31 March 2022

3 minute read

By: Jim Long

North America

Last Friday U.S. Lean Hog Futures reached new contract highs from May to May. A sign that future traders have now realized the huge decrease in pork production is a reality.

June 2022 Lean Futures

The relentless increase of June Lean Hog Futures of 38¢ lb. ($80 per head) is fascinating since all the pigs that will go to market in June were already born by the end of October. The so-called "smart money" didn’t do the Farmer Arithmetic that there were less hogs (year to date -7%). We believe October-December lean hog futures have significant upside with the supply-demand scenario shaping up.

Other Observations

U.S. Cull Sow Prices have jumped over 40¢ lb. in the last few weeks. Last week 500-549 sows were averaging 94.19¢ lb. (75.00-100.49). A 525 lb. sow @ 94.19¢ lb. = $494. Certainly, you can buy a gilt for replacement!

Official U.S. February sow slaughter was 239,200; February a year ago 241,200. Not much change. The latest weekly sow slaughter was 61,929. A relatively high number considering size of breeding herd and continued high sow mortality. We see these numbers as an indication that the U.S. breeding herd inventory is not expanding.

We have seen the U.S. lean hog futures gain $80 per head. A similar path is being followed in Europe. The German Hog Price on February 9th was 1.20 Euro/kg (60¢ lb.). Last week, 1.92 Euro/kg (96¢ lb.).A gain of 0 .72 Euro/kg or 35¢ U.S. lb. Very similar to the U.S. June Lean Hog Future gain of 38¢ lb.

Europe has over 10 million sows, Germany is the second-largest hog producer. Germany is going to pull hog prices higher in all of Europe.

Why is the price jumping? Europe lost significant money per hog for many months. A combination of low hog prices and high feed costs. The one fact of our industry: producers lose money, you end up with less hogs. We expect Europe’s hog slaughter will continue to decrease over the coming months as the sow herd liquidation cuts numbers further.

Europe’s lower pork production and higher hog prices will lead to less pork for Europe to export. This will be supportive of North American hog prices.

Chicken

We all know the price of Beef in stores is extraordinary. Chicken has also seen a big jump.

U.S. Young Chickens

Obviously, the Chicken price is significantly higher than a year ago and a month ago.

Weekly Chicken Slaughter

Certainly supportive of Pork that Chicken prices are showing significant strength.

Pork

We believe as an industry we continue to miss the opportunity that better tasting Hams and Loins could do for the value of the Pork Cut-out.

Last Week

About half of the carcass is Loin and Ham. Look at their prices vs. Belly, Ribs, and Butts. It’s shameful that we haven’t seen the reality that pork with better taste due to marbling is what the consumer wants. Put 20¢ lb. on Loins and Hams and we add 10¢ lb. on Cut-outs or $20.00 per carcass. How many of us when we are in a restaurant see a Pork Chop on the menu and wonder how, if we order it, we will be disappointed? Do you think it's only you? There is a solution to drive demand (per capita pork consumption) that has flatlined for 20+ years. Produce Loins and Hams that taste better. We need to think like marketers.