Covid Cuts Slaughter Rate

Pork Commentary, January 17th, 2022
Jim Long, President-CEO, Genesus Inc.

Last week the U.S. slaughtered 2,407,000 hogs; a year ago the same week 2,644,000, a decrease of 237,000 (about 89% of same week 2021 number). From all reports we hear the US – Canada plants are struggling to get people to work due to Covid issues. This is restricting slaughter. The same issue will be in hog barns with people not showing up for work. The fewer employees in the supply chain from Covid come on top of an already shorted labor force. Productivity suffers in all parts of our industry. “Hopefully” the “experts” predicting that the Omnicron variant will sweep through fast is true and things can return to our “new normal”.

We believe, if not for the Covid slaughter plant induced slowdowns, we would be discovering the total lack of hogs in inventory.

Iowa/S. Minnesota hog weights 292.2 lbs. this year; 293.1 lbs. last year same week. Hogs, despite Covid’s slowed slaughter rates, still below year ago. That tells us hogs not backing up except in specific farms.

Talked to a person attending the South Dakota Pork Congress last week. Asked him what was number one takeaway issue. Answer “Every feeder pig broker in North America is here looking for pigs to move, there isn’t enough to fill demand.” Large volume finishing empty barn space is chasing lower pig numbers, the result of 300,000 fewer sows, disease, record-high sow mortality, high feed costs, loss of productivity from shortage of labor etc.

Last week in this commentary we asked for readers to report to us what new sow barns are being built now. We have asked this question multiple times over the years. We always got a significant list of new barns. This year? Zero. Our thoughts. Either no one reads the commentary or there is zero or next to zero new sow barns being built. Our thought if you’re not adding you’re subtracting.

Iowa/S. Minnesota Market Hog Price 2021
January 1, 2021Lean Hog FuturesActual
Cash Market 2021
April72.42April 16105.84+33
May76.75May 14116.99+40
June82.75June 15131.08+49
July82.95July 15115.51+32
August82.45August 16102.67+20

So much for lean hog futures being a good predictor of where hog market is going. Looks like last year’s January Lean Hog Futures underestimated what the real lean hog market would be by over $60 per head. This year there are less hogs than 2021. Hard to believe April to August lean hogs won’t match or be higher this year.

Choice Beef cut-outs closed 284.31 lb. Friday; Pork cut-outs closed at 89.07 lb. Pork is about 30% the price of Beef. Obviously, consumers pay more for Beef. They much prefer the taste and pay accordingly. Would it not make sense to produce Pork that tastes better? Getting more money for our Pork is a path to better margins. Sometimes as an industry we chase pennies and miss the dollars that can unlock the path of better profitability. Pork with better marbling tastes better. The European Swine Genetics devoid of marbling will never deliver a product to meet consumers real demand. We are fooling ourselves to believe different. We need to think more as food marketers not hog producers.

U.S. Chicken price is really strong. $1.34 lb. vs. 82¢ lb. a year ago. A huge amount of money increase on slaughters running over 160 million a week. Certainly, helps cover higher feed costs. It appears so far U.S. Chicken industry not expanding with actual weekly slaughters most weeks lower than a year ago. Production restraint looks like a recipe to push prices higher. We expect the fewer hogs in USA will trigger similar price increase as soon as Covid labor issues end.

This weekend the Canadian government enacted a law that all truckers entering Canada must be vaccinated for Covid. This affects both Canadian and US truckers. It is estimated that up to 15% of Canadian truckers and 40% of US truckers are not vaccinated. This will affect supply chain including hog and pork flow. Just one more issue impacting our industry. We wouldn’t be surprised to see Canadian retail stores not able to keep shelves full and just in time manufacturing and retail facilities disrupted. Empty store shelves are something our society is not used to seeing. We expect that could trigger some real backlash.

Final Thoughts

Some Futures closed over $1.00 lb. on Friday. In 2021 mid-April to mid-August cash lean hogs every week was over $1.00 lb. We have fewer hogs in 2022 than in 2021. Less hogs will lead to prices greater than 2021.

Chicken and Beef prices will be supportive for hogs due to their own high prices. It’s not good news with hogs currently being marketed under the cost of production.

Our premise good prices will be here soon and be sustainable due to the continued lack of supply.