Hog slaughter has been running above year ago levels in the last two weeks but since early March slaughter has been about the same as last year while weights have been lower, resulting in less pork available in the spot market.
Highlights
- Hog slaughter has been running above year ago levels in the last two weeks but since early March slaughter has been about the same as last year while weights have been lower, resulting in less pork available in the spot market.
- Demand for fresh pork has been robust as high meat prices have caused retailers to focus on value cuts, such as loins, butts, and ribs.
- Ham prices were sharply higher in late March and early April following a surge in orders from Mexico, with some 75k MT of pork booked in just three weeks. However, as order flow has slowed down, ham availability has improved.
- The strong US dollar may be negative for US exports to Asia but the strong peso has supported exports to Mexico. Whether that continues will be a significant factor.
- Pork trim prices are firm and expected to trend higher on robust demand and seasonal supply reduction.
Full Report
In the last two weeks hog slaughter has averaged 2.485 million head/week, 2% higher than a year ago. Does this mean the March ‘Hogs and Pigs’ report was wrong? Not really. Weekly hog slaughter since the first week of March has been a total of 17.205 million head vs. 17.207 million head during the same period last year. The inventory survey pegged the supply of hogs over 180 pounds 0.6% lower than the previous year and the supply of hogs 120-179 pounds 0.3% above year ago. Current figures suggest we are slightly ahead of those figures but not by much. The survey also suggested that the inventory of hogs that will come to market between June and August should be between 1.5% and 2% higher than a year ago. Last year, weekly slaughter for non-holiday weeks in June and July averaged 2.35 million head/week. A 2% increase would put weekly slaughter at 2.4 million, about 85k head lower than current levels. Additionally, hog carcass weights trend lower during that time of year, subtracting more pounds from available supply.
So far this spring, fresh pork prices have performed quite well. The loin primal value at the end of the week was $99.5/cwt, 23% higher than a year ago, matching the price levels in 2021 and 2022 despite the increase in production. Fresh pork demand is in good shape as retailers look to feature less expensive proteins. Other fresh pork prices are performing quite well also. The value of the butt primal on Friday was $130/cwt, 18% higher than a year ago and the rib primal at $165/cwt was 46% higher. At this point, it appears that 2022 is a better comp than 2023 for fresh pork, something that’s also reflected in current futures pricing.
Processing items have so far performed in line with expectations. We continue to think that export demand remains a key driver for ham values. A rush of export orders for Mexico helped push ham values past $90/cwt in early April. Now that Mexico demand has pulled back so have ham values. Another indication that domestic ham demand is lackluster at best is the weakness in the value of boneless hams. Packers will look to sell bone-in hams forward given the lack of boneless demand. We think market has more downside risk for the fall that futures are currently indicating.
The same logic applies to bellies. So far the belly market has been trading sideways, which is not unusual for this time of year. Futures are currently suggesting that belly prices will/should be higher during Jun-Aug. But as the discussion in the previous section suggested, a slowdown in foodservice sales presents some downside risk for items that rely heavily on foodservice sales, such as bellies. More importantly, the downside risk for bellies is higher in the fall when foodservice sales seasonally decline while hog slaughter climbs over 2.6 million head/week. Our forecast is currently calling for belly prices to be resilient in the fall but we also recognize that at this time there is more downside than upside risk to our forecast for that time of year.
Price Chart
Forecasts
Steiner Consulting Group produces the National Pork Board newsletter based on information we believe is accurate and reliable. However neither NPB nor Steiner and Company warrants or guarantees the accuracy of or accepts any liability for the data, opinions or recommendations expressed.
