What’s in store for hog market
Hog producers have been enjoying a run of index prices mostly above $190 a hundred kilograms for a long time.
But they have dropped to the $170-$180 range this week. That’s better than the $150-$160 last year at this time, but are we on the edge of a slippery slope?
Analysts say the recent slip is due to the U.S. hog situation where packers have cut back because of poor profit margins.
Through the summer there was exceptional retail demand for pork, thanks in part to fast food restaurant promotions that included bacon on hamburgers. The demand was much needed because the number and size of hogs coming on the market is up. But now barbecue season is over and demand has slipped. Packers have taken the opportunity to scale back and pressure down prices.
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Demand from Japan has also been confusing and inconsistent. Its safeguard duty system results in a lot of pork being imported all at once. Then, when the duty trigger level is hit, imports plunge.
The E. coli food poisoning in Japan also hurt demand there.
Analysts, including Don Hrap-chak of SPI Marketing Group in Saskatchewan, Ward Toma of Alberta Pork and Ray Snitynsky of Manitoba Pork, say that for the next few months, it’s unlikely prices will strengthen.
The good news for pig producers is that feed prices are dropping and even with lower hog prices, producers should be in the black.
Looking ahead, the question is whether the North American herd is going into a rebuilding phase that will produce a surplus next year.
Sow slaughter in Canada and the U.S. has been fairly weak the last few months, usually an indication of herd rebuilding.That leads most to believe there will be more hogs next year and probably softer prices.
The wild card in predictions is Pacific Rim demand. Japan might be inconsistent, but it appears to be a growth market. Last year, it imported almost 50,000 tonnes of Canadian pork, up by about a quarter over the previous year and the most since the early 1980s.
Also, South Korea recently issued a large tender for North American pork.
There are almost endless predictions that the rising standard of living in several Pacific Rim countries will lead to sustainable increases in North American pork exports.
If true, this new demand could alter the traditional profit and loss cycle in hogs here, adding strength when rising supplies would normally weaken prices.
