16 August 2022

4 minute read

By: Jim Long

North America

The latest Iowa – Southern Minnesota weights are reflecting quite a current hog inventory. In the first part of May, the weights were averaging 289 lbs. Last year same time they averaged 284 lbs. In May we were 5 lbs. heavier year over year. The first week of August this year 275.6 lbs., a year ago 278.4 lbs. Now almost 3 lbs. lighter year over year. Since the first part of May an 8 lb. swing. A significant shift may be somewhat attributable to heat but we don’t believe that can be the whole answer. Hog prices have gone up on the National Price from just over $1.00 lb. in the first part of May to now being in the mid $1.20’s. This tells us Packers have chased hogs with higher prices to keep lines fuller. This aggressive purchasing has pulled hogs forward as producers take the benefit of higher prices. Despite the lower hog weights U.S. hog slaughter year to date is down 3.6%. Last week the U.S. slaughtered 70,000 head less than a year ago. The National hog price current average in the mid $1.20’s lb. compares to $1.05 lb. a year ago same time. A reflection of more demand and less supply. This bodes well going into the future.

Other Observations

Last week CNN breathlessly told a story that Beef demand was declining while consumers were driving up Chicken prices due to inflation pressures. We wonder where they get their information?

• We observe Choice Beef carcasses are $2.63 lb. range. We haven’t seen the Beef carcass price move more than a few cents either way for weeks.
• If consumers are driving up demand for Chicken as the CNN story goes, wouldn’t Chicken prices be going up? What we observe is the opposite. Since the end of June, the National Whole Chicken price has declined steadily from $1.65 lb. to a week ago averaging $1.32 lb. Not exactly a resounding sign of increased demand and higher prices as CNN was reporting. Some would call this Fake News.
• If CNN was doing a complete story on consumer demand maybe they should point out U.S. Pork cut-outs have gone from $1.05 to $1.25 lb. in a few short weeks. Obviously, as consumers are being squeezed by inflation, they are not cutting back on Pork purchasing if the price has gone higher. Maybe less stories on fake meat and more on an industry that consumers actually buy from i.e., Pork. Might better reflect the reality of real American consumers, not the ones the vegan woke’s in media fantasize about. American meat and poultry consumption is projected at near 220 lb. per capita this year. Americans love meat protein.

It doesn’t take an ag economist to observe the big price increase in market hogs and feeder pigs in China. Producers have gone from losing gobs of money to making good margins. All because of the massive sow herd liquidation caused by industry losses of over $60 billion U.S. We continue to believe China will be back in the Pork import market over the coming months. Giving continued price support in U.S. and European markets.

• We are all aware of how strong Beef prices are currently. The question in our mind is how high will Beef prices go in 2023 if the USDA projection of 1.7 billion to 1.9 billion lbs. less is produced than in the last couple of years. About a 7% decline. In our opinion, the significantly higher Beef price will be tremendously supportive to hog and Pork prices as we note Americans pay for and like consuming meat.
• Spain, the largest hog-producing country in Europe set a new record hog price last week of 1.70 Euro/kg. The hog price has gone up almost weekly since the end of January when it was 1.02 Euro/kg. In Spain, slaughter numbers are down significantly and weights are lower year over year. The specter of lower number of hogs in Europe as a whole continues. The liquidation of sows started mid-last year has not totally come home to roost.

Summary

• China’s higher prices from fewer hogs.
• Spain record hog prices. Europe even fewer hogs coming.
• U.S. less Hogs – less Beef.
• Global high feed prices will discourage any expansion near term.
• China, Europe, USA less hogs now and into the next year. A scenario that should lead to very strong hog prices.