This past week was much of the same with US markets continuing to be soft and slaughter hog prices $20-30 per head below cost of production.

The one bright spot was the USDA pork cut-outs which jumped a couple dollars getting to 62₵ lb on Friday (53-54 percent lean hog 52₵ lb).

For hog prices to rebound pork cut-outs must increase so that packers will pay more for hogs.

Other observations

• Hog marketing’s year to date have increased 2 percent. 53-54 percent lean hogs last year at this time were 67.29, they are now 52₵ lb. So a 2 percent increase in hogs has led to a 28 percent decrease in hog prices? That’s a huge difference and we attribute most of the price difference to tariffs by Mexico and China on US pork.
  
• This past Friday President Trump asked China to remove all tariffs on US farm products (including pork at 70 percent tariff).

“I asked China to immediately remove all tariffs on our agricultural products based on the fact that we are moving nicely with trade discussions. I did not increase the second launch of tariffs to 25 percent March 1st. This is very important to our great farmers - and me.” - Donald Trump

Our Contacts in China tell us the above from President Trump is being reported in China news.

• It appears hog weights are lower than a year ago. A year ago carcass weight average on the US National Daily Base lean was 216.64 lbs, this year it’s at 213.25 lbs (average of 475,000 head). The lower average weight certainly indicates no back up of hogs. This is positive for hog market going forward.
• Not much has been written on the effect on grain and oilseed usage with the huge decrease in China’s hog supply.
• Let’s surmise 120 million less hogs per year at some point. That is about 40 million tonnes of feed. Over 1 million truck loads? 20,000 fewer truck loads a week? In our mind it will lower soybean demand for sure. China was about self-sufficient in corn before the herd liquidation. Will they become exporters?
• China announced last week a plan to encourage companies-farmers to build small slaughter plants so hog movement will be restricted. Makes you wonder? Inventory of hogs was already down half the US inventory in December (36 million).
• All hogs have always been slaughtered in China. What will happen to existing slaughter plants? There certainly won’t be hogs to fill existing capacity. Less hogs – means less hogs to slaughter- less pork to sell. It’s a 'black swan' event.
  
• How lame are we? Pork cut-outs closed at 61.92₵ lb on Friday. Choice beef cut-outs Friday closed at $2.21 lb. Beef almost four times the price of pork.
  Duh! Maybe it’s the taste and flavour?
• Marbled pork ie, bellies were $1.77 lb Friday. Loin’s 77₵ lb. Hams 44₵ lb.
  Too many years being led by a "pigs into chickens" scenario has destroyed our loins and hams. Consumers are telling us directly what they think of our products when they vote with their money. The answer is in our opinion producing pork that has taste and flavour. That won’t be accomplished by mongrel hybrid boars and synthetic hybrid Durocs.
• Only real Durocs are registered. Durocs only registered as "NSR Durocs" can be used in Trademarked US Duroc pork programme. If we want to drive demand and increase prices, “white meat” should not be our goal. It’s obvious that “red meat” is what consumers want and will pay more for.

Danish Crown

Danish Crown is the major packer and pork exporter in Denmark.

Below is an extract of the article by Danish crown:

It is clearing up in the east

28 February, 2019

The world market for pork can be characterised by silence before the storm. A storm of tailwind.

The question is not whether the prices will soon increase, but only when and how quickly it will happen, says Danish Crown's global sales director Lars Albertsen:

"Everyone is looking at China. No one knows what the consequences of ASF have been for the Chinese production this year. The latest forecast I've seen predicts a 10 to 20 percent decline in Chinese production. And when half of the world's pigs are slaughtered in China, this corresponds to a decrease of between 5 and 10 percent in global production. It can become a huge catalyst for world market prices."

The optimism is further fuelled by the fact that the supply of pigs in the northern part of Europe is declining, so even though there is a slight increase in production in France and Spain, overall expectations are a decline across the EU of 1-2 percent this year.

"It doesn't sound like much, but it is enough to have the market return as soon as exports out of the EU begin to rise. Our expectation here in the first quarter is a slight increase, but I do not think we will reach 9 Kroner (1.38 USD) by 1 April. In the second quarter, on the other hand, it may go strong. Here, the weather will have quite a large influence, as soon as the thermometer passes 20 degrees in southern Europe - or actually throughout the part of Europe that lies south of Frankfurt - then there is a fairly noticeable increase in the consumption of pig meat in Europe," says Lars Albertsen.