December hog futures prices dipped below US41.5 cents per pound last week, the lowest level since the fall of 2009 on a continuous chart.
Our reporter Ed White had a story in the Sept. 22 paper about the most worrisome autumn for hog producers in 16 years.
The hog herd in the United States has roared back from the troubles it had with porcine epidemic diarrhea.
The market hog inventory is up, and with the cooler fall weather, hogs are reaching slaughter weight quicker.
In September, U.S. hog slaughter was running more than four percent ahead of the same period the previous year.
Slaughter was 2.466 million in the week ending Sept. 24, up more than eight percent over the same week last year, and was the third largest ever. The following week, slaughter was 2.436 million and was the fourth largest ever.
The normal seasonal trend is for slaughter to increase through the fall. The worry is that the market-ready hog supply will exceed slaughter capacity, estimated at a little less than 2.5 million head, and really crash prices. The last time that happened was in 1998.
Analysts think that won’t happen this year.
This situation has been predicted for some time, and so producers might be trying to market earlier than normal so that there won’t be as many to slaughter in that particularly dangerous period of late November and December.
That might account for the big slaughter numbers in September.
Slaughter weights would fall if producers are marketing early, but weights have not fallen yet.
Ed’s story noted that many producers have likely used contracts tied to the futures market to establish prices for many of the animals they will sell in the coming months, so are partly insulated from the damage caused by a cash price decline.
However, not all production will be hedged, and so it remains a worrisome period.
In researching this column, I also updated myself on a situation I wrote about a few months ago — the big increase in China’s pork imports.
China’s hog herd underwent a major contraction in 2014-15 because of a lack of profit, rural migration and government efforts to close small operations that caused manure pollution.
Imports continue to run much higher than in the past. European Union exports won a big portion of the market, but the United States and Canada also did well.
While still a small share of overall North American pork exports, China’s demand is important, and without it, hog prices here would be even lower.
U.S. pork exports to China and Hong Kong totalled US$323.7 million in the January-August period, up 95 percent over the same period the previous year.
China is America’s fourth largest pork customer. The increase to China is helping make up for reduced American pork exports to other countries.
Overall, U.S. pork exports are trailing last year by one percent.
Canadian pork export growth to China and Hong Kong is even more impressive, climbing 265 percent this year to C$311.2 million. China is Canada’s third largest pork buyer.
Canada’s total pork exports are up 13 percent this year
China is the world’s largest producer and consumer of pork. Although it intends to maintain a level of self-sufficiency in meat production, it is also setting up the infrastructure to start importing more protein.
A posting on dimsums.blogspot.ca carries a report on a speech by Chen Wei, the vice-chair of China’s meat association.
He said he anticipates that China’s net imports of meat will grow to about 10 million tonnes by 2020, or about half of the global meat trade.