Chicago hog futures are the highest since 2014 as traders assess tight supply in the United States, strong pork export demand and hopes for rising domestic demand.
Recently, I wrote about how African swine fever still grips China’s hog herd, forcing more culling that will lead to continued elevated pork imports.
But since then, hog futures climbed further on evidence that U.S. hog production is less robust than expected.
In Canada, production is up from last year, but the market is also up, following the formulas that link Canadian and U.S. prices.
Read Also
Canola used in only quarter of Canadian biofuel
Less than one-quarter of the biodiesel and renewable diesel used in Canada in 2024 was made from canola oil feedstock
This is welcome relief after 2020 when COVID-19 disrupted supply chains, particularly early in the pandemic when disease outbreaks at American plants forced temporary closures. That backed up hog supply and pressured prices lower, but created shortages of pork that forced retail prices higher.
There were fewer closures in Canada and hog supplies here did not back up but prices nevertheless fell, causing much aggravation among producers.
This year, COVID-19 impacts on packers have not disappeared but things are more stable.
The April 7 Daily Livestock Report produced by Steiner Consulting Group for the Chicago Mercantile Exchange made the following comment about the U.S. market.
“While packers have paid up consistently in the cash market in recent weeks, higher wholesale pork prices and higher by-product value has helped them keep margins in line. We calculate the gross packer margin for last week at around US$50 per head.”
Going into 2021 analysts looked at year end herd size reports to forecast the coming year’s production.
In Canada, on Jan. 1 the female breeding herd stood at 1.24 million head, up one percent from the year before but similar to 2019 and 2018.
But the American breeding herd was down.
As of Dec. 1, the breeding herd was 6.276 million head, down three percent from 2019. Also the total number of market hogs was down one percent at 71.23 million.
Nevertheless, the U.S. Department of Agriculture in January forecast a one percent increase in annual pork production.
That was overly optimistic.
The March 1 USDA Quarterly Hogs and Pigs report showed the swine herd at 74.773 million, down 1.8 percent from last year.
The report also projected that the number of sows giving birth from June to August would drop by four percent compared to a year earlier.
“It’s going to be in an environment where the slaughter supplies and the pork supplies are quite a bit smaller than expected,” Jim Mintert, director of the Center for Commercial Agriculture at Purdue University, said in a Reuters story.
There are also reports of elevated cases of porcine reproductive and respiratory syndrome (PRRS) in breeding animals in the U.S., helping explain reduced pig production.
This is slowing slaughter. To April 2, U.S. hog slaughter stood at 34.2 million head, down 4.6 percent from the same point last year.
The pace was particularly bad in recent weeks when the year-over-year weekly numbers were down eight to 10 percent. Hogs killed now were bred last May at the peak of the chaos caused by COVID-19 so it is understandable that producers were cutting back.
The situation in Canada is much different.
In the year to April 3, federally inspected slaughter was up 1.4 percent at 5.59 million head. The recent two-week shutdown of the Red Deer Olymel plant hurt Alberta’s output but increases in Manitoba and Saskatchewan more than made up for it.
Canadian and American pork cumulative exports in January and February were down from the strong pace set last year, due mainly to reduced China buying, but they remain strong compared to the years before 2020.
Canadian exports by dollar value fell 4.2 percent and U.S. exports fell 13 percent compared to the same two months last year.
For Canada, the drop in Chinese business, to $190.9 million from $274.3 million, was partly offset by increased sales to the U.S. and Mexico.
Particularly notable was a 460 percent increase in sales to the Philippines to $58.58 million. That country is also suffering from ASF and it recently cut its pork import tariffs, leading to expectations of further imports of Canadian and American pork.
On the domestic front, expectations are that meat demand can only benefit as the COVID vaccines roll out, businesses reopen and more people are employed.
A story at meatandpoultry.com notes that, traditionally, 60 percent of U.S. bacon consumption occurred at restaurants, but when they shut down last year, consumers switched to home consumption. By the end of the year, consumption surprisingly rose three percent. Now, the industry hopes people will continue to eat bacon at home and will choose it again when they are at a restaurant, providing sustained demand for pork bellies.
