25 April 2022

3 minute read

By: Jim Long

North America

Good sign last Friday that U.S. Pork Cut-outs closed at $1.10 lb. After a few weeks near a $1.00 it is necessary for cut-outs to increase to move the hog price higher. Over the last five years, average weekly pork production declines from now until summer. From our estimation a decline of 10-12% or 60 million lbs. a week. That’s why summer hogs are always more expensive. We expect the same this year with lean hogs reaching well over $1.20 lb.

Other Observations

Pork Cut-outs $1.10 lb. – Choice Beef Cut-outs $2.72 lb. Pork has good value relative to Beef. Getting better-tasting pork to consumers would seem like good business to increase pork prices.

Avian Flu hitting poultry hard with over 27 million birds eradicated to date in 2022.

Most of the Avian Flu eradication has happened in egg production and turkeys to date. All prices pushing higher and with lower production will be supportive of Pork demand and pricing.

In summary, strong beef and poultry pricing is supportive of Pork. As summer Pork supply declines in conjunction with the dynamics of the other proteins, how high hog prices go could be historical.

China

China's hog industry has a hog to corn ratio which they call China Pig to Feedstuff Ratio. The highest ever recorded was 20.10 on the 30th of October 2019. The record low 3 weeks ago at 4.530. Low hog prices and $13.00 U.S. bushel corn is leading to continued losses of about $80 U.S. per head. It’s not if but when the massive sow herd liquidation ongoing in China leads to rapidly higher prices. We have been in this business a while; farmer losses always lead to fewer hogs. Bigger losses lead to even fewer hogs.

Below are some results from China Public Swine Companies for the first quarter of 2022:

According to Xinmunet.com, seven public companies reported their Q1 performance, below table shows Muyuan lost the most @ 5.97 billion Yuan given its scale marketing 13.817 million pigs in Q1, Zhengbang is ranked first regarding the average loss per pig @ 827.8 yuan per pig.

China would have marketed about 150 million hogs in the first quarter at an average industry loss of $80 per head that’s a farmer's arithmetic loss of $12 billion in the quarter or about $1 billion per week. Not much if you say it fast! Farmers lose money, and you end up with less hogs. China started losing money last July, liquidation has been happening since then, we expect to see lower market hog numbers real soon in China, and with that higher price, at some point, have pork imports.

Europe

We have seen the rapid increase of hog price in Europe over the last few weeks. Spain from 1.02 Euro/kg to 1.54 Euro/kg (liveweight). The challenge is with high feed prices; breakeven is about 1.60 Euro/kg. We expect that sow herd liquidation continues across Europe. With the coming seasonal decline in hog numbers and the effect of ongoing liquidation. Our expectation is, Europe’s hog price will jump higher over the coming weeks.

The United Nations FAO – Meat Price Index reached an all-time high in March. We expect we will see new records in the coming months as global meat production declines and with that less feed demand.