14 October 2022

3 minute read

By: Jim Long

Last week the USDA released the September 1 Hogs and Pigs Report. What we saw was less market hogs (1 million), less sows (1%). We thought it would be interesting where markets are at now compared to a year ago.

As you can see the lean hog futures last Friday compared to a year ago are very similar. We all know what happened this year. We didn’t have mid-90 lean hogs this summer as lean hogs were projecting a year ago. How about 120.16. We expect with even fewer hogs in spring – summer 2023 the hog price will be the same or better. All hogs that will go to market between now and the end of August have been bred in a smaller sow herd compared to a year ago. We believe lean hog futures are undervalued compared to where the market will be. It’s not if but when a big price adjustment will happen.

Weekly U.S. Pork Sales

U.S. export sales the latest week were 34,300 metric tonnes. A strong number the latest five weeks have averaged over 30,000 a week, the previous four weeks were in the 20,000 metric tonne range. Of the 34,300 MT, 10,110 MT were to China. It’s a number to watch, year to date China has been closer to 3,500 MT a week. If China ramps up pork imports, it will indicate pork moving to China from many countries. What goes to China is out of all other markets. We have no doubt soon China will be importing greater amounts of pork.

Market

U.S. hog slaughter last week was 2,558,000, a year ago 2,599,000. Average net price lean hogs 93.55 – USDA pork cut-outs Friday close $101.54. Iowa – S. Minnesota slaughter weights 280.3 lbs., a year ago 283.5 lbs. A year-over-year difference of -3.2 lbs. certainly indicates a hog inventory is very current.

Europe

The latest European pig meat production is down year over year June -5.7%, July -8.4%. The total June-July production was 3.44 million tonnes, a decline year over year of about 140 million tonnes. That’s a large amount of pork. The EU decline in production is about equal to the total amount of U.S. pork exports over the same time. We expect EU production will continue to decline as the result of massive sow herd liquidation. Hog prices in Europe have been at record levels but high feed prices have limited returns. Europe will have less pork over the next coming months.

Summary

Are markets rational? Maybe over time. One thing is for sure hog production and all its challenges is a humbling experience. So much can go wrong. The only arrogance we experienced in our industry is with people who don’t own hogs. Arrogance can’t be found in hog farmers; we have been humbled too many times.

We believe lots of upside to lean hog future market. Exports seeing strength. Hog weights lower than a year ago while we slaughter fewer hogs. Less pork in Europe, Less pork in China, Less pork in the USA – at least a combined 75% of the world’s pork production is declining. We haven’t seen how high hog prices can go yet.