35 cents per $100 of value. This change is a result of a resolution passed by voting delegates at the 2022 Pork Industry Forum. Pork Checkoff payments are collected for all pigs sold with a change of ownership. This includes sales of weaned pigs, breeding age animals and at the final market destination. The Pork Checkoff is mandated by the Pork Promotion, Research, Consumer Information Act. The rate change was a recommendation of the Pork Industry Vision Task Force — a group of 19 leaders from the National Pork Board, NPPC and various state associations — to ensure the pork industry’s long-term success.

US Prop 12 enforcement will wait in California for Supreme Court ruling

A California judge extended his ban on enforcement of voter-approved Proposition 12 until July 1, to allow time for the Supreme Court to rule on the constitutionality of the animal welfare law. The Sacramento County Superior Court injunction was to expire on Feb. 28. Justices heard arguments on the farm-group challenge of Prop 12 in October and a decision is expected by the end of June. Approved in a statewide referendum in 2018, Prop 12 requires hog farmers to provide at least 24 square feet of floor space for breeding sows and it bars the sale of pork produced on farms that do not meet California’s standards. The pork industry prefers sow crates that greatly restrict movement by sows and argues that Prop 12 violates the dormant Commerce Clause by setting unfair barriers to interstate trade.